The Shopify's B2B Network Effects

2:34 AM Sunday, July 24, 2022 adrian oh 0 Comments

I saw this tweet storm by Austain Cain, who talked about Shopify's big success in creating an ecosystem that serves as a serious moat to the competition.

I started my business, as a co-founder of a company focused on building Shopping Cart for the SMEs - webShaper. It was until years later (~2015) that I eventually came to realize the power of such an ecosystem built by Shopify.

Shopify is the first eCommerce platform company to really understand what B2B (Business to Business) network effects is, and executed it perfectly with an API strategy. 



source: The API economy


Here is the thought process explained in layman's terms.

1) Customer A wants this, Customer B wants that, and Customer C wants yet another.

2) We (platform builders) cant possibly build them all, can we? 

3) Why don't we empower the customer? Or their developers, system providers, etc? Let them DIY.

4) Let's build API, and let's not charge for it (unlike Bigcommerce), remove the friction of usage.

5) Customers hire developers, system integrators, or get vendors to build to their needs utilizing the API.

6) Once the integration is built, the switching cost grows. As more integration is done, so goes (up) the price to switch. This means more customers tied in.

7) Developers, system integrators and vendors will promote Shopify once their integration is done. 

Eg DHL has built their shipping integration with Shopify, and suddenly the entire DHL salesforce = Shopify promoter. Whenever DHL customers asking for a recommendation of eCommerce platform, guess which one they will promote? 

8) The virtuous cycle continues and the mout is built and strengthened overtime.

9) It takes a global ambition and vast development resources to make this happen, Shopify is the 1st one in eCommerce platform space to crack it. 

Are you selling on Shopify and looking to expand your sales channels to Lazada, Shopee, Zalora or TikTok? Or are you on marketplaces now and looking at building your own brands.com on Shopify? Checkout what we do at Zetpy Shopify Plugin, we enable you to scale your selling on marketplaces, brands.com and also brick and mortar store (with Xilnex Cloud POS)


adrian oh

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