Can I do a dropship with a Facebook shop

The giant in the background

If you shop online, you probably use Shopify. Mostly without even realizing it. The company is driving e-commerce with power - and is now coming out of cover.


The basic principle of Shopify is "Software as a Service", ie a subscription: Anyone who wants to sell something on the Internet can easily click together a shop on the company's platform and design it according to their own wishes. As long as the shop is then online, the retailer pays a monthly fee, depending on the size, ranging from $ 29 per month to several thousand dollars. Shopify also offers other services, from payment processing (> Payment) to complete shipping logistics (> Dropshipping) to design or advice through the placement of freelancers (> Marketplace).


Every online retailer can design their shop however they want and are not obliged to indicate that Shopify is behind the offer. From the giant Budweiser brewery to the publisher Penguin Books and the business magazine "Economist" to the car manufacturer Tesla, numerous well-known brands use Shopify to sell their goods online. It is seldom visible. For this reason, the brand is best known among manufacturers and dealers. But that could change. Because in April 2020 the company opened its own online shop. The name is as simple as it can be: "Shop". With this, the Canadian company is now increasingly competing with the world's largest e-commerce provider: Amazon.


The pandemic and the restrictions on public life have made online trade grow even faster than before. The group is also benefiting from this boom: In the first quarter of 2020, Shopify retailers sold goods worth $ 17.4 billion - 46 percent more than in the same period last year. In order to increase not only the number of customers but also that of the shops, the company waived the fees for their> subscription to new dealers from March to June.


The great> success has a lot to do with the triumph of so-called dropshipping. Dropshipping - often called direct shipping in German - means that the retailer who sells a product online does not have to keep it in stock. He only forwards the incoming orders to a wholesale or logistics company, which then delivers the goods to the respective customers. Mostly without them noticing. The advantages of dropshipping are low capital investment and low risk due to the fact that there is no need for warehousing or slow-moving goods. Disadvantages: Since shipping is outsourced, the retailer has no control over the punctuality and condition of the goods, which can lead to dissatisfied customers. Questions about taxes or product liability are also more complicated than some small business owners think, who want to get rich on the fly with this business principle (> replenishment).


With a market value of more than $ 112 billion, Shopify is worth about as much as Volkswagen and BMW combined. The founder Tobias Lütke from Koblenz still owns 6.5 percent of the company, which makes him one of the 20 richest Germans according to the Bloomberg Billionaire Index. With Shopify, Lütke was in the right place at the right time. He benefited from the gigantic online shopping boom that has been going on for ten years. And he recognized the great potential of online marketplaces in the digital platform economy. Just as Google and Facebook make billions by bringing advertisers and internet users together, Shopify has managed to build a system around online commerce. The company brings together hundreds of thousands of retailers with numerous logistics service providers. These so-called Third Party Logistics Providers (3PL) help with> dropshipping, among other things. Ben Thompson, an expert in digital business models, puts it this way: "Shopify does what platforms do best: to act as an interface between two small levels of a value chain."

The fact that Shopify is making heavy losses - $ 125 million in 2019 alone - doesn't seem to worry investors. Perhaps they see the competitor Amazon as a role model: there, too, there was rarely a quarter with significant profit in the first 20 years. Like Amazon, Shopify invests a large part of its income, be it in the purchase of companies like 6 River (> logistics) or in international expansion. So far, Shopify makes three-quarters of its money in North America.


Like so many Internet success stories, this one begins in a garage. Tobias Lütke was born in Koblenz in 1981. He is a poor student, but a passionate programmer and computer gamer. After training as an IT specialist, he emigrated to Canada in 2002 after falling in love with a woman while snowboarding whom he met through an online computer game. In his new home he and a friend start selling snowboards online from a garage. Since he doesn't like the available shop systems, he programs his own. When he realizes that this software is much more in demand than his snowboards, it is the beginning of his entrepreneurial career.


Another legend about Lütke, which has been told over and over again, was that in 2008 he rattled off venture capitalists on an old bicycle on the famous Sand Hill Road in Silicon Valley to raise money for his company. However, when they asked him to move from Canada to California, he refused. In 2010, investors found Bessemer Venture Partners and First Mark, who gave Lütke money on his terms. By the IPO in 2015, it was $ 122 million. Shopify recently raised around another two billion dollars in corporate bonds and a capital increase.


A prime example of Shopify retailers is US entrepreneur and influencer Kylie Jenner. With around 193 million followers on Instagram alone, she has a large audience to whom she sells cosmetics from her brand Kylie Cosmetics via Shopify. Even though the alleged annual sales of $ 360 million are now heavily questioned, Jenner was able to sell 51 percent of the company in November 2019 for $ 600 million to cosmetics giant Coty. Numerous other celebrities such as the musicians Drake, Kanye West, Beyoncé, Justin Timberlake and 50 Cent, the footballer Cristiano Ronaldo, the TV presenter Ellen DeGeneres or the well-known gamer PewDiePie use Shopify for their online stores.


Shopify isn't the only shop software provider. Companies such as Shopware or Magento (formerly an Ebay subsidiary, now part of Adobe) rely on a similar model. The WooCommerce software is very popular on websites operated with Wordpress. Shopify is now attacking Amazon directly for the first time with its “Shop” app, which is aimed at end customers. There, in turn, “Amazon Storefronts” has been created for small businesses and individuals who sell their products from their own stores on Amazon. Shopify and Amazon are also increasingly competing with each other for logistics solutions.


After Shopify has networked retailers with logistics service providers for years (> success), the company is now in the process of massively expanding its own logistics offering. The goal: to become a complete operating system for online trading even more than before. Under the name Shopify Fulfillment Network, the group takes over the warehousing and shipping of products. In order to be able to grow faster there, Shopify bought the company 6 River, which specializes in warehouse management and automation, for 450 million dollars in the fall of 2019. Here, too, Shopify is competing with Amazon, where “Fulfillment by Amazon” is a similar all-round carefree solution for online retailers. Spicy: The founders of 6 River previously worked in management positions at Kiva Systems - the company that developed the robotic systems for the Amazon warehouses and was bought by Amazon in 2012.


The shop software was just the beginning of Lütke's> success. In the meantime, Shopify has grown into a kind of marketplace in which not only retailers are active for a long time. Graphic designers offer design templates for web shops there. Other freelancers help with marketing, write product descriptions or advise on shipping rates or other questions. Shopify earns with them.

Naive / replenishment

For all of its> success, Shopify has come under constant criticism: especially with its affiliate system. Anyone who recruits a new Shopify retailer will receive a reward of up to $ 2,000. On YouTube, in blogs and in Facebook ads, the “partners” called recruiters promise a life in luxury that you can lead as soon as you open a Shopify shop. Some of the same people claim that structural marketing of products like the questionable dietary supplement Herbalife can help you get rich. Shopify's own Facebook page also says full-bodied: "2700 people become millionaires every day - build your shop now!" Shopify even offers a template for the resignation letter to the boss on its website to alleged future e-commerce millionaires to make it easier to say goodbye to your old job. And this despite the fact that the American regulatory authority FTC expressly forbids the Herbalife brand in a judgment from advertising with possible wealth or the possibility of being able to quit his job soon. Even if Shopify is not traditional structured sales, the impression remains that the company does not care what promises are made to attract new retailers to the platform.


Another source of income is payment processing. Shopify Payments allows merchants to accept payments by credit card, Sofortüberweisung, and Apple Pay, among others. The payments are processed by the US service provider Stripe. Activating Shopify Payments is not mandatory for merchants, but it is obvious. If you choose a different payment processor, you will pay between 2 percent (Shopify Basic accounts) and 0.5 percent (Advanced accounts) to Shopify in addition to its fees.

Rebel pose

Shopify likes to play the role of the resilient underdog who comes up to scare the big and often hated online giants. "Amazon wants to build an empire, and Shopify is trying to arm the rebels," Tobias Lütke likes to say in interviews.

Foundation, endowment

In 2019 Tobias Lütke founded the “Thistledown” foundation together with his wife Fiona McKean and signed it over $ 150 million. The foundation is actually committed to the vision of a carbon-free economy. In the course of the corona pandemic, however, the goal changed: Health and research projects are currently being financed. Thistledown is the English term for thistle wool, the thin white threads that help the thistle's seeds fly. But it is also the name of a server for the online role-playing game "Asheron's Call", where Lütke and McKean met.


Sales in 2019 were $ 1.58 billion, almost 50 percent more than in 2018. Because of the Corona crisis, 2020 should be a significantly better year for Shopify. > Subscriptions from dealers account for 38 percent of annual sales and 54 percent for other services such as logistics or payment processing.


is a crucial factor in cloud solutions. Customers want to rely on the platform protecting the data they have been entrusted with - against external attackers, but also against abuse by the provider himself. At the end of September 2020, Shopify had to admit that two employees had stored data from "fewer than 200 retailers" have picked up. What exactly the two of them were able to do with this information - apparently not including payment data, but customer and order information - is still unclear. The two employees were fired and the FBI and other investigative agencies were involved, Shopify said in a contrite blog post.


At the beginning of 2019, Lütke founded Shopify Studios, his own production company for videos. Since then, the company's YouTube channel has featured numerous film portraits of successful shop owners who, for example, have been able to set up their online business thanks to a loan from Shopify's financial subsidiary “Shopify Capital”. But there are also game shows and stories of failed entrepreneurs and the lessons they learned from their failures.


- In the past year, 218 million people bought something from a Shopify-based online store.

- Shopify's App Store offers more than 4200 mostly paid apps that are supposed to make things easier for retailers. More than 80 percent of retailers use at least one of these apps.

- On Black Friday 2019, fitness brand Gymshark's Shopify store sold three million items in 48 hours - 17 per second.

- After Amazon and Ebay, Shopify is now the third largest online retailer in the USA.

- More than a million companies or sole proprietorships now sell their goods using Shopify. ---

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