Shopify and the Hard Thing About Easy Things

It’s happening in newsletters, where Substack gives writers an easy way to try to become the next Ben Thompson. It’s happening in video games, where Epic Games is building the tools and literally giving them away for free to expand the Total Addressable Market. It’s happening in AI, where OpenAI is giving everyone GPT-3 to build on top of.

Sunglass and visor companies lose - by fighting against each other, we erode profit margins and enrich suppliers.

Customers win slightly - they have more choice on the surface, but we’re all offering the same thing, and because we’re paying so much to acquire them, we don’t have room for major discounts now that venture capital isn’t bankrolling us as heavily.

All of the tools and services in the DTC value chain win - more competition means that each of the rebels needs more powerful weapons.

UPS, FedEx, and USPS win - we’re fighting to bring customers online, and more customers shopping online instead of in store means more shipping.

Google and Facebook win - we’re all spending a ton of money on ads.

Shopifywins - there are now four paying customers instead of one, and we’re all spending money to grow the market. Shopify takes a subscription fee and a cut of revenue.

Somehow, despite massive secular shifts and a lot of noise about rising ecommerce penetration, the DTC products themselves have produced only one billion dollar outcome: Dollar Shave Club (two if you count Harry’s).

When the pandemic began, we bought 16% of our things online. Now, we buy nearly 34% of our things online. That’s the kind of hockey stick growth investors like to see, and the ecommerce infrastructure companies’ valuations are skyrocketing accordingly.