WooCommerce vs Shopify: A battle for ecommerce platform dominance

This post is available below by text, and Jonathan and Brian talked about it for a podcast episode as well. They are additive to one another.

Ben Thompson recently wrote about Shopify and the Power of Platforms. He highlights the difference between an aggregator (e.g. Amazon’s Merchant Services) and a platform (Shopify) and makes a case for how Shopify can successfully compete against Amazon. If you’re new to Ben’s work, I highly recommend following the links he references in the opening paragraphs.

Aggregators vs Platforms

As Ben explains, Amazon is an aggregator that owns the users (i.e. customers, Amazon Prime subscribers) and aggregates the suppliers (i.e. merchants, manufacturers). Amazon succeeds by providing a great user experience (e.g. one click checkout, same day delivery) and by treating products and their suppliers as commodities, all available to the customer in a single, aggregated shopping experience. While aggregation can provide high value for customers, it minimizes the opportunity for merchants to differentiate and can ultimately hurt customers as competition and innovation are stifled. 

A competitor to Amazon might try becoming a larger aggregator. It’s a difficult endeavor. Walmart has been trying for years. The larger an aggregator grows, the more entrenched their position, and the less likely a competitor can unseat them by utilizing the same strategy.

There is another way to compete with an aggregator. Build a platform. 

While an aggregator owns the customer and commoditizes its suppliers, a platform empowers those who build on it, relying on its suppliers being differentiated and successful in their own right. 

As Ben details in the article, Shopify’s best shot at taking on Amazon is to double-down on their focus as a platform and, by all evidence, that seems to be their strategy. Shopify wants to be the platform that empowers its merchants to succeed.

There are several problems I suggest with Shopify’s strategy, though.

1. Data Control – Shopify has taken a strong stance on centralizing control of customer data and using their terms of service to enforce their policies. Their recent clash with MailChimp (who decided to leave the platform) may be indicative of more to come. It makes sense to have a centralized source of truth for your data. Shopify’s position, though, is an all or nothing approach that results in more lock-in to the platform and more data in their control. Actions that stifle or remove choice from the equation for end users and the suppliers who serve them is aggregator thinking more than platform thinking.
2. Closed Source – Shopify is a proprietary platform with closed source code. While they make efforts to show open source friendliness, the reality is that the platform code is theirs. If you stop paying Shopify, you lose it all and if you don’t like what they’re doing with the platform, you’re stuck unless you choose to leave.
3. Growth Risks – Shopify is growing fast and as a publicly traded company, they are focused on accelerating growth. Products like Shopify Capital, and the emphasis on offline services through Point-of-Sale as well as the continued push into enterprise, deepen the risk of growing for growth’s sake, rather than doing what’s best for the merchants they serve.

Shopify is a good solution for independent merchants who want to be more than an aggregated commodity. There are problems, though, and while Shopify is likely continue to grow despite the problems I’ve suggested (they have no shortage of interested investors), there is a better approach.

WooCommerce on WordPressOS

In my writing on Ecosystem Plugins, I introduced the concept of WordPress as an Operating System for the Open Web and cited WooCommerce as an example of an Ecosystem Plugin.

I believe strongly in the importance and value of WordPress as an Operating System, a platform, for the Open Web. 

With WooCommerce, I see potential for it to become more than an Ecosystem Plugin and serve as the platform for ecommerce on the Open Web. 

To do that, WooCommerce needs three things:

1. A great core experience – Out-of-the-box, WooCommerce needs to have the essentials built-in and provide a great, user-focused onboarding and operating experience. It needs to be intuitive and accessible for non-technical, small business merchants, who should always be the core focus. Importantly, this is not about removing choices and dumbing interfaces down. This is about doing the harder work and teaching merchants how to make the right choices for them and use the power that WooCommerce provides.
2. A vibrant partner ecosystem – Shopify has nearly 3000 apps in its “App Store” today. The WooCommerce marketplace has less than 300 extensions, and more than 30% are maintained by Automattic. For WooCommerce to succeed as a platform it needs to be trusted by its partners and seen as the best platform with clear short-term incentives and long-term value.
3. A strong community – WordPress’ community is a huge key to its success. Meetups and WordCamps create a sense of belonging and shared ownership that drives a loyalty to WordPress that’s unparalleled. WooCommerce needs to create a similar community where merchants feel that they have each other’s backs and are able to share their love for the platform that makes it all possible.

By many standards, Shopify is a giant compared to WooCommerce. With 4000+ employees, a $35+ billion dollar market cap, and a marketing budget to match, they seem to be the dominate ecommerce platform and show no signs of slowing down their efforts.

You can’t buy trust, vibrancy, and loyalty though. Deepening trust through a great core experience, investing in the partner ecosystem, and strengthening community loyalty is where I think WooCommerce has the opportunity to improve and succeed.

Here are three ideas for WooCommerce to increase its value and strengthen its position as the platform for ecommerce on the Open Web:

1. Introduce a WooCommerce Subscription – Provide access to non-SaaS extensions for a flat, monthly rate and easy bundling of SaaS billing for those who want it. Make it a clear win for all involved, including the merchants and marketplace partners. Position the subscription as an investment in the Open Web. The code is GPL – they could stop paying at any time and keep access. Paying, though, provides support and capital for reinvestment, ensuring the continued success of the platform. A subscription also offers opportunity to streamline the user experience for customers, reducing friction for developers.
2. Invest in the Partner Ecosystem – Make building a healthy partner ecosystem a priority. Provide guidance, mentorship, and funding to help developers succeed on the WooCommerce platform. Build strong relationships with SaaS providers, including ecommerce focused companies like BigCommerce, and help streamline their integrations into the platform. 
3. Cultivate Community – Invest in and support ecommerce meetups and create more ecommerce focused events. Double-down on the Open Web narrative and encourage community members to support each other in improving and maintaining their freedom as merchants on the Open Web.

Shopify provides a valuable service that empowers merchants. Unfortunately, their approach to centralized data control, their closed source platform, and the risks of a growth focus pose the potential for more harm than good.

I believe that WooCommerce, with data control in the hands of its users, an open source ecosystem, and a strong independent community give it the opportunity to become the best platform for ecommerce on the Open Web.

Special thanks to Caleb Johnson for his epic illustration.

This is a guest post by Jonathan Wold. Jonathan has been living and breathing WordPress for 14 years and believes its best years are still to come. He writes about WordPress on GrowInWP.com and blogs about life and habits on JonathanWold.com