Reinventing E-commerce: The History of Shopify (2004-2024)

Few companies in recent years have seen as dramatic of a rise as Shopify. What started as a passion project in 2004 is now a 100 billion-dollar company in 2024.

However, Shopify’s story is even more captivating due to the disruptive innovations it has brought to the world of e-commerce since its inception.

Staying true to its mission of making e-commerce available to everyone, Shopify has relentlessly pursued new ways of simplifying commerce and helping merchants sell more at scale.

In this article, we’ll take a brief look at the importance of Shopify today and the history behind it.

From a hobby store to one of the biggest e-commerce platforms, this is the story of how Shopify started.

Shopify’s story can be explained through numbers, but also the stories of its merchants.

• Shopify’s market valuation is over $107 billion as of February 2024. There are close to 2 million merchants selling on Shopify and there are close to 5 million active Shopify stores in about 175 countries.

• Shopify is currently the 4th most popular e-commerce platform worldwide and has over 11,600 employees. When it comes to e-commerce platform market share, Shopify controls about 11% of the global market and nearly 30% of the US market.

• Shopify supports its merchants with over 178 free and premium themes and over 8,000 apps on its app store with all sorts of functionalities.

Since its initial public offering in 2015, Shopify has been traded on the stock market. However, Tobias Lütke is the founder and CEO of the company, while Harley Finkelstein is its president, and Jeff Hoffmeister is its CFO as of 2024.

Part of the reason why Shopify has become so popular is its business model. Shopify wins when the retailers, developers, and designers within its community win.

It has provided them with incentives to collectively innovate and push the boundaries of the platform through themes, apps, and strategic partnerships.

Shopify’s headquarters are based at 151 O'Connor Street, Ground Floor, Ottawa, Ontario, Canada. However, Shopify has opened multiple offices around the world, including Stockholm, Singapore, Dublin, Bengaluru, and more.

• Shopify’s mission and day-to-day business of making commerce available to everyone are social at their core.

• However, Shopify has gone even further by launching initiatives like the “1 Million Black Businesses” to support African American entrepreneurs and other minority groups like indigenous & native people to start and grow an online business.

But that’s not all!

• Shopify is also heavily engaged in sustainability. Back in 2019, Shopify launched its Sustainability Fund. Since then, it has been financing sustainability-related initiatives to fight climate change, including Frontier and The Planet App.

Moreover, Shopify has invested over $30 million in carbon offsetting and contributed to offsetting over 120,000 tonnes of carbon in 2020 and 2021.

Looking at Shopify today, it’s easy to assume that it was always a polished Swiss army knife of an e-commerce platform. However, it’s important to appreciate that Shopify made history on multiple occasions thanks to the drive, passion, and innovation behind it.

So let’s go back to the start.

The Shopify story begins 2 years before its official launch.

Back in 2004, a Canadian trio of friends - Tobias Lütke, Daniel Weinand, and Scott Lake shared a passion for snowboarding.

Thus, they decided to start an online store for snowboarding equipment which they called Snowdevil.

However, they immediately ran into a technical problem. Running an online store required them to host and build a site, process payments, and manage orders and customer information.

While there were individual fixes for each of these problems, there wasn’t a one-stop solution.

Out of the three friends, Lütke was a passionate software developer who used the available web technologies at the time and integrated them into a unified e-commerce system.

His e-commerce solution was unique to Snowdevil but it quickly attracted interest from other retailers who were struggling with the existing technology.

Two years later Shopify would be born to make e-commerce easily available for merchants.

Following the creation of Snowdevil, Lütke, Weinand, and Lake got multiple inquiries from retailers about what they had done and how they could modify and use it too.

At that moment they realized they had built something powerful for which there was demand.

Thus, Lütke, Weinand, and Lake set out to modify and transform their software solution into a fully functional e-commerce platform.

While they originally called it Jaded Pixel, they quickly changed it to the more easily memorable Shopify.

• Shopify was built using an open-source template language. This would allow advanced users to customize templates and create unique storefronts with relative ease.

• The versatility and utility of Shopify were huge factors in its early day success as it attracted both big and small retailers in Canada and around the world.

Drawing inspiration from Apple and its App Store which launched in 2007, in 2009 Lütke and the team asked themselves, why not do the same thing for e-commerce?

Apps would offer a way to expand the functionality of online stores and solve a plethora of niche problems that merchants face all over the world without adding any technical complexity.

Demands for extra store functionalities were so numerous that Shopify couldn’t hope to satisfy all of them by itself.

Thus, a fateful decision was made to open the floodgates of app development and take advantage of Shopify’s growing community of experts.

• Soon enough developers could build and sell their own apps on the Shopify App Store, while merchants would start to enjoy tailor-made solutions for marketing, social media, SEO, shipping, localization, design, and much more.

• Thus, 2009 was a pivotal year in Shopify’s growth. The pace of innovations was limited only by human creativity and brought ever more merchants into the fold.

The following year Shopify launched its own mobile app for iOS and Android users. It would allow them to easily manage their store’s e-commerce operations from their phone devices.

While this seems like a no-brainer today, back in 2010 it put Shopify on the speartip of e-commerce innovation.

As the years kept rolling, Shopify became ever more popular and capable. In 2013, Shopify made the historic decision to partner with Stripe to introduce an in-house payment gateway called Shopify Payments.

Shopify Payments was revolutionary with regards to security features, fraudulent order detection, and seamless integration with the Shopify ecosystem, but also with the user experience it provided.

• Parallel with Shopify Payments, Shopify introduced a point-of-sale (POS) solution for brick-and-mortar businesses. By using an iPad, merchants could accept debit and credit card payments which would be directly integrated with the rest of their online store’s data.
  
  

• Shopify Payments and Shopify POS helped
  Shopify to position itself as a one-of-a-kind service provider. Many of its e-commerce platform competitors don’t offer the same level of services even 10 years later.

Although Shopify’s traditional target audience was small and mid-sized businesses, over time the platform attracted ever more interest from established large-scale retailers as well as from investors.

To accommodate the needs of large retailers, Shopify Plus was launched. It offered an even bigger arsenal of e-commerce features and deeper levels of support but at a substantially higher price point.

In 2017, Shopify introduced Shopify Pay, which was later rebranded to Shop Pay. It was the world’s fastest checkout, requiring only a single click.

This checkout feature single-handedly elevated Shopify’s performance in terms of speed and conversions.

In the same year, Shopify announced that it was releasing an integration with Amazon.

Shopify store owners would be able to have Shopify created directly list their products on Amazon. This announcement increased Shopify user stocks by 10%.

Inspired by Amazon’s Fulfilment by Amazon (FBA), which completely takes care of the logistic side of commerce, Shopify launched a competing service: The Shopify Fulfilment Network (SFN).

Shopify’s Fulfilment Network is a comprehensive solution that takes care of everything related to

• Direct-to-consumer (DTC) and online retail fulfillment

• Business-to-business (B2B) wholesale delivery services for over 20 retailers, such as Amazon, Walmart, and eBay

• Stock management and backup storage solutions

• Preparation for packaging and handling of returns

• Global shipping services via sea and air, featuring immediate price quotes and reservation capabilities

• Local ground transportation services

• Customs clearance and insurance provisions

• Financial solutions for supply chain operations

In 2021 Shopify introduced major changes to its software ecosystem. These changes greatly increased the platform’s customization and feature development capabilities.

Changes included:

• An upgraded theme architecture

• Adding sections to every page for unprecedented design flexibility

• A debut of theme app extensions with app blocks

• Upgrade to CMS capabilities with dynamic sources and metafields

Combined, these tools allowed developers to vastly improve their design and development capabilities, which led to creating even more unique stores on the Shopify platform.

While Shopify has long been a champion of small and mid-sized businesses selling online, it has been somewhat unattractive to the retailers with the biggest resources, due to the limitations of the platform and their demands for total creative freedom. No longer.

One of Shopify’s more recent, but equally important steps has been in the direction of headless and composable commerce.

Headless commerce allows merchants to decouple their front and backends to get the best of both worlds with regard to technology.

They can leverage Shopify's robust backend while using a different technology to create a storefront without limitations.

Composable commerce takes things a step further as the split is no longer between the front end and the back end but rather between all the necessary technologies that support specific business operations.

Thus, businesses can select and integrate various technologies to create a tailored solution for highly individualized businesses.

Individual software components are named packaged business capabilities (PBC) and can include but are not limited to:

• Storefront

• Catalog

• Promotions

• Cart

• Checkout

• Payment

• Search

In August 2024, Shopify will stop supporting its main liquid.checkout. In its place, it will roll out a new checkout called Extensibility.

This will allow Shopify merchants to create bespoke checkout experiences with no-code customizations. We have yet to see the impact that Extensibility will have.

Undoubtedly, the history of Shopify’s growth over the last two decades has been remarkable. However, it’s not a fairy tale either.

On multiple occasions, Shopify has been forced to scale back its workforce and some of its logistical solutions.

Shopify’s most recent layoffs happened in 2023 when they let go of about 15% of their staff.

Moreover, Shopify was forced to sell some of the logistic companies they had acquired to Flexport.

However, this has resulted in new strategic partnerships for them.

Considering that global e-commerce is estimated to reach almost $7 trillion, whichever company is able to provide the e-commerce space with the best infrastructure solution for e-commerce, will likely grow by the billions.

If you’re looking to be a part of Shopify’s future and use the platform to fuel your business, you should consider looking into professional Shopify developers.

Being a successful merchant on Shopify is difficult but not impossible.

It requires you to understand your target audience and offer them a high-quality product or service while providing them with an excellent user experience.

There is no one best product to sell on Shopify. However, a good product is one for which there is demand, a good profit margin, and not a lot of competitors.

Conducting market research or consulting a Shopify professional can greatly help you.

Yes, Shopify is an excellent e-commerce platform for beginners and veterans alike. Its user-friendly interface allows you to set up, design, and manage your store easily.

If you have a bigger business, Shopify’s abundance of marketing tools will help you streamline sales and marketing efforts.

If you're using a different platform and are considering migrating to Shopify, read more about our process.

See also: Hire Shopify Experts from a Certified Shopify Agency