The Shopify play

Over the past weeks and months, we’ve had many interesting chats with clients and industry practitioners about Shopify’s strategic direction. There seems to be a lot of curiosity on the topic, so we felt this would be a good time to publish our thoughts and try to draw some conclusions together. Lay back and get your coffee, because there’s a lot to say here.

From a product standpoint, Shopify’s team has been working in two parallel and very distinct tracks. The first one sees them staying true to their mission of arming the rebels by giving small brands the tools they need to thrive. At the core of this lies the idea of providing for a brand’s every need, with the current focus being on customer acquisition and operational efficiency.

The customer acquisition work started with the Shop app (which is becoming more and more of an Amazon for Shopify brands) and is now continuing with Shopify Collective, which allows brands to easily partner on cross-selling initiatives—dropshipping 2.0, if you will. Shopify is creating its own little acquisition engine, enabling small brands to detach themselves (with varying levels of success) from their deadly over-reliance on paid social.

When it comes to helping brands with operational efficiency, it’s no secret that Shopify is investing heavily in AI after the Shopify Logistics debacle: products such as Shopify Magic streamline the most mundane aspects of running an eCommerce business, helping small teams do more with less.

So far, this all sounds very Shopify-esque, but we’re not quite done.

Shopify has also been putting a lot of effort into creating a more compelling product for enterprise brands. Hydrogen, unveiled almost two years ago now, paved the way for Commerce Components. In the meantime, Shopify also released new Shopify Functions and a more customizable checkout, both reserved for Shopify Plus customers.

Larger brands want more flexibility, and Shopify understands that. They bet that solutions such as Hydrogen and Commerce Components will allow these brands to dip their toes into the Shopify ecosystem without going all-in, which may lead to deeper adoption down the road.

This might all make sense so far: Shopify offers SMB tools to SMB merchants and enterprise tools to enterprise merchants. The ultimate goal is to become the eCommerce platform for every single retailer in the world, no matter their size, digital roadmap, or tech stack.

And yet, there’s a problem: it really feels like Shopify is pursuing two distinct strategies here, not one.

For small-to-medium brands, Shopify is building a vertical SaaS, offering everything a brand might ever need. Vertical products thrive on closed feedback loops: they need access to all your data and all your digital properties so that they can constantly improve and offer more and more value. This is the play Shopify has done for years.

For enterprise brands, Shopify is building a composable commerce stack, allowing brands to mix and match pieces of the Shopify ecosystem however they want. Composable products, by definition, need open architectures, which hinder verticalization strategies.

In other words, by trying to acquire enterprise merchants, Shopify may be playing against itself.

This isn’t just speculation either: going from a “monolithic” Shopify build to a headless architecture based on Hydrogen is not an incremental change—it’s a categorically different experience. The moment you go headless, you give up a good 50% of the Shopify ecosystem. Native functionality you used to take for granted is simply not available anymore, and third-party apps and integrations will often not work anymore—or will not work as well as before.

Granted, Shopify is making improvements here and there by opening up more of the core platform and partnering with the most popular third-party providers in their ecosystem, but this isn’t a problem that can be solved by simply throwing more money at it.

To succeed long-term, Shopify needs an overarching strategy that creates a pragmatic, unified narrative across different merchant segments.

Perhaps that strategy is already here, and we’re just not seeing it—but if that’s the case, we are in pretty good company.