how shopify makes money

what do you think Kylie Jenner and The,Economist magazine have in common they,both have online stores that are powered,by Shopify they know that did you you,have most likely heard of Shopify and if,you've ever wondered how on earth do,they make money you come to the right,place the simplest explanation is that,Shopify allows anyone BD or small,mom-and-pop stores all the way to large,enterprises and celebrities to have an,online store where they can sell their,physical goods I'm pretty confident if,you've shopped online in the last month,majority of the brands or stores you've,come across are probably powered by,Shopify hey I'm defective Johnny I'm a,CTO and I work with founders to help,grow their companies in this deep talk,series we focus on some of the biggest,companies today how do they make their,money and what did they do to grow into,the companies they are today so for this,video,let's focus on Shopify now as a CTO I,often find myself recommending Shopify,or talking to my clients and founders on,how they can use Shopify to build their,online stores pretty easily do you,remember how I spoke about how slack got,started in one of my previous videos,well,Shopify kind of got started in a similar,manner let's go back to 2004 we have,this young lad Tobias Lutzke he just,wants to sell snow birds online and he,goes online to find ways to sell them,and he realizes there are barely any,tools that would allow him to sell his,snowboards online but because Tobias is,also a software developer he just,decides to coat together some of the,basic functionality that he would need,to sell his snowboards he just builds it,for himself he just codes the bare,minimum that he needs for his own,personal use two years later this guy,realizes that this internal tool that,he's built other companies will pay good,money to use it as well and that's what,he turns into would we today know where,Shopify now Shopify really hit its,stride right after the 2008 recession he,just started picking up and it grew and,grew and it grew the Shopify went public,in 2015 recently Shopify even surpassed,eBay to become the second largest online,shopping platform other than Amazon in,fact today Shopify is valued at nearly a,hundred billion dollars yeah let that,sink in so this,dive into the numbers in 2019 Shopify,made one point five seven billion,dollars and it made this money from a,million merchants that just means as of,2019,a million businesses you Shopify to,power their online stores so how does,shop if I make money,Shopify makes money two ways,subscription services and merchant,services don't worry I am going to dive,into both of them let me just give you a,quick analogy think of Shopify like a,big mall a big shopping mall and this,shopping mall has a million businesses,in it that's how big Shopify is the,first part of how Shopify makes money,called subscription services stores or,businesses just pay Shopify a monthly,fee to you sheriff I think of that as,rent shopping for charges all these,million merchants or rent every month to,use its platform and what a shot if I,give these merchants it gives them all,the things you would need to sell online,like a website and the pages and the,products and how to manage the products,like all the technology that goes into,building a store so the subscription,price that Shopify charges each month it,charged a different price to small,stores mom-and-pop shops and large,enterprises that have big stores or,mom-and-pop for regular customers for,regular businesses Java charges anywhere,between 30 bucks a month to $800 a month,plus a tiny percentage of each,transaction but for enterprises which,are companies like the Lakers Google,Tesla all these big companies Shopify,products called Shopify plus and this is,significantly more expensive than what,small mom-and-pop shops pay these,companies start paying Shopify at $2,000,a month and that can go all the way up,to $40,000 a month now if your store,makes more than 800 grand each month,Shopify won't charge you a flat monthly,fee it'll charge you a percentage of how,much money you bring in each month so,it'll charge you 0.25 percent a quarter,percent of the total money you make in,that month so you understand how Shopify,makes money from subscription right,that's not all now because these are,online stores they need a lot of,services to continue running so just the,way on your on your iPhone or Android,phone you have apps that you can,download from the App Store,Shopify also has an app store for these,businesses if you're a merchant you have,an,app store or from that you can download,apps that will help you run your,business apps like if you want,QuickBooks to do your accounting right,if you want an app to pay your employees,if you need an app to kind of edit all,your photos automatically on your store,like stuff like that and Shopify allows,any developer to make an app and put it,on and they can charge merchants every,month for using their app some apps are,free but most apps are paid and if you,charge for your app these merchants,Shopify also takes a percentage of that,money Shopify will take 20% of the money,you make as of q1 2020 there are over,4,000 apps available on the Shopify app,store that's a lot of apps Shopify is,making money on most of them as long as,your as long as you're charging for it,Shopify is making money off of that now,another way shop if I make some money is,by charging contractors and experts who,help stores so let's go back to the mall,example for a quick second sacrifice,this big shopping mall that has a,million stores in it and you are someone,who provides the service to stores in,this mall you redecorate their displays,or you organize the inventory you're a,contractor so you provide services so,whatever you charged as a contractor or,as a service provider whatever you,charged any Shopify store any business,Shopify also keeps 10% of what you,charged every store and these people are,called Shopify partners partners are,just contractors or service providers,who can do contract work for the stores,inside Shopify so another way Shopify,makes money is by selling themes so,because these are online stores it's,much easier to just change the layout of,the entire store so if you're a merchant,and you sell things on Shopify,you can buy themes that you can use in,your store so any developer can build a,theme and sell it on the theme store,within Shopify and if you buy one of,these themes shop if I split the money,with the developer who made it Shopify,keeps 30 to 50 percent of the money that,developer made so you see this partners,program it's kind of genius like Shopify,has built these million merchants stores,online stores and it has allowed any,developer to build and ciliary services,they can,build apps and sell apps they can build,they can sell services you can sell,themes and Chapra VAR makes money from,each of those transactions anything that,you need for your store and you're,buying within Shopify shop fair makes,money on each of those things it kind of,created this ecosystem where it allows,others to do the work and it just sits,back and keeps counting the money,rolling in that actually is the power of,platforms we can talk about that in a,future video keep an eye out on that now,let's talk about the second way Shopify,makes money so first one was,subscription services second one is,merchant services this is actually,Shopify selling you services as a,business directly for example let's say,you sell couches you sell couches online,and now it's a big headache to ship,couches I think and go figure it out,yourself or you can actually use Shopify,services to ship this couch and that's,called Shopify fulfillment network,Shopify will fulfill your orders for you,you still have to get them your,merchandise your product to them and,they'll actually ship it out to your end,consumers so it'll actually handle,fulfillment for you for of course an,added cost another way Shopify makes,many within merchant services is is by,selling your shipping labels so let's,say you are not using Shopify to fulfill,this order you want to ship it out,yourself great you might want to print,out a shipping table to stick on it and,send it off Shopify has negotiated,really discounted shipping rates from,all the top carriers and it sells it to,you at a markup which is still somewhat,cheaper than what he would pay at retail,but maybe Shopify had negotiated that,they can ship this cash for $2 and it'll,sell you the label for $3 or whatever it,made that made that dollar right there,so just a quick summary subscription,services where you just paying capify,rent each month to use a product and any,others any other things you buy from,other developers or contractors or,service providers or apps Java makes,money from all those purchases also and,merchant services where Shopify has kind,of tried to find the problems you would,face in running your business and the,hurdles you would face and they've try,to solve them and sell them to you as a,service,things like needing to fulfill orders or,buying shipping labels I'm sure you can,now see how sharp,is kind of valued at 100 billion dollars,they are incredibly diversified between,all of their revenue streams I hope you,enjoy the video thank you so much for,watching if you haven't subscribed yet -,appreciate you subscribing so you can,get notified every time you post one of,these videos please let me know in,comments below if you have any feedback,or any of the companies you would like,us to cover and if you are looking to,build a store and Shopify feel free to,reach out to me if you have any,questions on how to go about it I'd be,happy to help or not know there's Deepak,Dave Jonny signing off see you next time

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