Talking with Shopify

[Interested in Shopify? Click here to learn more!]

I haven’t posted for the last few days because I’ve been traveling to Canada to visit friends and family. On my tour I was able to stop in Ottawa to visit Tobias Lutke and the gang. They’re excited about their new headquarters – downtown Ottawa in the Byward Market – but they’re really excited about the boatload of new features they’ll be introducing to Shopify next month. Here’s the talk:

TheCartBlog: The new space you’re in looks great. Are you excited about it?

Tobias: We’re thrilled. Our old office was so small that a couple of people would have to work at home every day – there just wasn’t enough room. We still have things to do, but we think we’ll be very happy here.

TheCartBlog: So how did Shopify start?

Tobias: We created Shopify as a vehicle to allow us to sell snowboards online around 2003. We were very successful doing that – but as soon as the spring season hit, people stopped buying snowboards. We considered branching out into skateboards and other products, but we decided instead to productize the shopping cart we had developed and make a business out of that.

TheCartBlog: What was the landscape like in 2003?

Tobias: Well, we looked at OSCommerce and didn’t like it. Zen Cart was just getting started at that time, and we considered that too – but the day we started work, the first release of Ruby on Rails was announced, and I just fell in love with it. It mapped perfectly to my ideas about how an implementation should be done. So we were a very early adopter of RoR.

TheCartBlog: Shopify is a hosted service – tell me about that.

Tobias: The idea of software as a service (SAAS) is very appealing. If you look at the things that we’ve been able to accomplish in Shopify, it would be very difficult and expensive for an independent cart owner to do them in OSCommerce or whatever. For instance, we are PCI/DSS compliant. We also have sophisticated anti-fraud models, such as comparing the geolocation of the IP address to the customer’s billing address. We also do things like continuous health checking of payment gateways – so we find out about problems before you do.

(Editor: TheCartBlog has blogged about Shopify’s anti-fraud features before.)

TheCartBlog: What would you say is the main focus of Shopify’s efforts?

Tobias: Well, obviously we want to provide a clean, uncluttered, easy to use cart. But I would say that an area where we have really focused our efforts is making running your business fun and easy.

TheCartBlog: The back end.

Tobias: Exactly. We’ve put a lot of effort into reducing the number of clicks involved in order processing, shipping, and so forth.

TheCartBlog: You’ve also put a lot of effort into skinning, right?

Tobias: Absolutely. We created Liquid for template creation, and open sourced it so others could benefit from it.

TheCartBlog: How much customization beyond theme creation can you do?

Tobias: We’ll actually be coming out next month with an API that will provide web hooks into various stages of the ordering process, to allow third party developers to do integrations with Shopify. When you combine this with Vision, our Shopify-in-a-box test tool, we’re sure we will see a lot of creative people extending Shopify.

TheCartBlog: Does Shopify take advantage of the open-source mindset and crowdsourcing?

Tobias: Absolutely. Just like we’ve open sourced Liquid, many developers have open sourced their implementations to us – we frequently get payment gateway contributions, for example.

TheCartBlog: Wow – those can be so painful to develop.

Tobias: LOL! Sometimes we see them and we say, “here’s a blast from the past” because of the unstructured wire protocol they use.

TheCartBlog: A criticism of the hosted model is that there are ongoing fees for the life of the business. How do you respond to this?

Tobias: Leaving aside the ability of Shopify to add features like fraud prevention and PCI/DSS compliance, let’s just think about our basic business model. With Shopify, if you’re not successful, we’re not successful. Shopify wants you to sell more – our incentives are completely aligned with yours.

TheCartBlog: What’s your response to Magento?

Tobias: They’ve done a lot of things right. But I don’t think you’re going to see business owners modifying Magento – it seems to be by developers for developers. And as I said, we think the SAAS model has a number of benefits that can’t be matched by a licensed product.

TheCartBlog: Tell me about your feature development process.

Tobias: We have a Customer Advisory Council that provides feature input. We also get a lot of input by email, and we do trend analysis on the requests we get from that stream. We don’t keep a formal roadmap; it’s more of a job jar that we work away at. Our feature analysis process always starts with the UI and asks, “what’s the UI impact?”

TheCartBlog: I’m a discounting guy. Let’s talk discounting.

Tobias: We have discount codes, percent off, dollars off, and free shipping. You can also constrain your offers with minimum order amounts and restrict the number of times discount codes are used. Discounts are on the whole catalog now, but we’re looking at ways of slicing and dicing the catalog into “collections” and only offering discounts on those collections.

TheCartBlog: How can independent software vendors like That Software Guy make money with Shopify?

Tobias: Many of our partners are full service website designers who have become Shopify experts and can set up and configure a store for their clients. We also partner with theme developers who are good with templating and Liquid. And as our API opens up, we’re sure there will be some interesting integrations to third party systems. We would encourage you to set up an affiliate account and drive your clients through your affiliate link.

TheCartBlog: Sounds like something I should do. Well, it has been great talking with you. Good luck in your business and we look forward to hearing more from Shopify soon! is a hosted e-commerce solution, headquartered in Ottawa, Canada. Thanks, guys!

Talking with Elastic Path

Elastic Path is a high end online-operations provider focusing on businesses with annual online sales in the $5M-$200M range. I was able to chat with Jason Billingsley of Elastic Path yesterday about his company and the world of shopping carts.

TheCartBlog: Looks like you’ve got a lot of Java in your product – tell me about that.

Jason: Most enterprise software is written in Java these days. There would be a lot of pushback from our customers if we offered a scripted solution. We look at PHP as really an entree into web development, not something we could put into a large scale project. We also have a desktop client which uses the Eclipse RCP, which our developers just really love.

TheCartBlog: What do you think the best entry level solutions are?

Jason: What we tell people who are doing less than 1M in sales annually is that they should really look at Yahoo stores. Some of our conversions involve vendors who are doing $35-40M annually on Yahoo stores, so there’s no question that it’s scalable. They take a cut of your sales, but you save the hassle of maintaining your cart.

TheCartBlog: What about Magento?

Jason: Roy and his team have done something really special … I think this could be revolutionary for the entry level. In fact, sometimes we look at their work and think “gee, that’s an interesting feature; we should do that!” Of course, he’s done the same with our work, so there’s a lot of cross-pollination going on. LOL!

TheCartBlog: So you think Magento could take off?

Jason: I think that if they develop workable migration plans for people coming off OSCommerce, it absolutely could.

TheCartBlog: What parts of Magento are you most excited about?

Jason: The idea of pushbutton upgrade is absolutely brilliant. Now of course, in order to play well with a feature like that, you’re depending on developer compliance with your modification guidelines and best practices.

TheCartBlog: You’re not saying some developers would take a shortcut and circumvent the proper procedures, are you? 🙂

Jason: LOL! You can buy Elastic Path in source or object code format, depending on your customization needs, and we have customers who tell us, “don’t give us the source! We’re afraid we’ll mess it up!”

TheCartBlog: What’s the split between DIY’ers and people who also contract with you for professional services?

Jason: About 50/50. Our customers typically have a significant existing infrastructure, so there’s going to be systems integration work – some want to do it in house; others outsource it to us.

TheCartBlog: Say, speaking of outsourcing, I know this sole proprietorship that does software development

Jason: LOL we haven’t worked with sole proprietors for at least five years.

TheCartBlog: D-ohhh!

Jason: You need to be significantly larger to handle the customers we have. Right now we’re working with outfits like Avenue A – Razorfish.

TheCartBlog: Wow.

Jason: Yeah. We’re actually envious of the creative resources they have – but they’re a great partner.

TheCartBlog: So what’s next for Elastic Path?

Jason: We’re seeing a lot of really unique buildouts now. Of course the classic model of online operations is you have a catalog, you do payment processing and order fulfillment, etc. but what we’re doing now is different things. For instance, there’s the Netflix model of subscription and product queue, or TV enabled transactions where people order products and services using their remotes.

TheCartBlog: That’s fantastic. Congratulations on your tremendous growth, and we’ll look for great things coming from Elastic Path.

Elastic Path has a staff of 80 people and is currently hiring. Their offices are in Vancouver, Canada. Thanks, guys!