Becoming Shopify | Evolving eCommerce Ep.1

Robin Li  

Today on the show, we have Harley Finkelstein, the Chief Operating Officer at Shopify, Shopify is a leading global e-commerce company, providing trusted tools to start, grow, market and manage a retail business of any size. Headquartered in Ottawa, Canada, Shopify powers over 1 million businesses and more than 175 countries and is trusted by brands such as AllBirds, GymSharks, PepsiCo, Staples, and many more.

Hans Tung  

Harley, you joined Shopify in 2010. And now it is your 11th year.

Harley Finkelstein 

Yeah, I’m in my 11th year now, which is about a third of my life, which sounds crazy, but I’ve spent about a third of my life at Shopify.

Hans Tung  

Yeah, that’s it. And today, it’s a special day because I turned 50.

Hans Tung  

I’m sure by the time you reach my age, Shopify will be in the trillions of dollars and market cap. And this is not a forecast. And then what was Shopify back then I remember it was Jeremy Levine and Alex Ferrara from Bessemer, who introduced you to me, but we never met you back in the early days. What was like back then? And how did you decide you want to join the company?

Harley Finkelstein  

My story with Shopify started before I joining. I was born in Montreal, but I grew up in the States. I grew up in South Florida, and I went to McGill for undergrad. And I moved to MIT to Montreal in 2001. To go to McGill, September 11 happened, markets went sideways, and my parents weren’t able to support me anymore. So, I became an entrepreneur, really out of necessity to support myself, I built a little t-shirt business while a student at McGill. And then a mentor of mine convinced me to consider going to law school, not to become a lawyer, but rather to become a better entrepreneur. His hypothesis or his belief was that law school would be like finishing school for an entrepreneur, I would learn how to write and think and be more articulate and critical reason and debate, he was right about all those things. But this particular mentor happened to be teaching law at the University of Ottawa. So I decided to apply to one school, University Ottawa law school, and I moved to Ottawa, which is the capital of Canada, had no friends no family here. And like I always did throughout my life, I had always found that entrepreneurs were sort of my tribe, they were my community. I just want to meet people, I want to make friends. I asked where the entrepreneurs are, and a bunch of entrepreneurs were hanging out at a little coffee shop in in Ottawa, I walked into this coffee shop, and there were four or five entrepreneurs. Tobi was there as well and began talking to Tobi, we became friends. And I decided that what he was building, he was just transitioning from a snowboard business to the actual software business. And I loved what he was doing. I love the fact that he was basically democratizing e-commerce. He made it easy for everyone to start a beautiful, scalable online store. And I became one of the first stores on Shopify and spent the rest of my law degree and went to business school. Not really studying, but rather, running an online business. And after I finished grad school, I called Tobi and asked him if he would have me join him as the first non-engineer and that was 11 years ago, and it’s been the rest of my life. What a great story.

Hans Tung  

I mean, I could relate a little bit to that. But during my first year at Stanford, my father passed away, so I had to sell Cutco knives to get tuition for the next quarter. But your story is much better.

Harley Finkelstein  

Well, actually, the Cutco is so fascinating because whether it’s Cutco or selling anything door to door like that, it’s a wonderful experience because it forces you to learn how to sell, how to market yourself, how to figure out what are the possible restrictions or barriers to success, and then very quickly alleviate them. But it also has a low barrier to entry. Anyone can sell Cutco knives. And in 2005, 2006, most people cannot start a direct-to-consumer business. It either you had to sell in a marketplace like eBay, or Etsy or Amazon, which was inexpensive. But, you know, you were renting customers most effectively from those marketplaces, the flip side of it is you could pay a million dollars and have Oracle or Magento or demand, we’re building an online store. But no one had that kind of money. And so exactly, it was just too expensive. So in the same way that I think you had the opportunity of doing something that had a low barrier to entry, the reason I was so attracted to Shopify in the very early days was it felt like it had a low barrier to entry. But it also had an unlimited ceiling in terms of it had no ceiling, in terms of what I could possibly do with it with a piece of software like this.

Hans Tung  

Yeah, I think democratization is definitely a key investment theme for us and applying into many categories.

Robin Li  

Yeah, you talked a lot about how Shopify is doing this for any entrepreneur. And a lot of people think Shopify is just the SaaS company that helps small businesses launch their e-commerce, but it’s actually more of a retail operating system. And I like I saw this amazing image that you guys had in your recent earnings about this, like storefront, and then had all the different sections of a business, whether it’s like payments, or fulfillment, or shipping or order management, like super incredible.

Harley Finkelstein 

It’s interesting, because the term you’re using is accurate, is we are trying to build the world’s first retail operating system. But the reason that is interesting is because no one’s searching for a retail operating system like that, no one knows they want that until they actually realize that’s actually what I want. But if you think about the timeline of Shopify, and when I started, we were a very small company, we were focused on helping small businesses sell online. And that was it. And then over time, a couple things happened. One thing that happened was some of those small businesses that started out at their mom’s kitchen table grew to be category leaders, they became the GymSharks and the AllBirds, Kylie Cosmetics, they became incumbents. And what was interesting to us was, there was no graduation off our platform. And if you think about most software applications, let’s use email marketing or basic accounting, you know, basic accounting, you’d start with an excel spreadsheet, or maybe a book and an Excel spreadsheet, and then maybe you go to QuickBooks or zero, and then eventually maybe go to Oracle Financial, there’s this natural graduation as you scale. But we were watching merchants go from completely, no sales, net new business to do hundreds of millions of dollars, and they were not leaving Shopify. So the first evolution was, we can help much larger brands as well. And that was Shopify plus. And then we realized something else was happening, which is the future of retail and commerce, from our perspective, was not gonna be limited to online, we really believed it’s gonna be online, offline, on social media platforms on marketplaces, it really is going to be agnostic, it’s gonna be based on what the consumer wants. And if we were going to be the most important piece of software in retail, we had to enable entrepreneurs and businesses and brands to sell everywhere. So we introduced things like Shopify point of sale for brick and mortar stores, we became the launch partner with Facebook and Instagram, we connected to walmart.com, and Amazon and eBay to enable merchants to sell wherever they want. And then probably the last iteration was, wait a second, we also have something else that’s happening. If you think about Shopify, for just one second, you pretend that we are a retailer. And you were to aggregate our stores, let’s just use US for example, we would be the second largest online retailer in America. Now that insight was really fascinating, because what that told us was, we actually are entitled to incredible economies of scale because of our size. But instead of keeping those economies of scale for ourselves, what if we actually distributed them to small businesses? So what if every small business as a Shopify gets payment rates that only just big companies usually get or fulfillment rates, or access to capital or access to incredible functionality? What would happen? And the end result is you have this incredible leveling of the playing field or an additional point in additional democratization, whereby when you start on Shopify, you not only get to sell anywhere you want, but you also get all these back office capabilities like payments and shipping and capital that we can offer you at rates that frankly, you couldn’t get anywhere else.

Hans Tung  

Three words so far, democratization, retail OS, and scale, massive scale, obviously during COVID-19, with offline being shut down, e-commerce grew a lot. And we’re fortunate because we’re very sizeable, probably the most active e-commerce investor on the world, the biggest portfolio there is. We ended up investing in BigCommerce, the baby Shopify now and then Affirm. So very happy about the Affirm partnership with you guys. You have so many merchants, and it’s such a massive scale. What are some of the merchant stores that you can share with audience of how they have whether through COVID-19? How do they overcome some of the difficulties or thrive during this time?

Harley Finkelstein 

To be clear, what happened for us internally, when COVID hit, which was sort of mid-March was first we shut down the offices to make sure that our employees and our staff and our team were safe. But then we immediately said, Let’s throw out all our plans, let’s focus on everything possibly we can, you know, we’re over 5000 or 6000 people now, let’s do everything we possibly can to put out new products, new functionality, so that small businesses can not only survive, but in some cases may be able to thrive through this. So very early on in COVID, we increased our capital availability, we added $200 million to the pot of available capital for merchants, we expanded beyond just the US for capital to places like Canada, UK, we added new functionality for brick and mortar stores, which is local pickup and delivery so that every brick and mortar store who had to close their doors can now operate as a fulfillment center and can now actually focus more on digital commerce, we also created a gift card product. So any service-based business that traditionally wouldn’t have come to Shopify can also, you know, a hair salon or a dry cleaner. They have a great customer list, maybe they have an email list where they can go to their most loyal customers and say, look, we can’t sell you these products, because we’re service-based, and you can’t come in to see us. But here’s a gift card that you can buy right now, which gives us cash flow immediately. And you can redeem at a later time. And sort of macro level. I think Shopify really adapted quickly to this new environment. And we did everything we could to help entrepreneurs and small businesses. We also saw new categories of merchants come to Shopify, we saw categories like grocery, which we’d never seen before. I mean, we had very, very few grocery stores on Shopify, whereas now two of the largest grocery store chains in Canada, are now using Shopify to sell meal kits and sell their 12 most popular items. And then what we saw from our existing merchant base was incredible resilience. One of my favorite stories is what Ben Francis did a Ben Francis is the founder of a company called GymShark. GymShark is one of my favorite brands, I wear their stuff all the time. And it’s an important story to me, because Ben started GymShark out of his dorm room while working as a pizza delivery boy. And it’s grown to be a category leader, globally amazing brand. Well, immediately, what they realized was, people were not going to gyms anymore. And the most, the number one reason for purchase of GymShark apparel and products is to use an in gym. So they completely changed their approach to marketing to brand. And they actually called themselves HomeShark as opposed to GymShark for two to evidence and to show that, hey, we understand what all of you are going through. And I’m seeing a ton of that I’m seeing restaurants again, that was not really in our business that are becoming retailers that are becoming wine shops that are doing incredible meals. So the resilience that we have seen has been nothing short of dramatic across the entire merchant base. And it goes to show you that entrepreneurs if at their core, whether they’re big brands or small brands, they’re resilient. We saw Heinz ketchup, amazing story, Heinz, which is again, not a company that ever went direct to consumer, not a company traditionally when it comes to Shopify, within a couple of weeks, they called us and I think on a Monday they called and said we’re thinking of doing a direct-to-consumer condiment online store on Shopify. I think by Friday or Saturday we’re up and running and now Heinz at home is available to anyone. So, yes, the entrepreneurs and small businesses did really well, but some of the largest brands also adapted and pivoted very quickly as if they were entrepreneurs.

Hans Tung  

Well, I hope those GymShark users are all using Peloton.

Harley Finkelstein  

Yes, well, I don’t know that for sure. But I know Peloton, I certainly have been using my Peloton way more than I think. They’re doing a great job. I’m a big Peloton fan.

Robin Li 

I mean, you talk about a lot of these, you know, new entrepreneurs as merchants on your platform and actually want to ask Here’s a little bit about all the entrepreneurs who are building out a platform. You have already 600 apps, right? And over what, like 30,000 developers?

Harley Finkelstein  

So our ecosystem is unequivocally a committed in Shopify. And we not only nurture it, but we care deeply about it. We, in the early days of Shopify, we began to get lists of feature requests from our customers, from our merchants. And a lot of them were really good suggestions. Like, hey, can you guys create your own payment gateway so we can get better rates, or have it integrated into the onboarding? But some of the feature requests were very specific to a particular type of business. So an example would be, hey, Shopify, can you create a tool that converts shoe sizes, from US shoe sizes, to European shoe sizes, I can see that for some merchants, that is incredibly important. But that is not what most people need most of the time.

And so in the early days, we made this decision that Shopify core offering will do what most people need most of the time, full stop. And that anything beyond that, that is specific to a vertical or a particular industry or particular need of a business, we would leverage and create entire platform so that third parties from all over the world can build on top of us. And that is turned out to be one of the largest partner ecosystems in tech and software. Even as we’re having this interesting conversation, there are 1000s of developers and freelancers and companies all over the world, thinking of new applications and new functionality to make Shopify better. And at the same time, we’ve created an entire ecosystem of agencies and freelancers, whereby if you were to walk into an agency in Oklahoma, or Budapest, or Tel Aviv or Brazil, and you were to say in an online store, there’s a very good chance by default, they will build it on Shopify. And that is, because we’ve and those are the 30,000 merchants, 30,000 partners, you’re talking about in the last 12 months, more than 30,000, these agencies have brought business to Shopify. And I think the reason that we’ve been successful long term with this ecosystem is because you have to borrow, I think they call it the Bill Gates line. But I know that O’Reilly also talks about this, we have really tried to create more value for our partners than we capture for ourselves. And over time, we want them to make more money. Now, in some cases, we ended up going into their space. So you know, in the case of fulfillment, we now are doing Shopify fulfillment network, we are incredibly transparent with those partners to say, look, this has crossed the threshold of what most people need most of the time, and therefore, we have a responsibility to build this ourselves. However, here is the opportunity for you going forward. So even though you see us going into fulfillment, we are not going to do refrigerated fulfillment, we’re not going to touch perishables, we’re not going outside of the US. And I think we’ve always been thoughtful about that relationship and dynamic with these third parties. And that is built incredible trust and we don’t take that for granted.

Robin Li  

Can you talk a little bit more around this evolution of Shopify as a revenue model, especially like these two main buckets around subscription versus merchant solutions that you touched on a little bit just now.

Harley Finkelstein  

I mean, merchant solutions didn’t exist back when, you know, we were first getting started, it was simply a subscription was $29. We did play a little bit with a percentage of GMV initially, but we didn’t have any merchant solutions so that that bucket didn’t exist. But really, the pricing model for Shopify is quite simple. We want to make it really, really easy to get started, meaning it should be affordable, you should feel that there’s great value for it. And over time, as the merchant become more successful, we want you to use more of Shopify as solutions, we want you to use payments from us and capital from us and shipping from us. In the case of Shopify plus that’s a more interesting one because our initial pricing on plus we launched it in 2014. And it was really launched. It’s really just a way for people the most successful merchants to upgrade to it was really a graduation place for our most successful merchants. We never really anticipated we would see so many net new merchants migrating off you know, Toms Shoes, for example is now on Shopify and Rebecca Minkoff and Steve Madden and Procter and Gamble and Unilever and Snickers and all these crazy companies, Budweiser, that wasn’t really the intention, the intention was let’s give a place and create a product for the most successful direct to consumer brands started on Shopify to graduate to. So the initial pricing was $995. And that is particular, it was not $995 a month. And over time we have moved it to a model which we think is still incredibly the value to cost equation is so far in the site of value, it’s now $2,000 a month or 25 basis points. And the reason that we like this model is because for some of our merchants, if they have a huge month 25 basis points feels incredibly affordable, it feels incredibly fair. If you compare that to any enterprise e commerce platform, it is by is far less. And there is some price elasticity there. But we fundamentally think that it is a really great value from a product perspective. And if a month goes by that you don’t have any sales, well, it’s just $2,000 a month. So, we’ve been playing every couple of years with the pricing of plus, and we like we’re at right now. But the truth is, the enterprise ecommerce space was simply ripe for disruption. This idea of RFPs, this idea of six months sales cycles, I mean, God, like people go golfing with each other used to go golfing with each other and have steak dinners, that is just not our style. So, the existing enterprise e-commerce market, it just felt dated, it was a lot of trade shows, it was these massive installations, they’d fly 30 people into your office, and the pricing would be astronomical. So, Shopify still focuses on the entrepreneurs. And that’s who we fundamentally care about most. But some of these larger companies, including that large CPGs, they’re acting very entrepreneurial, they want things that are fast and adaptable, and they want to be able to hook into ShopPay or Apple Pay, or cross sell on Instagram, or walmart.com. And they can do all that from Shopify, at a price that feels fair, but also allows us to share in the upside as they go really big.

Hans Tung 

Yeah, just listening to you talk about adding more value to your customer and your partners. And then you take from them reminds me a lot of how Jack Ma and Alibaba used to talk about growing the ecosystem. And how Leijun from Xiaomi try to provide more value to the Xiaomi. Top fans and users as well. As you think about providing services to your users, you touch on a number of features and partners. What is working with Facebook or Walmart, or Affirm? Can you talk through the logic you guys have in rolling out each of these major partnerships and features?

Harley Finkelstein  

Yeah, let me give you a quick anecdote. When I was a kid, every couple of months or every couple years, a video game would come out that I would really want. So I would go to my mom and dad and said, hey, there’s new video games coming out, I really want it. And if I was lucky, or is my birthday or something, they would say great, I will buy for your birthday. And the way that we would go ahead and complete that purchase would be as follows. My birthday is November so and in Canada in November, it gets quite cold. My father and I are my mom would go to the store where they sold it the GameStop or whatever it was. And we would wait outside. And at 9am or 8:30am, or whenever the store opens, the doors would open, we would walk inside, we picked the video game up, hopefully it was still there, we would then go to the cashier, wait in line, pay for it again, walk out and go home and use a video game which would be really fun. That is how retail worked at that point. It was all about the retailer dictating to the consumer. Here’s how you buy your shop at this time you walk through this thing. Here’s how you checkout the payment methods we accept. That’s it. And frankly, that’s how retail operated. It was all about the retailers making the decision on how and when and why and what is being purchased. What happened was ecommerce completely democratized distribution of retail and commerce. So, what we’ve seen happen is retailers now are taking instruction from the consumer, the consumer is now dictating how he or she wants to purchase. And that is completely different than anything we’ve seen in the past. So, if you believe that, and I think at this point, everyone believes that. But in the early days of Shopify, it was still something that people were skeptical about. We then think that for you to be successful as a brand, a merchant of business in 2020, but in 2030, as well, you need to be able to sell wherever your customers are. And if this was 150 years ago, or 500 years ago, customers would be in the town square, which is why the baker would sell his bread or her bread in the town square, and the cobbler would sell shoes in the town square so on and so forth. But now consumers are hanging out on marketplaces. They’re hanging out in places like Walmart. They’re hanging out on Instagram and Facebook and Pinterest. And they are online. There are pop up shops and farmers markets. So we believe that our responsibility is to enable merchants sell anywhere that they potentially could have the consumer and more channels that open up, that’s a great thing because it means the brand can sell in more places, it also increases the level of complexity. And that’s what makes Shopify so valuable, we continuously simplify all that complexity. AR and VR is popular, it’ll become a much more popular channel. If this was 10 years ago, MySpace would probably be a channel, we are agnostic to what the channels are, I mean, the online store, we think is still the most important channel because it’s owned by the brand, it’s like their email list, it’s owned by them, whereas all the other channels belong to someone else. So, we believe it, we have the onus on us to make sure that we integrate and make it really easy for even a single person operation to sell at 20 different channels, all via the Shopify retail operating system. And that’s the reason why we show up. And we do these great deals with companies like Facebook and or Instagram, or Walmart, or eBay or Pinterest, because that’s where consumers are hanging out.

Hans Tung  

You mentioned MySpace, we were in college, MySpace was bigger than Facebook, right? You probably don’t realize that or don’t remember that.

Harley Finkelstein 

But that’s just the point. If MySpace was popular today, Shopify would have MySpace channel. Why? Because there’d be people hanging out there. But MySpace doesn’t exist anymore. So no one’s hanging out there. So we actually think if you sort of think about it, like a hub and spoke model, all the different spokes or all these different channels, and right now, maybe there’s eight different channels that are really valuable for most merchants, maybe there’s five, but let’s just say there’s five to eight of them. There may be 150 channels in the future. And some of those channels may be niche marketplaces, we work with a company that sells used musical instrument marketplace. Well, that is a really important channel if you’re selling us musical instruments that you want to cross sell on top of, or cross sell to. But frankly, that is irrelevant for most of our merchants. So we have channel SDK so that anyone can also add a Shopify channel, so our merchants can easily push products there. But the idea is that all feeds back into one centralized back office. And that’s where you see a single view the entirety of your retail operations. And that’s what’s important.

Hans Tung  

That’s the retail OS. When we look at Square, we look at Alipay, they introduced capital or pay with some kind of ways to work with their merchants beyond just the flow of goods. There’s also been touch flow of capital, you guys have been a lot of inroads with Shop Pay and Shopify Capital, and etc. Can you chat a bit more about that?

Harley Finkelstein  

Yeah, I mean, the Capital One was, it’s so easy to answer because the relationship that Shopify has, with our more than 1 million merchants is quite unique relative to most software companies. When a merchant says that they are going to work, and they run a Shopify store. What that means is we’re going to work quote unquote, means they’re opening their laptop, or they’re at their desktop, and they’re in the Shopify admin. Shopify, for most of our merchants, is synonymous with them doing their work. So wherever possible, we always try to figure out what we can do for them, where they can have a better product experience, where they can pay less money. And hopefully, there’s a revenue opportunity for Shopify as well. And one of the things that we noticed was a lot of our businesses, a lot of the small merchants on Shopify, they found it impossible to get any type of capital. And banks didn’t want to lend to them. If they were getting some sort of lending or some sort of cash advance, the rates were astronomical. And it was because no one had enough view of their business to make effective, efficient, timely underwriting decisions. But we know a great deal about these merchants, we know the quality of their traffic, we understand what they’re selling, how much they’re selling, we understand where they are, you know how many employees they have, because we know how many staff accounts they have, we’re able to actually have a much better view, whereby we can actually add some just really smart AI and machine learning technology on top of it and do instant underwriting. And because now we have sufficient capital on our balance sheet, we can lend and provide cash advances to the tune of over a billion dollars to small businesses. And the neat part about it is what the money is being used for. They’re buying inventory, and they’re buying more advertising. So it’s this incredible site. Exactly. It’s that fly, what’s his great cycle, this incredible like the cycle of success, where we help them with capital, they make more, they’re able to pay it back. And what we see over time is a lot of our merchant take capital paid back in some cases early and get we get more capital. And so this idea that we can also play the role of their capital partner just makes a lot of sense. One of the things we’re trying to do with Shop Pay, you also see this with fulfillment is consumers expectations have been completely changed. We want things fast; we want to in 48 hours, we want an affordable shipping price. We also don’t want to put in our credit card information, every time we shop we don’t want to put in our address because there’s a five digit zip code. But in Canada, there’s a six-digit postal code, which is a combination of alphanumeric characters. So that is a real pain in the ass. It is not easy to do that, especially on a little iPhone or a smartphone. So, one of the things we realized was, one, we think that we can help our merchants on our platform, maintain that expectation level that consumers have been reset with, we’re trying to do that with fulfillment. But with Shop Pay, we also realize that your favorite brands on the internet, for the most part are on Shopify. So if you’re a consumer, and you want to buy sneakers from AllBirds, or lipstick from Kylie or Jeffree Star, or whatever you want. But all of those stores are on Shopify, which means that we we’re not a consumer brand, we’re kind of a brand behind the brand, we still can make it incredibly effective, efficient, reduce any friction at all, by making the checkout those that enable the checkout the shop pay super simple. And when in a pre-COVID world, when I used to give a talk at an event, I would often do an experiment on stage and in front of 500 people. And I would say I’m going to check out of AllBirds in 12 seconds. And if I can’t do and they would time me I would buy everyone in the room AllBirds and of course I would do it in like four seconds because Shop Pay is so fast and so easy to use. But what that’s doing is back to that leveling the playing field, it means that even if you are a one person operation at your mom’s kitchen table, just getting started, you can now offer a similar checkout to what Amazon offers, and you can get access to this incredible accelerated checkout, you also get access to capital and payment and all these things all together. That’s what we say when you hear us say we’re arming the rebels that we want to give the rebels quote unquote, which really are the independent businesses, an unfair advantage, they can compete and they can win in some cases over the largest companies on the planet.

Hans Tung  

You’re the Android OS of e-commerce.

Harley Finkelstein  

But I understand the metaphor there.

Robin Li  

I am obsessed with Shop Pay. So I love the fact that like when the text message comes in to verify that it’s you I don’t even have to type it in because you can just tap.

Harley Finkelstein  

What I’ve started doing recently is when I encounter a store on Shopify, or even not on Shopify, but certainly on Shopify, that doesn’t have enabled, I immediately messaged them when I encountered a brand or a product that I want to purchase. Actually, I just bought some, I like these MUJI pens. And I just tried buying some MUJI. The experience of MUJI is just atrocious. I mean, it’s horrible. So I sent out a tweet saying, one you guys got to move to Shopify, but you also need Shop Pay, because it took me 12 minutes to buy something, it should take me 12 seconds. And I think that’s the reason I love this so much. I love the fact that we’re leveling the playing field. But from a consumer perspective, it’s just a pleasant way to purchase.

Robin Li  

Yeah, I get really excited and delighted when I find out the app. Like. And actually touching upon that. You also have a Shopify app now for consumers. Now I can even track all my shipments that are coming in, which is kind of exciting, but also kind of daunting that I have shopped so many times this past week. Can you talk a little bit more about the app? And maybe the evolution of that?

Harley Finkelstein  

I said this even just a few minutes ago, Shopify is a brand behind the brand. We like making our merchants and brands look good. And for the most part, most consumers that are buying off a Shopify store don’t even know what the Shopify store is very intentional. However, one of the things we’ve noticed through the Shop Pay the out in the wild. We also had another app called Arrive initially, which these were sort of things we were playing with shopping, we knew it was a great idea, but the idea was can we help consumers track their packages across every store? If you buy something on Walmart, and you want to see where the package is, you can check in Walmart.com, go to your admin and see it on Amazon, same thing on eBay, but none of them are connected. So the Arrive app, which started really as a hack day project at Shopify was just something that allowed you to track your packages. And it would begin to think well if we combine this amazing application called Arrive, which is this effectively a shoppers helper or a shopping assistant with shop pay. And we wrap it up in this thing called the Shop App, could we make shopping more pleasant, more delightful to use your term? And we think we think we could. So the idea of shopping is really this idea of a shopping assistant or shopping concierge, where all your packages are easily tracked, you can see no matter where they’re purchased from, you can easily see where they are, you can see when they’re being delivered. But you can also have a relationship post sale with those particular merchants. So, a merchant that I purchased from a week ago, can send me something this week that says, hey, you bought, you know that pair of shorts, we actually have a T-shirt to go with that. That’s good, that would look great together, it allows for a richer experience. And then finally, what were things we’ve added to it for COVID is we’ve also enabled functionality so that you can find local businesses in your in your city to shop from. However, unlike most of these apps, the sale still goes back to the merchant, we don’t want to create a marketplace, we really want to create a shopping companion. So you can discover, you can communicate, you can have a relationship with these great brands, but the sale still happens on their online store or wherever you’ve purchased that from. And it’s amazing. It’s I think it was top three or top four shopping app, and is still in the iOS store. People really seem to like it. And it just makes online shopping a lot easier.

Robin Li  

Yeah, thank you for that. This is actually a question for Hans. GGV is a very early investor of Alibaba. And you saw the evolution of their business model going from a C2C platform Taobao to a very successful B2C platform Tmall. And you know, you mentioned a little bit earlier to Harley that, Shopify is the Android to the apple. So what’s your take on the competition between Shopify and Amazon?

Hans Tung 

Yeah, Amazon obviously is an amazing company. They started with B2C and start to come up with other innovations. But these days, when you actually know well, merchant was Amazon may do, especially a brand we do very well initially, but over time, there’s always a risk of white label products that come out of Amazon platform. Whereas with Shopify, you don’t have to worry about that it’s the brand behind the brand. So if you think of Amazon as a sort of iOS of e-commerce, if you will, then this is more of a crude analogy, but Shopify seems to be the Android OS of e commerce. And we all know that Android is much bigger worldwide than iOS. And you’re going after the initial going after the bottom 70% of the pyramid, but increasingly, even the top 30% are reaching out because they need more than one channel they need. They need more help, can’t depend on one partner or just on their own need to move faster. And you can roll it out faster with Shopify.

Harley Finkelstein  

I totally agree with you actually, what you’re going with this is exactly how I think about it too, which is that consumers have begun to vote with their wallets to buy from independent brands, they have this and that that is a new thing. Like this idea of it has to be fast and cheap. That’s all the only reason I’m buying something that has changed dramatically. Consumers still feel like there’s almost a renaissance of what we want to buy from our local baker or local cobblers I used earlier, consumers are voting with their wallets to support independent brands in a way that I don’t think we’ve seen, at least in my career before. And it’s almost unequivocal that if a consumer is able to have a great shopping experience, so you know, generally a similar shopping experience to a very large company, but they can buy directly from the brand. They’re going to do that. And I know GGV thinks a ton about direct to consumer. What I find fascinating or frankly funny about direct to consumer is almost spoken of as a fad. It’s this trend, and it’s the way it always should have been the problem was brands, independent brands, and entrepreneurs didn’t have access to do that. And I always think about this example, which is the Kylie Jenner example, If you think about what Kylie built, and you juxtapose that on what Michael Jordan did with the Jordan Brand, both have sold billions of dollars of product. But Michael Jordan doesn’t own his brand. Whereas Kylie does 100%. And you think about all the sponsorship deals, David Beckham, with Adidas, or you know any of these companies, no one owned their own brand, because no one had access to it. And Kylie has 100% of Kylie Cosmetics, or she did before she sold it, that she owned herself. I think is so amazing.

Hans Tung  

There’s a big difference in 30 years with the proliferation of tech and so many tools now available. Its concept has evolved dramatically over the last few decades.

Harley Finkelstein  

And it’s like creators, why do creators love YouTube so much is because for the most part, they’re able to have a direct relationship with their fans. Now, obviously, there’s a platform there with YouTube. But generally, there is some malleability there, they’re taking their fan base off of YouTube and bring him on to TikTok, or they’re bringing from TikTok onto Instagram. And then the room lives there. The idea that we’re actually putting more power in the hands of creators, entrepreneurs, makers, there is no way that anyone can think that’s a bad thing. That is a wonderful thing that’s happening.

Hans Tung  

I’ve been involved with a few companies that ended up being over $50 or $100 billion dollar market cap. And the common characteristics are always democratization, increasing consumerization of their offering. So it’s easier for a little guy to use some kind of OS in order to build that ecosystem around that OS, and massive scale and channel and just make everyone better, you can do that. This ecosystem would be absolutely amazing.

Harley Finkelstein  

It’s totally true. You’re so right about that.

Robin Li  

You know, given that Shopify is so global these days, and more than 30% of Shopify revenues from outside of the US, how do you decide which markets to go into more or further?

Harley Finkelstein  

Shopify really started as a product focus on the English-speaking world, we always had the functionality to enable the storefront to be in any language you want. But up until about two years ago, maybe a year and a half ago, it’s not that the backend, the Shopify admin, that retail operating system was only in English. And we were in 175 countries. In terms we had merchants in 135 countries. At the time of IPO, which is five years ago at this point in more than five years ago. However, we were not localized. It’s neat to talk about our partnership with Walmart recently where, you know, in the US if you’re a merchant shop, that you can push your products to Walmart’s marketplace. We weren’t thinking like that about Japan. And now we are. And so now actually, we have a relationship with the Rakuten channel in Japan. So in the last couple of years, we’ve really taken a very conscientious approach to what does it mean to be the best product or to have product market fit in those countries. And we selected a number of geographies, number of regions where we thought, with translation with local payment methods with the right partners, we think Shopify could actually be the very best product in that region. And when we didn’t think that we could be the very best product in that region, we simply said, we’re going to leave that for a later date. And we’ve been able to make great headway in Asia, we’ve been able to make great headway in Western Europe, South America. But I think our approach now is very different to what it was, let’s just allow you to translate into any language. And we realized that if you want to do well, in India, you have to have a really great way to do cash on delivery. And in terms of payment methodology, and if you’re going to work great for merchants in China, you need to make sure that you’re able to connect with the right marketplaces there, which is very different than marketplaces that you’d see in the United States. So I would say that language, local payment methods plus partnerships, if those three together lead to what we would call strong product market fit in those regions, then we put people there, and we really try to figure out a way to win that market. So, I would say that international in terms of the International growth, I still think there’s so much ahead of us right now. I think we’re the very best product for the English-speaking world. And you see that just in terms of our penetration of those markets, and our market share in those geographies, but we have a lot of tricks up our sleeve international that’s coming up. And I think the way we’re approaching it is we’re trying not to rush into it. Actually, it’s one of the benefits of being in Canada, Canada is such an international real country, diversity is unequivocally our strength here. So we approach things with as such a cheesy term, we proceed with such great empathy because we just understand even in Canada, you know, we were to language country. If you got to come back here to Montreal, there are some regions where you have to speak French and there’s no one speaks English in some of these places. So we try to bring deep empathy to it. And I think that’s a better strategy long term.

Hans Tung  

I like the word empathy. My wife is Canadian, and she always thought that Canadians are more empathetic and that’s a very important quality to build Android iOS system for the world.

Okay, what’s the habit that you have had that changed your life?

Harley Finkelstein  

I grew up with anxiety. I’ve had anxiety since I was a kid, I didn’t know what it was. I didn’t know what to call it. I just had wake up every morning with this feeling and I’ve now been able to determine it is anxiety and I’m happy to be a bit vulnerable on a podcast even though we’re talking about mostly business stuff. And a 10-minute sit in the morning with insight timer, doing some meditation has made me a better leaders, maybe a better husband and dad and I know a lot of people. Our world’s talking meditation, but it has changed my life dramatically for the better.

Hans Tung  

Oh, so important sharing, what’s something you’ve read recently that you will recommend?

Harley Finkelstein  

I reread Anti Fragile recently when COVID hit. I read anti fragile years ago, I think it’s brilliant. I’ve read the Black Swan and although, but it felt like it was a really anti fragile time. So I read it with a bunch of people at Shopify, sort of as a book club. And this idea that when something breaks, it can actually get stronger like the immune system, or humans going through a crisis like COVID or pandemic, it just felt like the most relevant book, so if those of you that haven’t read, or read it years ago, and you forgot about it like I did, it’s a great book to reread right now.

Harley Finkelstein  

careers.shopify.com, for sure. I can definitely give you a great reference. And then, you know, pawns will be a very unhappy with me, but you can turn the book club like that.

Hans Tung 

I’m sure we’ll figure out why. I’m a happy shareholder in Shopify as well. So they always wait to play the growth. Last question. If you could have dinner with three people that are alive, past or present? Who would it be?,

Harley Finkelstein 

My family. We came to Canada as immigrants in 1956 from Hungary, and both my grandparents are Holocaust survivors. And my grandfather is no longer around. But when he came to Canada, he didn’t speak the language or have no money. But he immediately became an entrepreneur. He never called himself, but he started selling eggs at a farmer’s market. And I would love to understand this. I would love to sit down with them and have dinner and understand deeply what that was like take for young children under the age of four years old. For kids at the age of four, bringing them to new country not knowing the language not having any money. And immediately finding some sort of resiliency, becoming an entrepreneur and provide that is something that I am obsessed with entrepreneurs. I love entrepreneurs. But I’d love to talk to sort of the original entrepreneur of my family’s my granddad, I have had the opportunity to meet Barack Obama. He’s one of the most impressive people I’ve ever met. And I’d love to spend more time with him. And you, Hans as the third person.