Ecommerce platforms see big opportunity in enterprise

Over the last decade, a generation of ecommerce platforms grew up by providing technology to help small businesses level the playing field with the largest competitors.

But as they seek to maintain growth as public companies and face down headwinds from the return to in-store shopping and inflation, platforms are increasingly looking to work with big names, too.

Companies like BigCommerce and Shopify are doubling down on strategies to target enterprise clients as they see new opportunities for recurring revenue, and the ability to roll out premium features that offer continuous upgrade opportunities.

Sales and marketing dollars are shifting toward enterprise at BigCommerce, the open source platform that provides tools for B2C and B2B businesses to launch and manage stores. On the company’s recent quarterly earnings call, CEO Brent Bellm said that the company spent the last few years building out enterprise capabilities. There are now signs that they have arrived in full. In Q3, the work was starting to show up in results. The company said its enterprise accounts were up 16% year-over-year, while annual recurring revenue (ARR) for this segment was up 35% year-over-year. Bigger contracts typically mean more predictable revenue that is easier to manage around, and that’s evident here. Enterprise now accounts for 71% of the company’s overall ARR.

Clients like One Kings Lane, Hungry Harvest, Music Direct and Dippin’ Dots launched new stores this quarter.

The growth is leading BigCommerce to move sales and marketing resources from the smaller stores, which can tend to have more churn, to these bigger accounts.

“We are actively shifting our demand generation budgets, both in people costs and variable spending towards the superior economics delivered by enterprise accounts,” Bellm told analysts. “We have tested this increased spending prioritization over the past two quarters, and we are moving full speed on this now across all teams and budgets. We are also focusing on ROI and operating leverage by removing most promotions on new non-enterprise bookings. This is increasing revenue and profit even as it delivers fewer short-term bookings in the non-enterprise business.”

It is also investing product resources in the enterprise direction. BigCommerce launched on Google Cloud Marketplace to reach enterprise customers, and added features such as multi-location inventory management. It will also add APIs to allow retailers to offer custom buy online, pickup in store (BOPIS) options.

To be sure, there’s a tradeoff. Enterprise accounts typically take longer to close, and they can be more resource intensive, as it often means convincing a larger organization to make a move. There is also a “tighter” volume of leads amid the current economic uncertainty, Bellm said. For BigCommerce, there will be more variation from quarter-to-quarter in the short-term as these changes take place. But it has the upside of the potential for longer retention, and more ARR.

“This is a differentiated winning strategy that our partners are as excited about as we are,” Bellm said.

At Shopify, the tools and ecosystem offered by the Ottawa, Canada-based company often tend to bring to mind direct-to-consumer brands. But even as that segment begins is seeing pullback this year with the return to in-store shopping and privacy-related advertising challenges, Shopify is seeing growth among its largest clients using its enterprise offering, called Shopify Plus. Growth in gross merchandise volume of Shopify Plus customers outpaced Shopify’s overall GMV in the third quarter. Additionally, Shopify Plus contributed 33% of MRR, compared with 28% of MRR in Q3 2021.

Similar to BigCommerce, Shopify President Harley Finkelstein talked about new household name clients that the platform has gained, including beauty brand Glossier, Panasonic Technics, Cole Haan, Stella & Dots and Melissa & Doug.

Shopify Plus is positioned as both an upgrade for merchants that start on Shopify and seek scale, as well as a platform for larger brands that may be operating on in-house systems or other enterprise platforms.

“Originally, Plus was a great migration path for our most successful merchants,” Shopify President Harley Finkelstein told analysts. “More and more, it's becoming the best place to sell when you're selling at scale.”

Brands on Shopify Plus get access to certain features, and that creates opportunities for Shopify to see their business grow through upgrades. Plus customers are the first to get access to new Shopify Audiences, which allows brands to create lookalike audiences to sell on platforms like Facebook, offering a solution to Apple’s App Tracking Transparency limitations. Shopify is also looking to add more solutions to allow for cross-border commerce, headless, and fulfillment and delivery through the recent $2.1 billion acquisition of Deliverr. Known as “merchant solutions,” the revenue of these services as a percent of overall GMV, or attach rate, reached an all-time high of 2.14% in the third quarter, Shopify said.

There's also the opportunity to take a "land and expand" approach with certain brands and retailers by working with a part of their business, then aiming to impress them and bring more of their operations onto Shopify.

To reach customers, Shopify is also partnering with professional services firms that work with enterprises. A partnership announced with Ernst & Young this week is designed to empower consultants who can integrate Shopify with enterprises, and create new avenues to sell regulated products such as pharmaceutical products and alcoholic beverages through ecommerce. The partnerships will result in the training of 500 technical professionals at EY, and the launch of new Shopify centers of EY’s innovation hubs, called Wavespace.

“Enterprises and online merchants are re-evaluating their e-commerce strategies to provide better, more relevant and frictionless experiences to meet high e-commerce customer expectations,” Kristina Rogers, EY Global Consumer Leader, in a statement. “This collaboration with Shopify will help brands enhance their customer journeys, explore new channels and ultimately grow their businesses.”

To be sure, ecommerce platforms have seen opportunities to serve enterprises for years. Shopify and BigCommerce are joined by Adobe and Salesforce in the marketplace. But it’s clear that new resources are being moved into place in the hopes that established brands and retailers will consider upgrading, or making a switch from their current platform.