With the latest suite of updates and integrations, Shopify’s “everywhere” app is now an undeniable part of the online shopping experience for millions of consumers. But for a long time it was just a side bet. How did it get so popular?
One of the most important stats Shopify shared in their recent Summer 2023 product update was that three out of four Shop Pay checkouts now happen on mobile devices. This spawned social chatter about how dedicated mobile apps were making a comeback, but actually the opposite is true: merchants – and online shoppers – are increasingly focused on mobile-friendly or mobile-optimized checkouts. It’s all about getting through the checkout quickly wherever you are, whenever you are inspired to make a purchase.
The Shop app was built with exactly this type of experience in mind, which is a big part of why Shop has quietly started giving Amazon a run for their money. The Shop app and Shop Pay are now two sides of the same coin.
All roads lead to Shop
Shopify launched Shop in 2020, but it took a couple of years of focus and development before launch, and it’s taken a few more years to reach critical mass in terms of both merchant adoption and consumer experience.
When Carl Rivera started working on the Shop app in 2018, he already shared that they were looking for a way to become the “most amazing way to shop from your phone” and to move away from an advertising-first approach and focus instead on organic promotions “from brands that you’ve already shown an interest in, either by purchasing a product from their Shopify store or by following their profiles in the app.”
We’ve seen a similar trend at Littledata as economic pressure has pushed more brands to look at organic channels and revenue-focused engagement tools like Klaviyo, Attentive, Rebuy and Postscript. But we’ve also seen this trend (with Shop in particular, it’s often a question of filtering Shop app “referrals” correctly in GA4, the new version of Google Analytics).
The pandemic gave an extra boost to early adoption of Shop, with a focus on both shipments and in-person pickups. It’s gone through a lot of iterations, from a way to track shipments more easily (no small feat!) to a platform for discovery and, as Shopify themselves puts it, a new way to shop.
Our own data shows that Shop has already overtaken channels like Amazon but Shopify should be more worried about other payment technologies, especially PayPal, that have been rooted with consumers for quite some time now and don’t show signs of letting up. Looking at over 1,000 of our top Shopify merchants at Littledata:
- 53% are now actively using Shop Pay, as opposed to just over 40% in 2021*
- Larger brands are moving away from Amazon, using it only for referrals (discovery) or not at all
- Smaller brands are adopting a range of payment and checkout options, focused on PayPal (still more widely adopted among our sample than any other payment option) as well as Amazon (including the new Buy Now button, see below), Shop Pay, and, to a lesser degree, “Buy now, pay later” options (13% now offer Afterpay, Shop Pay Installments, and/or Klarna – the only change since 2021 is that Shop Pay Installments is now as widely adopted as Afterpay)
*Note that in 2021 it was largely just a way to track packages
Although Shop App (now called just “Shop”) has continued to evolve to offer a complete suite of features around payments and product discovery, the core has never changed – and that focus on core technology has helped them catch up with Amazon’s focus on customer experience: shopping and shipping, plain and simple.
In fact, the Shop app has become so popular that many merchants are now confused about how to tie user behavior and marketing channels back to the Shop app. But again, from the shopper’s experience this doesn’t matter – it’s just easier to complete a purchase and default to your most recent payment method and shipping address.
Amazon beware: it’s hard not to “sign in with Shop”
In my view there are three parts to Shop that have helped it become a constant part of the modern consumer experience, and all three have been there since the beginning:
- User identity (that’s you!): Signing in with the app is super easy and once you have an account tied to an email address, checkout is often a one-click process
- Mobile-flexible experience: Whether it’s just the checkout, on a mobile app, or on the web, Shop App is remarkably flexible and focused on CX (customer experience) and UI (designy stuff) above any type of customization
- Owned payments: Offering their own payment method is obviously good for Shopify’s bottom line, but it’s also good for consumers as it supports all major credit cards and popular payment options out of the box
By unifying payments with an easy checkout experience, Shop App has already become competitive in terms of both initial sales (lead gen or conversions) and upsells/retention, which means that Amazon should be seriously worried about Shop – or go all in on a deeper integration with Shopify and other brand-friendly ecommerce platforms.
Shop app and Shop Pay have increasingly become two sides of the same coin. One way to think about this is that you need one to verify the other, but in fact it’s even more fundamental. Shop account has become many shoppers’ online, if you’re shopping at a brick-and-mortar locations of DTC brands like Gorjana and Rothy’s. When you give your email for a receipt, you’re signaling to Shop that you’ve made a purchase.
As Andrius Baranauskas, Director of Product for Shop, put it earlier this year:
“Identity was always at the core of Shop Pay: signing you in with as little effort as possible. With signed-in shopping with Shop this is now available across the whole ecommerce funnel, signing-in users early into checkout so it’s a breeze when you reach it. Shop is the only customer account buyers will need.”
That said, for now Shop is still a way to shop, as opposed to a shopping destination. New features around Shop searchability, custom product collections and branding (such as rich media headers) are exciting, but as we’ve seen it can take a year or two for wide adoption.
Three things stand out in those first years of adoption:
- Shop succeeds by helping customers first and merchants second
- The main benefit for customers is a quick and easy checkout experience
- The main benefit for merchants is better retargeting
So, while I don’t believe that Shop Day will compete with Prime Day – our merchants see a higher sales volume during BFCM – maybe it doesn’t have to. Do we really need another flash sale?
The data shows that it’s better for brands to engage directly with consumers in a meaningful way on a regular basis. This helps to increase retention and customer lifetime value (LTV), which in turn lead to better audience creation and help merchants build an engaged customer base over time.
And many Shopify apps are building on this idea. For example, our tech partner Klaviyo, which many merchants use for both email and SMS marketing, has released a new feature that makes it easy to use Klaviyo Sign Up Forms in conjunction with the Shop app.
It’s long been obvious that Shopify is much better for retailers themselves, providing lower subscription fees, more ownership over products, and better margins than a merchant would get as an Amazon seller.
But the landscape is always evolving. At Littledata we track over 30 different payment gateways for Shopify stores and there’s still no one-stop solution. While some merchants might use Shop Pay to coordinate local pickup and delivery, others might push Afterpay as their buy-now-pay-later option as opposed to Shopify Installments, which is a newer option, though Afterpay currently only works for Shopify merchants with a store address in North America, the UK or Australia/New Zealand. Shopify Payments is currently accepted in 23 countries while Amazon Pay on Shopify only supports 13.
Amazon’s Buy with Prime…powered by Shopify
Shopify and Amazon recently announced a feature that lets merchants integrate the Buy with Prime button into your existing Shopify checkout and automatically match your existing theme.
While reporters called this a “surprise move”, it’s actually not surprising at all. Select merchants have been testing the feature for months (it had been banned and then rekindled) and it’s simply the next stage of a partnership where Shopify owns more of the experience, including payments, and Amazon owns the fulfillment and delivery experience. Shopify president Harley Finkelstein makes this clear in the announcement video, stating that the new functionality gives “Prime members access to Prime benefits like fast and free delivery outside of Amazon.com for the first time ever.”
The Buy with Prime feature lets shoppers use their Amazon wallet but payments are processed through Shopify’s checkout. This gives Shopify the upper hand because they still own the checkout data – with both payments and order tracking still powered by Shop but fulfilled by Amazon. It’s yet another sign that Shopify’s side bet on the Shop app has paid off better than their side bets on robotics and fulfillment.
Shopify’s emphasis on Shop app and Shop Pay has led them to encourage more sales channels as routes in to that final one-stop Shop experience. They have paid special attention to TikTok. In fact, the same week they announced the renewed Buy with Prime integration Shopify started quietly rolling out a much more advanced TikTok Shop integration. Even if the initial purchase happens on TikTok, retargeting those customers pushes them back to a merchant’s Shopify store, where they can purchase on – you guessed it – Shop.
Point and click
Have you noticed that shop.app is more and more often the URL where you actually complete online purchases for everything from subscription pet food to household items and even luxury goods?
Neither have most shoppers.
But that’s the whole point. Last week I was discussing Shop app with some friends, and it turned out that several of them had used Shop for payments and (they had a lot more Shop Cash than I do, to say the least) but only one of them had even realized that it was a Shopify product. This might sound crazy to those of us in the industry, but it shouldn’t surprise us. The common response was more like: “Oh, that’s Shopify? I thought it was just some sort of easy checkout.”
That’s a huge win for Shopify. How much more seamless can you get?