Memo: Bolt’s Gutsy Strategy

It may not work but it’s a gutsy strategy. Bolt is trying to out-rebel the armory of the rebels. The call to action is clear: “Switch to Bolt.” In another fiery thread by Bolt founder Ryan Breslow, he began: Shopify is eating their ecosystem.

Ryan Breslow 🕺 on Twitter: “Shopify is Eating their Ecosystem (thread): / Twitter”

Shopify is Eating their Ecosystem (thread):

Just two days after, in a sponsored article published in Retail Dive on Monday, Bolt challenged Shopify directly. The headline “Has your online shop outgrown Shopify?” insinuates a new direction taken by Breslow and team. It’s now a rivalry stoked by a chairman of the checkout platform now valued at over $11 billion by investors. A click-through link titled “Tired of Shopify holding you back?” drove the message home.

  • top of funnel: viral thread
  • mid-funnel: topical sponsored article
  • bottom funnel: custom landing page to capture interest

Bolt wants to take on Shopify, transitioning from a one-click checkout tool to a full-fledged eCommerce platform. The landing page that Retail Dive sends readers to leaves no question unanswered:

Take back control of your store with Bolt CheckoutOS, the checkout partner that scales with you. Switch from Shopify for a flexible commerce solution and get up to $2M in incentives and marketing funds.

The thread, sponsored article, and the landing pages are all part of the new approach to growth that Bolt is relying on to reach its goals. The $11 billion valuation is hefty, especially given that Shopify competitor BigCommerce is trading at below a $2 billion market capitalization. According to filings, Bolt’s total revenue for 2021 was expected to be between $216.2 million and $216.6 million with a Non-GAAP operating loss of $19-20 million.

The thread headlines a repositioning strategy that may be designed to help Bolt stretch its total addressable market (TAM).

In the viral thread, Breslow says that Shopify copied Bolt when it launched Shop Pay. He also says that Shopify uses its positioning in the market and app store to bring in developers to build solutions for its clients, uses the app landscape as its own R&D and then manipulates app store restrictions to cut off the most popular apps at their knees and recreate the product themselves.

Breslow has become known for fiery tweet storms targeting powerful industry players. His last, which challenged YCombinator, came shortly before he stepped down as Bolt’s CEO (a choice he said was his own). In that thread, Breslow said his Twitter threads were not a marketing strategy. At least in the Shopify case, the tweets accompanied by the sponsored article seem coordinated. Bolt wants to become a Shopify competitor, and this narrative shift around Bolt’s own positioning (while pointing out the weaknesses of Shopify) were clearly planned.

This move to take on Shopify could boost Bolt’s business from one-trick tech company. Bolt’s current valuation underscores just how valuable checkout solutions have become. But to earn its valuation (and eventually grow beyond it) its next chapter has to be bigger. This is the impetus behind its growing value proposition. It now bills itself as a “CheckoutOS.” Bolt isn’t the only company that started in one corner of eCommerce tech and is looking at what other areas it can conquer in order to raise its own ceiling. But becoming the next Shopify is a tall order. Can Bolt achieve it without eventually using the same tactics as Shopify to grow users?

Right now, Bolt is suggesting it can be a home for both growing businesses as well as app developers who may have been burned by Shopify. The bottom line of Breslow’s argument is that eCommerce should be open-source. Bolt sees itself as a leading candidate in the version of eCommerce that is now inhabited by companies like BigCommerce, Magento, and Commerce Cloud – where commerce scale is decentralized because of open platform access. It wants to not only compete with Shopify, but replace it with a new model. However, Wall Street is still catching up to Shopify.

Shopify is down 57 percent over the trailing three months. Unlike Amazon, who found ways to calm the Street while reinvesting in future growth, Shopify has not been able to weave the same “we’re just beginning” narrative. Shopify needs quarterly growth to justify its market cap and to achieve that, it will have to own more and more of the ecosystem until the eCommerce industry matures beyond its currently nascent stage. Wall Street sees online retail as an industry in post-COVID retraction, further agitated by Apple’s privacy policies impacting the Facebook advertising that many retailers relied upon. Look at how reliant Shopify is on Facebook’s marketing prowess:

Speaking anonymously (with permission to share his thoughts), a Shopify executive contested my view that product decisions are made with the public market in mind. No one in Shopify’s leadership “optimizes for Wall Street,” he said. Rather, the Shopify executive explained that simplicity is prioritized. Products are concluded because they are not good for merchants, consumers, or the ecosystem as a whole.

A product manager also reached out to explain the unique role of checkout within the Shopify ecosystem. End to end control is critical, it’s “the most important piece of commerce.” And as Shopify continues to scale, the company wants control over the most critical point of the consumer workflow.

So while Shopify isn’t publicly weaving the narrative that its Amazonian rival did in its first 15 years, the management team is still playing by the same book: ruthlessly thinking for the long-term even throughout global and societal changes.

The ultimate irony of Bolt’s new strategy of antagonizing Shopify (like Shopify antagonizes Amazon) is simple. Shopify is slowly becoming more like Amazon to capture more share of eCommerce growth. If Bolt wants to compete against Shopify in other platforms, they will eventually adapt the same practices: picking and choosing between who gets to work within its ecosystem. When Bolt went after YCombinator, I wondered if the leadership team sanctioned the controversial statements made by Ryan Breslow. By taking aim at Shopify and backing it up with sponsored articles and thematic landing pages, it’s clear that the new marketing and public relations strategy has been sanctioned by the company. It has elevated Bolt in the eCommerce discussion. It’s set the stage for merchants and developers to see Bolt through the lens of larger aspirations.

Breslow sees Bolt as the third-generation of commerce enablers, a position shared by a number of headless competitors including its rival Fast.

But while the marketing strategy seems effective thus far, scale is a risky proposition. As Breslow correctly notes, there is a “success ceiling.” To break through the glass, you may end up making as many enemies as you do partners. If Bolt succeeds, it will have its own viral threads from younger, ambitious entrepreneurs to contend with. They’ll talk of the next generation and the right way to do things. And if they’re lucky, they’ll see the success ceiling too and adjust their strategies accordingly. It may lead to a bit of compromise. It may not work but it’s a gutsy strategy.

By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams 

Member Brief: Horses, Buggies, and Shopping for Groceries

Shopify beat expectations in its latest earnings but its share prices sank 15% on Wednesday. Wall Street is worried that the Shopify boom, and by extension the eCommerce boom, is ending with the pandemic. Moiz Ali believes it’s a sign that Shopify has done a poor job of preparing its enterprise clientele for success. The Native deodorant founder (and prolific investor and advisor) notes Away, MVMT, Ritual, and Manscaped as DTC brands that have parted ways with Shopify. He poignantly added:

This member brief is designed exclusively for Executive Members, to make membership easy, you can click below and gain access to hundreds of reports, our DTC Power List, and other tools to help you make high level decisions.

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Memo: Shopify, Fulfillment, and Disruption

This isn’t as much a story about Shopify as it is one about supply chain disruption and the assessment of the company’s risk tolerance. Logistics and fulfillment is now one of those disciplines that require a company’s full measure of attention and discipline. Amazon could do it, while Shopify cannot.

Shopify’s fulfillment network – and its ambition to compete with Amazon in the fulfillment game – has suffered a setback. Shopify is shrinking its network of warehouse and fulfillment partners by about half. We learned of the plan to scale back the strategy last week after an existing partner notified 2PM of the impending change. He noted: “Any merchants that use custom packaging, do wholesale, or kitting, won’t be serviced by the new offerings.” A recent report by Insider made it official.

The move is telling in terms of where Shopify sees itself in the grander retail landscape. Shopify’s goal has long been to build an “army of rebels” that can compete with Amazon’s larger machine. That’s worked well as a retail movement and Shopify has had a considerable past year. Brands use it to launch and build their businesses and the company has become synonymous with direct to consumer retail. It’s positioned itself as the anti-Amazon, a market position that has served it well. But there are some areas where Amazon’s moat provides undeniable advantage.

Retail logistics is a monstrous undertaking in the best of times. The past year has been one of the worst. Supply chain disruptions have increased by 88% over 2020, with 47% of disruptions impacting the US, Shopify’s chief market. We provided this breakout below:

 

On December 27, we wrote:

While Shopify has the advantage now, Amazon’s network of fulfillment systems is quickly becoming essential. Shopify’s great rival, may eventually become its most necessary partner.

Shopify cannot absorb the increasing complexity of the shipping industry, not even with world class software. Why? Because it’s a people and vehicle business. Software can optimize manpower; it cannot replace it. There are rules and external forces that dictate the state of shipping, deliveries and returns that even the best software cannot overwrite. When disruption becomes that dictator, the best-equipped machines are needed. Amazon is that machine. It’s built a business, and a moat, designed to maintain optimum performance even in the worst of times. Also from December:

Through years of investments, Amazon has created its own cargo shipping fleet and is leasing planes, along with the opening of an Air Hub in Cincinnati, to avoid out-of-stock problems that have begun plaguing other retailers at this stage in the holiday shopping season. Amazon has stretched its business in myriad ways, but its advantages are no longer just product and digital-driven.

Shopify Fulfillment Network is nowhere near DOA, according to Insider’s report and insider reports. The company is eyeing third-party acquisitions. It will likely retool, with a smaller warehousing footprint and a heightened focus on one of eCommerce’s biggest pain points: returns. Now for Shopify, returns may not be one piece of a massive fulfillment network but rather the selling point of a slimmer, software-driven operation.

Returns is one of retail’s modern problems that could be greatly improved with more capable software. In the post-returns marketplace, we suggest that with enough returns volume, a marketplace or returned goods could thrive. But first, Shopify or a Shopify partner like Loop would need to become the de facto solution for returns administration. The following is a relevant snippet from that report:

After analyzing dozens of warehousing operations and interviewing countless owners, one thing became clear: There is an elegant marketplace opportunity disguised within an unglamorous industry. In a recent discussion with a top independent third-party logistics CEO, he said:

“With the exception of our two largest clients who use Loop, the rest of our clients all use our WMS/OMS to facilitate their returns. We’re a drop in the bucket doing $150M in GMV last year. But right now no one we ship for is using Shopify’s internal system to facilitate the process.”

Shopify’s fulfillment setback is a reminder of why Amazon is the rare, full stack retailer: marketing, search, buy, ship, return. This strategy shift is a chance for Shopify to better navigate its next moves, not as Amazon’s replacement but its potential partner. In December’s Bloomberg feature on Tobi Lutke’s leadership style, a former Amazon executive was the source of the quote: “Shopify made us look like fools.” That response was short-sighted. Retailers are buying containers by the dozen, they are building new 500,000 square foot fulfillment facilities, or  outright renting entire container ships. Logistics is now an all or nothing proposition and few have exemplified this new reality than Amazon, who Shopify should just partner with at this point. We ended our memo on this Bloomberg report with a different takeaway:

While Shopify has the advantage now, Amazon’s network of fulfillment systems is quickly becoming essential. Shopify’s great rival, may eventually become its most necessary partner.

Everyone needs a frenemy in their life.

By Web Smith | Editor: Hilary Milnes | Art by Christina Williams