Shopify and The Key Decision for Business-in-a-Box Platforms

Remain a Platform, or Become an Aggregator?

Welcome to issue #7 of next big thing.

Shopify is one of the most interesting companies in the world today.

It's the leader in Business-in-a-Box (BiaB) Platforms, a set of companies that enable new businesses to be started, managed, and grown using their products.

And, as highlighted by Shopify’s recent announcements, BiaB Platforms end up facing a key strategic decision: how do they enable businesses on their platform to grow?

Do they remain a Platform, or become an Aggregator?


Shopify 📈

Shopify*, a software company that enables businesses to sell online, is on a tear.

Its market capitalization has doubled in 2020, and the company is worth close to $100B as of this post.

I've mentioned Shopify in several of my previous essays - It's both a consumer and enterprise company, it has enabled entrepreneurship from home for many people, and it's located outside of Silicon Valley (HQ in Ottawa) with the ability for employees to work from anywhere.

But the reason that I'm thinking about Shopify again this week is that they made another big announcement: a partnership with Walmart to enable Shopify merchants to list items on the Walmart Marketplace.

This comes on the heels of an announcement with Facebook to enable Shopify merchants to have a storefront on Facebook, and the launch of Shopify's Shop app, a way for customers to browse products from Shopify merchants in a single mobile app.

These three announcements over the past ten weeks are all geared towards one goal: enabling merchants on Shopify to grow and generate more sales.

And this got me thinking about the broader landscape of Business-in-a-Box (BiaB) Platforms, of which Shopify is a member, and, arguably, the leader.

Business-in-a-Box (BiaB) Platforms: Start, Manage, Grow

“Business-in-a-Box” (BiaB) means exactly what it sounds like it means. As a customer of a BiaB platform, you can run a business using the products and services provided.

The concept has been explored by several of my friends in their writing, including the team at CRV, which highlights that a BiaB is the ancient business model of franchising applied to the Internet. Alex Taussig has written about the verticalization of BiaBs. Web Smith and Blake Robbins have described BiaB Platforms such as Shopify as “arming the rebels” against companies like Amazon.

There are three fundamental aspects to every BiaB platform:

  1. The platform enables you to start a business.

  2. The platform gives you tools to manage that business.

  3. The platform helps you to grow your business.

Take Shopify, as an example.

You can start your business on Shopify - create a name, make a logo, build a store, and get a domain name.

The product then enables you to manage your business, by accepting payments, tracking orders, getting insights on your customers, and more.

Finally, Shopify provides you with ways to grow your business - create campaigns for emails and Facebook ads, and, as discussed above, through the Shop app, and partnerships with Facebook and Walmart.

Other examples of BiaB Platforms, in no particular order, include Substack (enabling you to start, manage, and grow a newsletter business), Teachable (online courses), Superpeer (video calls), MyVillage, Wonderschool, and WeeCare (home daycares), Squire (barber shops), Dumpling (grocery shopping), SmartHop (trucking), and many more.

Platforms vs. Aggregators

The canonical definitions of Platforms and Aggregators on the Internet are by Ben Thompson.

Platforms facilitate a relationship between users and third-party developers. Aggregators, on the other hand, intermediate the relationship between users and third-party developers. It's an important distinction, and one that you can read more about here.

In Shopify and the Power of Platforms, Ben explains why Shopify is a Platform, whereas Amazon and Walmart are Aggregators.

The other BiaB companies mentioned above are also Platforms.

Take Substack, for example, which I'm using as a writer to bring you this newsletter.

I signed up with Substack to start a newsletter - naming it next big thing, creating an about page, writing a welcome email.

I use the Substack editor to publish my posts, and, if I charged for this newsletter (which I don't, and don't plan to), I could manage my revenue through the dashboards.

And finally, I can grow my newsletter through a few tools that Substack provides, such as buttons like this one:

Share

All the while, Substack is facilitating a relationship between me, the writer, and my audience, the email subscribers including you, without intermediating that relationship. Substack is a BiaB Platform.

The Key Decision for BiaB Platforms

Today, Substack provides a few tools, such as the Share button, to grow a newsletter.

But it will face a key decision in the future on how far to go to enable its writers to grow their businesses.

Substack could decide, for example, to provide an app that showcases all of its writers, enabling a user to search through the newsletters, browse articles, and sign up for those they wish to. This would be analogous to the Shop app by Shopify.

In doing so, Substack could be going down the path of becoming an Aggregator.

Becoming an Aggregator has its attractions. It can build a greater moat around your business, closing the loop between supply and demand, and making it hard for new entrants to compete with you.

But becoming an Aggregator can also lead you astray from your core focus and vision, and can upset the businesses that came to your platform to launch in the first place, precisely because they did not want to get aggregated down the road. The most successful businesses created on the BiaB platform could leave.

Again, Ben Thompson has a great post analyzing this, where he argues that Shopify is best served not focusing on aggregation via the Shop app and other future launches, because it could lead to Shopify trying to compete with Amazon by playing the same game.

Instead, Shopify is best served focusing on its fulfillment network, partnerships like the one with Facebook (and the one with Walmart which was announced this week), and other products that enable it to remain a Platform. Shopify can continue to build a moat without becoming an Aggregator, which is what has led to its success thus far.

Remain a Platform, or become an Aggregator?

That is the key decision that Shopify, Substack, Teachable, Superpeer, MyVillage, Wonderschool, WeeCare, Squire, Dumpling, SmartHop, and every other BiaB platform will ultimately face.

The next big thing is a BiaB Platform

I write all of the above because I’m very excited about BiaB Platforms.

They will all face decisions around how far to go to enable the businesses running on their platforms to grow.

There’s no right answer for every company. But it’s the type of strategic decision that can make-or-break a business.

And the BiaB Platforms that make it have every chance to become the next big thing.


I plan to take a break from writing next week, and will return with issue #8 on July 1, which will contain an important announcement 🙂.


I started next big thing to share unfiltered thoughts. I’d love your feedback, questions, and comments!

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*denotes a company I'm affiliated with as an investor - see my substack about page.