Will Shopify Win the War for MLM Distributors after Amazon has Won the Battle for Customers?
The “Amazon Effect” is now an accepted universal term on how online sales have made customers disappear from retail stores and direct sales companies with as much force and devastation as the raging fires in Brazil that are eviscerating the rain forest that shares its name!
But the greater danger to direct sales, unique to direct sales, is the effect that Shopify is having on people who are choosing to sell products in the new Gig Economy.
Shopify reported that in 2018 it had more than 800,000 online stores, 1 billion customers in approximately 175 countries, and total gross annual sales exceeding $41.1 billion.
Not bad for a company that was founded in 2006 by two guys who were attempting to open an online store for snowboarding equipment.
In 2006, Direct Sales with its replicated website technology and e-commerce platform were one of the very few choices where an entrepreneur could launch an online business with a cost-effective infrastructure that otherwise would be an unaffordable option for most start-ups or second income seekers.
$29.00 a Month Gives You Access to the Most Advanced and Effective Technology
In June 2009, Shopify launched an application programming interface (API) platform and App Store. The API allowed developers to create applications and easy to implement plug-ins for Shopify online stores and then sell them on the Shopify App Store. This partnership approach with developers made Shopify as much a destination for innovation as for the products that people purchase every day.
Today, a turn-key best in class Shopify site costs $29.00 a month and a micro-entrepreneur can choose from among thousands of products drop shipped by 3rd party companies or unlike direct sales, sell proprietary products one develops exclusively on their own.
Companies find their way to Shopify from Kickstarter, Shark Tank, Madison Ave. and from an idea at the kitchen table.
Shopify’s success is not limited to the direct to consumer sales model, as they are already utilizing affiliate and multi-level tiered structures to generate sales through 3rd party software solutions available from the Shopify app store. A 15-year-old commission software company named iDev Affiliate is just one of many integrated commission engines available that can pay 10 levels and is available in a subscription service for only $39.00 per month.
Shopify has essentially developed a potential infrastructure that enables someone to create their own multi-level marketing company for less than it costs to join the most current direct sales opportunity.
Shopify is not only the destination of choice for micro-entrepreneurs but offers the very same platform for companies that have successfully scaled into some of the most successful online companies in the marketplace today.
Taylor Stitch launched its online Shopify store in 2010 selling custom and tailored menswear.
Just three years after their launch, the company made an unexpected $1.5 million in sales with its revenue tripling each year since their launch.
BooTea sells all-natural detox teas. In only-9 months after this Shopify store started, they were earning $600k in monthly revenue and today has more than 1 million customers worldwide.
In 2012 a bathing suit company called TRIANGL sold over $5 million in its first year on Shopify. The following year they earned five times that much, moving past $25 million and in 2017 doubled that to over $50 million.
Currently, Sisters, Kim (KKW) and Kylie Kardashian (Kylie Cosmetics) both use Shopify as their e-commerce store and together sell hundreds of millions of dollars in cosmetics within an intensely short period of times with some of the highest visits per month on any e-commerce site on the internet.
Direct Sales Doesn’t Need to Invent New Technology, We Just Need Access to It
For many companies in direct sales, their 2019 technology solutions don’t look that much different than it did in 2006. While changes have been made, we are more often than not leading from behind. We are mobile responsive instead of mobile-first. We promote actionable intelligence when we should be moving to AI and we still believe that most people want to check out on a traditional shopping cart instead of Instagram, Facebook or pay with their iPhone.
The divide between the technology haves and the have-nots has exponentially grown wider because the prominent back-office providers that service the majority of companies in our industry have not adapted their business model to attract and offer the most common innovations Shopify makes available to their distributors at a nominal cost.
Our software providers tend to operate as Apple without an app store. Salesforce without a marketplace to customize the experience. They build an impressive open house but make it difficult to find the front door!
While larger companies can make the investments that are required to stay relevant and competitive with extensive 3rd party integrations, small to medium size companies don’t have the resources or the knowledge to simply leverage the back-office API’s that are made available to them by their back-office providers. As technology continues to become more segmented, specialized and ever-changing, it becomes critically important for the industry to have a vendor business model as well as a company business strategy that gives broad access to these technologies as they become available.
The alternative is not that a particular Company gets left behind but that our vertical will work for fewer and fewer companies.
Companies will be forced to search for hybrid solutions, from sources such as Shopify, where technology can be at the forefront of their plans because it is affordable and accessible.
In May 2017 Shopify introduced a robust promotional engine that doesn’t require a professional programmer. The impact was quickly felt as one in five sales completed online last year, were completed using a discount that included either buy one get one free, free shipping, or discounts available to only a designated class of customers. Also, merchants with an active discount program were eight times more likely to make a sale.
While our vertical is deciding how to move forward, Shopify is not standing still. They are an e-commerce platform moving to become a more complete solution against competing direct sales business channels. In 2019 Shopify validated these intentions when they announced the following innovations:
In April 2019, Shopify announced an integration with Snapchat to allow Shopify merchants to buy and manage Snapchat Story ads directly on the Shopify platform. The company had previously secured similar integration partnerships with Facebook and Google.
In May 2019, Shopify acquired Handshake, a business-to-business e-commerce platform for wholesale goods to provide more options for people looking for stand-alone innovative products
In June 2019, Shopify announced that it will launch its own Fulfillment Network. The service promises to handle shipping logistics for merchants and will compete with an established leader, Amazon FBA.
On August 14, 2019, Shopify launched Shopify Chat, a new native chat function that allows merchants to have real-time conversations with customers visiting Shopify stores online.
If Brian Chesky the founder of Airbnb is right when he says, every company today is a technology company, then direct sales companies must have affordable access to the latest technologies if we are to compete against the likes of a $29.00 Shopify model.
Shopify is not the Problem but the Solution
There’s an old African proverb that says, “If you want to go fast go alone. If you want to go far go together".
Back-office providers need to stop trying to go it alone or leave it alone to clients to solve the problem.
Direct sales software does two things best in class with a strong competitive advantage, admin and commissions. They need to be a gateway to best in class web, e-commerce, and communication solutions.
They need to follow the business model of other established and sophisticated platforms such as Microsoft, Adobe, Salesforce and Shopify who use and identify 3rd Party certified partners to their customers, trained to bridge the gap between the capabilities of their software and the experience their clients are expecting.
There are no significant software platforms in any other vertical that doesn’t embrace this business model other than direct sales, which is one of the fundamental reasons we have not lagged in technology but fallen behind in making it accessible to our customers.
Shopify does not need to be an alternative choice to direct sales, or an inspiration on how we need to evolve strategically. More importantly, it must become the basis for a pragmatic solution that allows us to move forward together.
Today, several direct sales companies are using Shopify’s API for the customer shopping experience and a customized checkout cart integrated into their back office. This allows one single database for data and customer service and access to a state-of-the-art shopping cart with real-time access to their ongoing- integrations. There are also no transaction fees to
Shopify as you can use your merchant account on a customized checkout system.
We have an opportunity for Shopify and Shopify’s competitors to not only be the solution for an advanced and enhanced direct sales customer experience through smart integrations and plug-ins, but direct sales has an opportunity to be the solution for those businesses on Shopify that want to expand their distribution channel into a new distribution model.
Direct Sales companies are brilliant at sales and marketing through personal relationships. Direct Sales software has the best in class technology to track those sales and rewards. Let’s align ourselves with a business model and a strategy that gives us access to enhance both of those strengths, so our vertical becomes the promise of the gig-economy instead of a weaker competitor to it!