DTC Brands Doing Incredible Numbers on Shopify, Says COO

Direct to consumer brands are doing incredible numbers on Shopify, says Shopify COO Harley Finkelstein. He says that Kylie Jenner has generated almost a billion dollars in sales on the platform and many other influencers such as Kanye West, Drake, and most recently Tom Brady are also doing very well.

“Even if you go beyond just Kylie, you look at companies like Bombas and Allbirds and Tommy John and Fashion Nova, these are brands that didn’t exist five or ten years ago and they’re absolutely doing incredible numbers on Shopify with no slowing down in mind,” says Finklestein. “Shopify was built to help anyone that has an idea start a great business and sell to a global audience.”

Harley Finkelstein, COO of Shopify, talks about the incredible numbers DTC brands are doing on Shopify, the huge success of Shopify Capital, and their quick acceptance of cannabis stores in Canada and potentially the rest of the world, in an interview with Jim Cramer on CNBC:

DTC Brands Doing Incredible Numbers on Shopify

We’re really happy with how we ended the year and certainly, the quarter was great and we’re really excited about our future. We’ve been at this now for almost 14 years. We’ve grown to 820,000 merchants up from 600,000 merchants a year ago. We have a big top of funnel with brand new entrepreneurs getting started on Shopify for the very first time. We also have some very large brands like the big CPGs and some big direct to consumer (DTC) companies all using Shopify to scale their businesses. We’ve got a really great business model and we’re having a lot of fun.

It’s amazing. I think the Kylie story ($1 billion in sales) was surprising to a lot of people, not for us because we see so many stories like that all the time. Whether it’s Kanye West launching his Yeezy store on Shopify or Drake’s store or Tom Brady’s new store, we see all of these major brands and huge influencers using Shopify to create authentic products and sell it to the audience. I always sort of think back to if DTC and direct-to-consumer were around when Michael Jordan was creating the Jordan brand with Nike I think Nike would be a supplier and Michael Jordan would be the brand. He would own the entirety of his business as opposed to getting a licensing fee.

We’re really excited about this. But even if you go beyond just Kylie, you look at companies like Bombas and Allbirds and Tommy John and Fashion Nova, these are brands that didn’t exist five or ten years ago and they’re absolutely doing incredible numbers on Shopify with no slowing down in mind. Shopify was built to help anyone that has an idea start a great business and sell to a global audience. We really do bend the learning curve to make it really easy to get started.

Shopify Helping Democratize the Entire Business Process

The ones that succeed, not all of them do, but the ones that do succeed they grow really large with us and over time we want to provide them with more services and more solutions. For example, we launched Shopify Payments a couple of years ago. We went to the payments companies and negotiated rates on their behalf. We launched Shopify Shipping and went to the shipping company and negotiated shipping costs on their behalf. We always are trying to find economies of scale to help democratize the entire business process for these small businesses.

More recently we realized that a lot of these small businesses also need capital. Because we have so much information on them we’re able to make really quick and very effective underwriting decisions so we were able to go and offer them capital cash advances. We’ve given out hundreds of millions of dollars of cash advances to a lot of these small businesses who if it wasn’t for Shopify would not be able to get this money on their own.

Entrepreneurs Want to Own Their Audience

Etsy fundamentally is a marketplace. Etsy is a place where someone who makes a product can go to find an audience. But our feeling is that you know for an entrepreneur they don’t always want to rent the audience. They want to own the audience. They want to have a direct relationship with their customers. They want to own the entire to profit margin. They want to be able to sell and have long-term relations with the people that are buying their products.

So companies like Etsy do a really good job of curating a bunch of products and renting those customers to those makers. We think the marketplaces are really great but we think ultimately makers and entrepreneurs and merchants want to have a direct relationship with the people buying their products. One of the things that is not well known about Shopify but one way to think about what we do is really this retail operating system. Merchants can start a store with us very easily and they can build a beautiful online store but they can also cross-sell to different marketplaces like eBay or Amazon.

The idea is that it feeds all feeds back in one centralized back office which is Shopify. That’s where they can run the entirety of their business. Really the idea is let’s become the most important piece of software they use on a daily basis. The first thing they open every morning, the last thing they close every night. So obviously marketplace will play a role there but ultimately merchants want to find customers wherever those customers exist and more and more they want to sell direct to those customers.

Shopify Facilitating Cannabis Sales in Canada

The reason we started with Canada was there was clarity in Canada. The Canadian government, the legislature, they were very clear with how they were going to roll out the commercialization and the legalization of cannabis sales on the consumer side. We felt it was really important for us to act quickly and effectively to not only win as much of the Canadian market as we possibly could but also to show the rest of the world as they begin to think about cannabis sales that we are the first phone call that they should be making.

Whether it’s the province of Ontario or British Columbia or most of the largest licensed producers like Canopy in Canada, Shopify is what’s powering those retail sales. We think that we can do a great job helping other countries and other regions do the same thing.