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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.
Trending in Retail Channels
Can Shop Cash entice more users to use the app for browsing and buying?
Shopify is launching a new rewards program for items purchased through its checkout system.
Shop Cash will provide the opportunity for consumers to earn 1% back on purchases made through Shop Pay.
The feature includes a direct tie-in with the Shop app. Users can check their balance through the app, and the rewards are redeemable for future purchases through Shop, as well.
“This is a coming of age moment for Shop. It’s become an incredible app that allows shoppers to discover great brands, check out with one tap, and track orders in real time,” said Harley Finkelstein, president of Shopify, in a statement. “Shop Cash represents the next evolution of Shop, connecting independent brands to more shoppers, and rewarding those shoppers for being loyal fans.”
The launch falls on Shopify’s 17th birthday, so the ecommerce software company is giving away Shop Cash to celebrate. For Shop Day, Shopify partnered with dozens of merchants, including Trixie Cosmetics, MrBeast and Monday Swimwear. They’ll share custom links across channels that offer cash to spend on the Shop app. In all, Shopify will give away more than $1,000,000. Brands will also be running exclusive Shop Cash offers throughout the day.
The rewards program marks a new way that Shopify is aiming to transform Shop into more of a shopping app where users can discover new items, extending beyond its initial use for post-purchase order tracking and management at launch in 2020.
Shopify has been making moves over the last year to provide more opportunities to browse and buy recommended products, as well as giving brands more tools to showcase storefronts and tell their stories. With Shop Pay, the app offers one-click checkout. There are signs that it is all inspiring users to seek out the app. Shopify said 35% of the orders on the Shop app are repeat purchases.
With more brands joining the app and infrastructure for the shopper experience and checkout in place, rewards can help make the app stickier for consumers. The opportunity to earn cash, redeem it and even check a rewards balance are all reasons to keep returning to the app, and make it a destination to shop.
Shopify has long been known as the infrastructure layer of commerce, as it provided the tools for brands to run and manage an online store under their own name. With the Shop app, it is aiming to make Shopify itself a destination for shopping. It remains a nascent effort, even as more brands have taken advantage of the new features to enhance storefronts.
This comes as marketplaces continue to rise across ecommerce, and giants like Amazon and Walmart experiment with tools that do more to boost discovery of new products.
Social media has long been the engine of discovery in ecommerce, especially in the direct-to-consumer realm that Shopify has owned. Users found products on Facebook or Instagram, then finished checkout on a brand's phase. With the push toward privacy making performance marketing more difficult and customer acquisition costs rising, the ecommerce platforms are attempting to take that power into their own hands. With advertising placed close to the point of sale through retail media and the ability to check out on the same page where a user sees a product, marketplaces and Shop are realizing new opportunities to attract, convert and deliver for users within one app. For Shop, the trick is to attract more shoppers to the app. Rewards like Shop Cash are a carrot to do just that.