Ilana Strauss: Here's a little test. I want you to walk over to your recycling bin. Go on, take a look. My guess is you have at least one crumpled cardboard box from something you bought online and chances are there's a major company powering at least some of these purchases, a company whose name does not start with A.
Craig Miller: Frankly, when he said "You've heard of Shopify, right?" I said, "I think you're a Swedish music site." And he said, "No. No. No. Not Spotify. Shopify."
Ilana Strauss: That artisan toffee you ordered last week? Shopify.
Voice 1: Ooh, a package.
Ilana Strauss: That Gymshark hoodie? Shopify. Today, this Canadian company powers more than 1.7 million merchants and enough sales to make it the second largest online retailer in the U.S. From small family businesses to big brands like Kylie Cosmetics and Allbirds, Shopify is the invisible thread that connects them all. But getting here meant making pretty unconventional choices.
Craig Miller: I'm sure there were many people at Shopify that said, "What is this company doing?"
Ilana Strauss: I'm Ilana Strauss, and you're listening to When It Clicked, an original podcast from ClickUp. On this podcast, we meet the people behind the business stories and the products that you think you know, and bring you the secret history of how it all came together, to the one moment when it all finally clicked. Today, the story behind the company that beat eBay in online merchant sales and how it plan to build the tools businesses needed – before they knew they need to them – created a whole new class of entrepreneurs.
Ilana Strauss: This is When It Clicked ... for Shopify.
Ilana Strauss: If you've got internet, it's never been easier to buy things online. Instant payment, two-day shipping and free returns for everything from mattresses to makeup have been making hitting the 'buy' button pretty foolproof. But it wasn't that long ago that online shopping was not this simple. And setting up an online store, well, that was even harder.
Craig Miller: So Shopify's origins start kind of in the mid 2000s when Tobi, a German immigrant to Canada, decided he wanted to run his own business and he set up a site called Snowdevil, which sold snowboards. And it was wildly successful for one season until the summer came and no one bought snowboards. And he discovered that the software that he had written was actually much more valuable than the store.
Ilana Strauss: That's Craig Miller, the former chief marketing officer and chief product officer at Shopify. In university, he studied to be an electrical engineer. But like many Shopify staff, it was his work as an entrepreneur that got him noticed.
Craig Miller: In university, I discovered this strange world called affiliate marketing, where you could basically set up a website and refer people to other companies and then just get cash sent to you. It seemed bizarre because I was a full-time student and I just discovered that I had this weird knack for creating these webpages that would show up at the top of the search engines.
Ilana Strauss: This knack ended up getting Craig his first job after graduation. Two guys he met in a bar were starting an online classified ad company called Kijiji. They needed someone to make sure people found their website and Craig was the fourth person hired.
Craig Miller: The thing that was tricky for me was always spelling it. So one of the first things I had to do was buy the domain names K-I-J-I, K-I-J-J-I, K-A-J-I, K-A-J-J-I. Yeah, it took me a long time to figure out how many ways people could misspell Kijiji.
Ilana Strauss: With that weird name and Craig's SEO experience, Kijiji quickly grew to be one of the most popular websites in Canada. Then he got the call that changed his career forever.
Craig Miller: In 2010, I got an email from a recruiter named Doug. And frankly, when he said "You've heard of Shopify, right?" I said, "I think you're a Swedish music site." And he said, "No. No. No. Not Spotify. Shopify." And so at the time, Shopify was a really small startup in Ottawa. I think it had 50, 60 people and they were looking for someone to do marketing. And again, I explained to this recruiter, I am not a marketing person. I have never taken a course on it in my life. I've never read a book on it in my life. I don't know anything about marketing.
Craig Miller: But he said, "Why don't you come meet the team and see what you think."
Ilana Strauss: At the time, Craig wasn't even looking for a new job, but he was curious about what Shopify was all about.
Craig Miller: It was a very interesting set of people working on really, really unique challenges and having a lot of fun doing it. The fact that they were making money was almost an accident because they were more into the technology and the problem at hand than kind of the business case behind it.
Ilana Strauss: In 2010, ecommerce was still a small part of the retail market. Just over 4% of retail sales were made online, yet signs of growth were there. The U.S. Department of Commerce reported a 16% increase in online sales in just one year. Retailers needed to adapt, but many still used websites like billboards.
Catherine Erdly: Really at that time, they almost just conceived of them as an electronic catalog. It was more like a shop window. It was more common for a retailer to have products up or something a little bit about the business, but it wasn't common that everybody had a transactional website.
Ilana Strauss: That's Catherine Erdly. She's been working with small businesses on retail strategy for more than two decades. She says that back in the early 2000s, it was really tough to set up an online store. It was technical and expensive, especially for independent retailers.
Catherine Erdly: They had very limited options. They could sell on somewhere like Amazon if they were accepted. They could sell on somewhere like eBay, but that wasn't a particularly great customer experience. They could certainly sell on Etsy, if they met the Etsy criteria. But if they didn't fall into those categories, then they had very few options. You could pay a developer to create a website for you, or you could teach yourself HTML and do it yourself. But if you weren't tech minded, then you were talking about an outlay in the tens of thousands of dollars.
Catherine Erdly: But then if you didn't like the color of the homepage or you didn't like the order the products were shown in, then you would have to go back to somebody and probably pay them again in order to make those changes. So it was extremely unwieldy. You're talking about a major investment.
Ilana Strauss: When they were starting out, Brandini Toffee was not the kind of company that can make that investment. Hiring a developer to build a custom website? That was way out of reach. Today, Brandini Toffee has four retail stores, a distribution deal with Costco, and a booming online business.
Brandon Weimer: All right. We are here next to our toffee kettles. We're cooking our almond toffee with butter and sugar.
Ilana Strauss: But back in 2006, it was basically a kitchen table operation run by two high schoolers who just wanted to go on a school trip to Italy.
Brandon Weimer: Our parents said, great, go get a job and help us pay for it. And so instead of getting a job, we decided to create our own product, which was almond toffee. It was a recipe I had been taught as a kid in about middle school. And so we started for a few hundred dollars with goods that you can get from the grocery store. And our moms were very involved as well and quickly realized we had a business.
Ilana Strauss: That's Brandon Weimer, the co-founder of Brandini Toffee.
Brandon Weimer: So our main sales at the time were events. A lot of street fairs, a lot of traveling, setting up shop, closing up shop in a more temporary basis. So a website was really our opportunity to create loyalty of people, friends, family, whoever else we've met in between could go to our website to purchase product.
Ilana Strauss: Brandini Toffee set up a store through Shopify, making them one of the first 200 independent merchants using the software.
Brandon Weimer: We wanted to make the product. We wanted to ship it. We wanted to do the tech side and we were small and it was a great opportunity with very low barrier of entry.
Ilana Strauss: In those are early days, this was the market Shopify was serving – merchants wanting to set up their own online stores.
Craig Miller: Shopify was very much a website hosting company that included a shopping cart, and that was what most people associated with Shopify and that was kind of the valuable product that we were selling to the world.
Ilana Strauss: By 2011, Shopify had more than 18,000 businesses paying to use its software and apps and demand was growing by more than 60% year over year. The business model for helping companies build their own ecommerce sites was solid. Yet, CEO and founder, Tobi Lutke had a bigger vision for Shopify. He saw the direct-to-consumer market was beginning to take off and predicted huge shifts were coming in how people shop. He wanted Shopify to pave the way for this retail future. The problem was it was a future not many people could see or understand.
Ilana Strauss: Craig remembers the all-staff meeting where Tobi tried to explain how the company needed to shift.
Craig Miller: I think it was about 2013, Tobi spoke to the company and described something very obtuse. He said, "I want to build the world's first retail operating system." And I remember the crowd leaving, saying, "Yeah, yeah, this sounds great. Let's let's build this retail operating system." And then a day later kind of seeing these people again and all of them kind of scratching their head saying, "Well, what exactly is a retail operating system?"
Ilana Strauss: The retail operating system Tobi envisioned was about more than online shopping. He wanted to be able to provide all the services a business needed to sell directly to customers, everything from sales and inventory tracking to shipping labels to payment platforms. And he wanted to help businesses sell to their customers in many places: on a website, in a storefront, on a smartphone, even on social media. He wanted Shopify to be an entrepreneur enabler. It was a big shift for the company. And a big risk.
Craig Miller: The traditional path for a company like ours would've been to focus on becoming a website hosting provider, of which there were lots of them in the market and of which the future was super certain because we knew what a website hosting company looked like. We knew exactly what to do next, and we knew who our market was, and it was simple. But instead, we took the other path, which was to build out something that we believed was important in the future, but it definitely wasn't a defined market. It was entirely risky to go down this path. But, we decided that that was the direction for the company.
Ilana Strauss: And that's when it clicked. Shopify decided to become the company that would power the future of ecommerce. But deciding on this direction was very different than convincing customers. And as chief marketing officer for Shopify, Craig had to figure out how to sell this futuristic vision.
Craig Miller: I remember the day after Tobi gave this infamous talk, I had a team that said, "Okay. Let's change shopify.com to start talking about the retail operating system." And I said, "Whoa, whoa, whoa, slow down. That's going to be tricky because people don't know that they want a retail operating system." And so my job at the time being the CMO was to sell a retail operating system to a world that wasn't ready yet for a retail operating system. And so I said, "Hey, instead of going out there to the world explaining exactly what we are, especially for a world that's not potentially ready for us, instead let's respond to what they're looking for."
Craig Miller: So if they're looking for a website hosting provider with a shopping cart, let's show up. If they're looking to sell on market places, let's show up. If they're looking to sell in retail stores, let's show up. And once we get them to start using Shopify, let's expose the broader strategy and platform to them, but let's not try and sell them on a concept to which they might not be ready for yet.
Ilana Strauss: So that was the customer marketing piece. To realize this vision of becoming a one stop shop for entrepreneurs also meant Shopify had to develop a bunch of new products.
Craig Miller: And so we had to start thinking about Shopify as being more of a back office for businesses that would include information on their products, their inventory, their customers, information like that, of which once they have that information in there, then they could sell on different channels.
Ilana Strauss: From the beginning, Shopify had built its business powering online sales. But to realize this new vision for the company, they had to do more. For the first time, they needed to build products for brick and mortar retailers. It was a massive project for a company that specialized in software.
Craig Miller: The challenge with making this giant pivot in the company, especially a company that was doing really well, is kind of equivalent to changing the engine of a plane mid-flight. So this was a huge technical undertaking for us to go down this path and it wasn't easily reversible.
Ilana Strauss: Just a few months after Tobi gave his infamous retail operating system speech, Shopify unveiled the first product at the center of its new strategy:Shopify point of sale. Basically, it was the software that turned a tablet into an in-store order system with a credit card reader for payments. Point of sale would allow merchants to process all their sales, both online and in store, in one place. And people in the company were convinced it would be a hit.
Craig Miller: By 2013, Shopify had had sort of a series of successes behind it, and so there was a certain amount of self confidence inside the company that whenever we launch something, people would love it and would start using it instantly.
Ilana Strauss: But point of sale was not an instant hit. Shopify was competing with companies who'd been offering credit card readers and point of sale software for years with fifth and sixth generation products. Shopify was new to this market and launching this service was a pretty big leap.
Craig Miller: It was tricky because I was so excited about it, the entire team was so excited about it. We launched it and after a couple days, we didn't start seeing thousands and thousands of businesses signing up for this because most people still thought of us as being a shopping cart company.
Ilana Strauss: Craig remembers it being a tough time for people at Shopify.
Craig Miller: I'll never forget going over to one of the developers that was particularly disheartened and I said, "Trust me, one day, I'm going to be walking around in a random city and I'm going to go into a store and they're going to be using Shopify POS. And you're going to know this thing paid off and it worked."
Ilana Strauss: This kind of talk became a bit of a mantra among Shopify's leadership. Trust me, the future of shopping is coming. We're building the products entrepreneurs will need to scale their business. They just don't know they need them yet.
Craig Miller: Now, I'm giving you my point of view. I'm sure there were many people at Shopify that said, "What is this company doing?"
Ilana Strauss: Craig admits building products for the future was tricky. Shopify's vision was often too far ahead of the curve for consumers. Like the time they worked with Facebook to create a buy button.
Craig Miller: In probably around 2015, Facebook started experimenting with something called buy buttons and they thought that all you had to do was add a little button that said buy next to a post on Facebook and suddenly people would be buying tons of stuff on Facebook. And it didn't work. And so that team felt disheartened and people said, "Why did we waste all this time? It's not working. This is useless. Like that was just a terrible idea. We should have just not done it all together." But, as is often the case with technology, we were probably there just a little bit early.
Craig Miller: And luckily we kept working with Facebook, year after year, on different permutations of trying to figure this out because we knew that social commerce would be a thing. So I do think there were a lot of times that there were doubts, but I think we would try and be tenacious and being tenacious in technology pays off.
Ilana Strauss: Customers began to see the payoff, too. Brandini Toffee decided to ditch the cash register at its four retail stores and to start using iPads loaded with Shopify point of sale software. Here's Brandon Weimer again.
Brandon Weimer: I think probably an underlying benefit of all of it is a sense of control. To have all that information under one roof divided by channel where we have our online ecommerce channel and we have our point of sales channel –that's helped immensely.
Ilana Strauss: And remember that software developer who is so disappointed that point of sale wasn't an overnight success? Well, the promise Craig made to him did eventually come true. It just took a few years.
Craig Miller: I will never forget it. I went into a store in New York City and I went to pay for my purchase and sure enough, there was Shopify POS and I was super ecstatic. And the crazy thing is then I went to the next door and they were also using Shopify POS. So it paid off. It just took a little bit of time for people to get used to it and for people to start adopting our technology.
Ilana Strauss: Shopify kept building the technology, introducing more apps and services to help merchants continue to customize their online sales and reach their customers directly. By 2015, more than 150,000 businesses were using Shopify to power their stores. Catherine Erdly also started seeing more and more of her retail clients start using Shopify for all the reasons Tobi envisioned.
Catherine Erdly: If you think about something like eBay or Amazon or Etsy, they're hugely powerful in helping small businesses get their products in front of their customers. But they're marketplaces. Basically they have complete control over every aspect of the purchase. But where Shopify, I think, is so transformational is that a Shopify website is the business' website. So if you go and buy a candle from a candle company that has a Shopify website, that company then has your details as opposed to Etsy having your details.
Catherine Erdly: Therefore, that company can build an ongoing relationship with you as the customer, which ultimately is the kind of true path to success for product businesses because it's all about those repeat customers. They're the best customers. They're the ones that really drive the profit.
Ilana Strauss: And it wasn't just small retailers that were using Shopify. Big brands like Budweiser, Tesla and the Los Angeles Lakers were customers. And the company was preparing to go public. Craig says that process became another turning point for the company. Another chance to take stock of the business they wanted to become and the customers they wanted to serve.
Craig Miller: I sat down with Tobi and we actually worked on what's called the founder's letter, which is the first, I guess, page of the prospectus. And it's one where there's actually a lot more freedom. You can describe the company in the terms you want to describe. And one of the things that was very interesting about this is this was probably the first chance for Tobi to really articulate what the company is and what it values and why it exists. And in doing so, we had a, a very interesting discussion, which was do we care about big companies using Shopify or small companies using Shopify?
Craig Miller: And during that process, I'll never forget, he said, "Look, I love all of our customers equally, but if a company that starts using Shopify and they're very large, that's great. But if a company is small and starts using Shopify and they're able to grow over time, like those are the companies that we exist for." And that again, I think just provided some clarity for us as a company. And so we really focused on thinking about our market as being kind of unlimited and about encouraging people to start a business and see where it goes.
Ilana Strauss: This focus on making entrepreneurship available to everyone? It became a kind of rallying cry at Shopify.
Craig Miller: So Nike had a tagline that says, "If you're a body, you're an athlete." And I kind of ripped them off and said, "If you have ambition, you're an entrepreneur."
Ilana Strauss: Shopify didn't just want to help existing businesses. They wanted to take people who had never sold anything before and show them how to become an entrepreneur.
Craig Miller: And so we even started thinking about helping them find products to sell, teaching them how to do marketing and really kind of lowering the barrier to entrepreneurship.
Ilana Strauss: More entrepreneurs meant more potential customers. And even as online shopping became more sophisticated, Shopify made it easy for merchants by keeping the technology simple.
Catherine Erdly: I remember retail tech experts saying that you could build the same tech stack that a legacy department store had on Shopify in 45 minutes, and it probably would work better than the legacy systems that the big stores had because it was designed to work together.
Ilana Strauss: As ecommerce grew in popularity, Shopify grew along with it. Social media fueled a whole new class of entrepreneurs. And direct to consumer sales, they took off. When Kylie Jenner's website crashed the day her lip kits went on sale, she turned to Shopify to help her build her new online store. Gymshark and Allbirds, they became brand names by using Shopify to scale up. By 2019, more than one million merchants were selling through Shopify. Then almost overnight, the world turned upside down. The COVID-19 pandemic swept the globe. People were forced to stay home, and online sales went from niche to necessity.
Catherine Erdly: Bricks and mortar stores all of a sudden had to do the unthinkable. They had to close their doors to customers and they had to move online sometimes within a matter of a week or two weeks. And Shopify was the perfect solution because it's very quick and easy to set up. It's very easy to understand. It has great customer support. It has this whole plethora of apps if you want to customize it. And a lot of people looked around, realized that a lot of people who have Shopify websites are very happy with them, and Shopify was their choice for getting online quickly.
Ilana Strauss: And it wasn't just existing businesses that opened online stores. Many people used the pandemic to pivot and start new businesses from scratch.
Catherine Erdly: It's really interesting to see in 2020 and 2021, where we've had this pandemic and this global crisis, I think it's spurred people onto think, okay, I'm going to start my own business. So, Shopify is perfectly placed for that.
Ilana Strauss: Total sales on Shopify increased by 96% during the pandemic, making the company the second biggest online retailer in the United States. The future that Shopify had envisioned had arrived and much more quickly than they expected.
Craig Miller: We were a company that would debate ideas and concepts vigorously. But once we made a decision, we didn't go back on it. So the exec team at Shopify had a feeling, had some faith, and just drove for something that we felt was the right direction. And we did not have any concerns that we were wrong because we felt that this is the direction of the future. I think the big question was how fast would the future happen?
Ilana Strauss: You've been listening to When It Clicked, an original podcast from ClickUp. I'm Ilana Strauss. Just like Shopify, ClickUp is also committed to making tasks simpler for entrepreneurs. For more information, visit clickup.com to discover how we're making the world more productive. Thanks for listening. And don't forget to leave as a rating and a review in your favorite podcasting app. See you in two weeks.