“Shop” from Shopify: right problem, wrong solution

Put yourself in the shoes of a brand new ecommerce startup. Where do you get your first customer? How about your first thousand?

Your first idea might be: “buy ads?” But this is getting harder. As advertising consolidates, both paid and organic customer acquisition costs (CAC) have been increasing. Facebook ads can be effective, but not at any price. Many DTC brands aren’t operating in categories where they can afford to spend $50+ to acquire a customer.

Okay, so maybe it’s hard to use ads to buy new customers, but what about getting people who’ve already bought from you to buy again? This should be easy, because happy customers often want advertising from their favorite brands, it’s just a matter of seeing the ad at the right time. But where can you do it?

Email is good, but not great. It’s good because you check it often, it’s not great because you go there to respond to your boss or read a newsletter. If you think “I’d like to go shopping today,” you don’t take a trip to your inbox. 

This week, sensing an opportunity to solve these problems for merchants, Shopify launched a new app called Shop, which aims to improve product discovery. The app allows you to browse through a feed of recommended DTC products and easily purchase them using the Shopify one-click Shop Pay checkout. 

Shopify will collect data from customers browsing on the app, and can leverage this new data to offer highly-tailored recommendations to customers. It’s like a digital mall — a way to browse products and wander through stores, but online. 

One interesting thing: Shop actually isn’t a new app. It’s an update and rebranding of an existing Shopify package-tracking app called Arrive, which is already used by 16 million consumers. Building off an existing app is a neat hack to get their first users in the door, but it goes deeper than that. By integrating with delivery tracking, Shop has a natural mechanism to drive customers back to the app: notifications about when their packages are being delivered. (An opportune moment to sell you the next thing!)

So, will Shop work?

In theory, a digital mall should exist. Amazon is great for explicit queries, but we need a place to discover the thousands of quality brands that aren’t on Amazon. If I want a cool new backpack from a DTC company, where can I go to browse around? I guess Instagram is the best option, but unfortunately for brands, it’s also chock full of other distractions. 

So, something like Shop makes sense in theory, but is Shopify the right company to build it? There are two major risks: getting consumers to use the app, and upsetting merchant partners. 

The first risk is that Shopify might not even be able to build a successful consumer app. This is a substantially different skill than B2B software, and to be honest, the initial Shop product experience left a few things to be desired. 

For example, on-boarding was a bit rough. If you type in “sweatshirt” to the search, it returns companies that have “sweatshirt” in the title instead of, y’know, sweatshirts.