How Shopify Could Revitalize Malls
"Make the money, don't let the money make you / Change the game, don't let the game change you" - Make the Money, Macklemore & Ryan Lewis
Disclaimer: I own Shopify stock. My time at Amazon influenced the opinions presented here, but all underlying facts are publicly available. All opinions expressed here are strictly my own.
On Friday, December 9, 2016, the Topanga Westfield Mall in Los Angeles was buzzing. People had called in sick at work and skipped school to wait in line for up to 8 hours for a shot at experiencing their favorite brand.
The brand in question? 19-year-old celebrity influencer Kylie Jenner’s 1-year-old online cosmetics company, Kylie Cosmetics. Over 14 days, 25,000 people visited the pop-up store to experience “Kylie, the person – featur[ing] a replica Kylie bedroom, selfie station, lip kit wall, and exclusive holiday products.” Not bad for a brand that previously only existed online.
Most people are familiar with the “front-end” of Kylie Cosmetics’ stack – Kylie Jenner’s massive Instagram following (181 million at the time of writing). But far fewer are familiar with its “back-end” – the Shopify e-commerce platform that powers its online and pop-up stores.
From what I could find, Shopify hasn’t worked on similar high-profile pop-ups since. But with COVID slashing mall property values by 25% in the past three months, now might be the perfect time to revisit this idea.
On April 28, 2020, Shopify quietly launched its consumer-facing Shop app, which combines an existing package tracker with a feed of products from your favorite Shopify stores. In its current incarnation, the app isn’t useful if you don’t regularly purchase from Shopify stores; store discovery requires manual searching, and alerts are redundant for packages from large merchants like Amazon or Apple.
However, the app does provide some clues as to Shopify’s priorities and future roadmap. The obvious takeaway is that Shopify is trying to establish its brand directly with consumers instead of supporting stores behind-the-scenes as they have done so far.
Less obvious is the fact that Shopify could potentially become a “store of stores” that aggregates products from different stores; contrary to popular sentiment, this isn’t bad in and of itself. Done right, it could satisfy Shopify’s goal of “arming the rebels” by highlighting and cross-promoting products instead of “building an empire” like Amazon is doing by building competing products.
One way Shopify could satisfy both goals of maintaining merchant confidence and direct consumer outreach is by setting up a physical Shopify “store of stores” in malls. These stores could allow multiple merchants to sell under one roof, similar to the department stores they’d potentially replace. However, unlike the department stores, there would be a rotating roster of merchants to keep things fresh.
Providing merchants with scarce shelf space is a vote of confidence in both the individual merchants themselves and the merchant community as a whole. Shopify can also empower smaller merchants and align incentives by taking a cut of the revenue instead of cash upfront. Shopify can become the only e-commerce platform that allows its merchants to reach the aspirational goal of a physical storefront.
Shopify gets to build its brand directly with consumers by creating the physical spaces that enable unique merchant experiences. Consumers get to put a face to the names of their favorite merchants, driving merchant loyalty. They also get excellent service from merchants who live and breathe their brand.
Merchants can connect with their fans in-person and hear first-hand experiences of how people are using their products. They can offer their consumers a risk-free way to try their products in-store. They can also get foot traffic from other merchants in their roster as well as mall-goers in a way that’s almost impossible online.
Last but not least, malls can get a steady tenant in Shopify. By frequently changing the roster of merchants in the Shopify store, malls are also able to attract a different clientele every weekend. Similar to Apple stores, Shopify stores could also drive traffic to other stores in the mall.
Shopify has all the required ingredients to make running such a store a success.
For starters, Shopify has a wealth of data on consumer purchasing habits, which enables accurate predictions on consumer appetite for individual merchants and products. They also have cross-merchant data on which merchants have significant consumer overlap, which they can use to create a merchant rotation.
Shopify has invested significantly in multi-channel retail, including a deal with Walmart just this week; a physical store could be yet another channel. Shopify is also not afraid to get its hands dirty by stepping into the physical world with products like fulfillment and a Point of Sale terminal.
They are also heavily focused on shipping in the age of COVID, with CEO Tobi Lutke describing Shopify’s current progress as “2030 jumping forward in time”.
If anyone at Shopify is reading this, please feel free to shoot me an email if you’d to chat further. Thanks!
This week’s issue turned out longer than I anticipated, so I’ll be off next week. See you two weeks from today.