With what started out as an idea to sell snowboards online, Shopify has grown into a multi-billion dollar platform that over 1.7 million businesses use globally to sell their products. In 2021 alone, it processed just under $80 billion in order value with 5.6 million online stores registered on the Shopify platform.
But how exactly did Shopify evolve from a simple tool to an incredibly successful platform? And what initially motivated its founder, Tobias Lütke, to create Shopify in the first place?
Without further ado, let’s dive in to find out.
It was the year 1981. Nasa launched its very first space shuttle mission, the popular movie “Raiders of the Lost Ark” makes its debut in theaters, and Tobias Lükte is born.
Born and raised in Koblenz, West Germany at the time, Tobias (also known as Tobi) was introduced to computers when his parents gifted him one at the young age of six. It was a Schneider CPC that quickly sparked his passion for coding.
Tobi quickly fell in love with computers and at the age of 12, unbeknownst to him, he began coding as a hobby. He would regularly rewrite the code for video games he played and was far more interested in his computer than anything school had to offer.
Tobi left high school at the age of 16 and, like many billionaires, did not go to university. With his sights firmly set, he set out to become a programmer. As he described in his own words:
“To me, it was magic. By the time I was 12, I wanted to know the secrets behind the wizardry, and that started my journey toward computer programming. This was the early 1990s, when computers weren't built for the mass market.”
Tobi went on to enroll in a computer programming apprenticeship at the Koblenzer Carl Benz School. With a deep hunger and drive to learn, Tobi picked up valuable coding skills at a time when programming was quickly becoming in hot demand.
It was during a snowboarding trip in Canada where Tobi would meet his then future wife and former Canadian diplomat, Fiona McKean.
The two quickly fell in love and later on in their relationship, Tobias moved to Ottawa to live with Fiona. It was his love for snowboarding, moving to Canada, and programming skills that would soon combine to set the stage for his great success.
Long before remote work became a trend, Tobi was working remotely as a software developer for a German startup while he resided in Ottawa. He disliked remote work and found it isolating, not to mention that his programming tasks were primarily in financial backend software, which he described as “the driest of the dry kind of stuff.”
It was at this time Tobi was drawn to retail and its potential margins in the right niches. Leveraging his technical expertise, Tobi began building his first online shop and was quickly able to spot plenty of room for improvement in the online retail space.
Although Tobi loved programming, he was burned out from working with programming languages that were boring and uninspiring. Using several systems available at the time such as Miva, OsCommerce, and Yahoo Stores, Tobi was able to start building his online store Snowdevils with the goal to sell snowboards.
Building his store with these platforms was incredibly frustrating for Tobi, to the degree that he could barely change the background colors on his site due to the limited customizability.
It was here where the founder-problem fit was manifested in Tobi, a term coined by investor and Sequoia Capital partner Roelof Botha that describes a situation where a founder encounters a problem that they become fully committed to solving.
In the midst of his frustration, Tobi received a message from his friend about the open-source web application framework Ruby on Rails that had just been released. After downloading it, he instantly fell in love with its tools and gained newfound enthusiasm for programming.
In the next two months, Tobi began fully developing the software behind his store Snowdevil. That year he was able to turn a profit from his online snowboard sales but inside he still had a burning desire to solve the broken eCommerce industry.
From that point on until 2006, Tobi and his co-founders Scott Lake and Daniel Weinand began developing an eCommerce platform for merchants that he wished was available when he was creating Snowdevil. Over the course of one and a half years, Shopify was ready to be released to the world.
Tobi and his early team were able to build an easy-to-use set of tools that made it simple for merchants to build eCommerce sites as well as solve their own site-specific problems.
Shopify created an open source template language called Liquid that to this day serves as the backbone for its themes and for loading dynamic storefront content. The initial product allowed merchants to set up customizable store templates, integrate PaPal or credit card processing, track orders in an RSS feed, and automate inventory organization.
These were all features unheard of at the time. For the first time ever, individuals with no programming or online selling experience now had the tools to create their own online retail stores to sell their products.
Slowly Shopify began growing and in 2007 was generating around $8000 a month in revenue. Despite having a relatively small customer base, Tobi described 2007 as a turning point for the company because of the change in how they charged customers.
Before, they would charge merchants a percentage of their sales, which was discouraging for merchants making most of their money on Shopify. The model was then switched to a subscription-based one with small transaction fees that grew less as plan sizes increased.
This meant less money for Shopify in the short-run but incentivized customers to hit greater sales levels to lower their fees.
From thereon, Shopify focused its product development on creating features and tools that helped its customers sell more. The more sales on Shopify, the more revenue from merchant transaction fees.
Shopify started getting traction and that year attracted an investment of $250,000 from Toronto-based angel investor John Philips.
Shopify continued to focus on making its platform intuitive, easy to use, and accessible to as wide an audience as possible. In 2008, the company was generating $60,000 in monthly recurring revenue (MRR).
More features such as order tracking, inventory management, and basic analytics were added that were essential for first-time sellers, a demographic Shopify heavily marketed to.
But Shopify was not only attracting small or medium-sized merchants. Large corporations began showing interest in Shopify and the problems it can effectively solve at a far lower budget. At one point, Tesla Motors was exploring ways to use Shopify.
With an extensive FAQ database and many guides to help users navigate the site, Shopify quickly became the most intuitive eCommerce platform around. Its resources, ease of use, and low learning curve allowed nearly anyone to become a Shopify user.
With his keen developer mindset, Tobi and his team saw the potential to target an even larger market. Through market research and asking other developers in their network, they knew there was a market for people interested in building their own apps and customizations for Shopify stores.
The next step was creating a platform for people to share and sell the Shopify apps they create, bringing in a new level of customizability and creativity sourced right from the community.
On the third anniversary of Shopify’s launch, they released an API (application programming interface) and app store. In the press release, Tobi said:
“E-commerce is a highly individualized business. Every store wants to offer a unique buying experience but providing too many features makes the software cumbersome and difficult to use. The Shopify API solves this by allowing merchants to install exactly the features they need to get the most out of their store…and our Partners can get a recurring source of revenue by developing great applications for these stores.”
It was a genius move by Shopify that pivoted them far past any competition and put them on the trajectory to becoming a multi-billion dollar company.
Merchants now had ways to customize their stores with apps that best suited their businesses and developers were able to compete in creating the best apps for the platform.
From here on out, Shopify was exploding both in growth and popularity. With the release of Shopify Mobile, merchants were able to track their online stores and perform crucial tasks from their phones.
Come 2011, Shopify was hosting over 11,000 stores that were generating $125 million in yearly revenue. They continued to push learning on their platform with competitions and programs like “Shopify Experts” to support and encourage people to become online sellers.
By 2012, Shopify had grown by 61% with now over 18,000 stores that were generating over $270 million in total revenue.
Not content with focusing on just online selling, in 2013 Shopify began exploring how merchants sell offline. They released Shopify POS, a way to sync several features between online stores with brick-and-mortar ones.
In December of the same year, Shopify also received $100 million in its series C funding, allowing them to significantly expand its sphere of operations. As it rapidly grew, Shopify’s motto went from “making it easy for anyone to create a beautiful and powerful online store,” to “making commerce better for everyone.”
In 2014, Shopify expanded its mobile and Shopify POS features to give merchants more flexibility to accept payments and run operations by phone. By this point, they were hosting 120,000 online retailers, were ranked number 3 by Deloitte's Fast50 in Canada, and were now earning $105 million in revenue (twice that of the previous year).
In April 2015, Shopify filed for an initial public offering (IPO) on the New York Stock Exchange (NYSE). By the end of May of that year, it went public at $28 a share, 60% higher than its $17 offering price.
By the end of 2015, Amazon announced it would be closing its Amazon Webstore service for merchants and recommended Shopify as the migration provider, resulting in Shopify’s shares jumping 20%.
Between 2015 to 2017 Shopify added integrations with Facebook Messenger, pioneering “conversational commerce” and allowing merchants to communicate with customers on a more personal channel. It also added QR codes that shoppers could scan to connect directly with stores and products.
In 2017 Shopify announced they will integrate with Amazon to allow merchants to sell on Amazon from their Shopify stores, with the news raising their stock price by nearly 10%.
In 2018, Shopify invested $500 million into their new Toronto office. Shortly after, they opened their first location in Los Angeles, where they held classes and a “genius bar” for businesses to attend workshops around the platform.
From new product launches to company acquisitions, 2019 was a busy year for Shopify. Despite the negative effects of the global COVID-19 pandemic on many businesses, Shopify’s stock actually rose due to the pandemic.
In May 2020, Shopify announced it would be going fully remote in response to the rapid spread of the Coronavirus. Over 5000 employees began working from home, and the company continued to announce new hires throughout the year.
Between 2019 to 2021, Shopify announced acquisitions of several companies such as wholesale B2B platform Handshake, warehouse robotics firm 6 River Systems, and augmented reality app Primer.
In 2022, Shopify announced several new acquisitions and partnerships with major platforms like Twitter, JD.com, and Klaviyo. However, like many major corporations in 2022, the company has lost nearly 80% of its stock value year-to-date (YTD) but is still worth nearly $35 billion as of the fourth quarter of 2022.
In July 2022, Shoify announced a series of layoffs totaling around 10% of the platform’s workforce, with Tobi explaining they made a “wrong” bet about the pandemic online shopping boom.
So what does the future hold for Shopify?
Only time will tell, but despite the economic downturn of 2022, the platform continues to grow and push the boundaries of what’s possible in the eCommerce space. Therefore, so long as eCommerce continues to grow (and it certainly is) it’s safe to say Shopify will likely not be leaving anytime soon in the foreseeable future.