Carl Rivera, Shopify: Building direct relationships – Well Made E131

In April, Shopify launched Shop, the consumer-facing counterpart to Shopify. In the app, buyers have direct access to thousands of companies selling through Shopify. The Shop app not only connects shoppers to brands of all sizes, but it makes the checkout flows we're used to feel incredibly arduous and clunky. Even with its intuitive UI, simple payments, and transparent shipment tracking, Shop General Manager Carl Rivera says this is just version 0.5.

Since selling his company Tictail to Shopify in 2018, Carl has continued on his mission to help brands and shoppers discover each other. To make a marketplace that brings companies straight to customers without the rising costs of acquisition.

In this episode, Stephan talks to Carl about building a platform that gives brands the power of customization while giving customers the ease of streamlined simplicity. They discuss how the Shop team is prioritizing upcoming features, and why email is their main competitor. Carl also shares why the Shopify acquisition was the perfect fit and how the rapid growth of Tictail motivated him to slow down.

Full episode transcript below. Also mentioned on the show.

• Adopting new shopping behaviors with Dan Frommer, founder of The New Consumer
• Scaling environmental accountability with Chelsea Mozen, Director of Sustainability at Etsy
• Shopify's sustainability fund
• Ben Thompson, Stratechery

This transcript was lightly edited for legibility.

Stephan: Carl Rivera. Welcome to the show.

Carl Rivera: Thank you. I'm super excited to be here.

Stephan: You are the GM of Shop app and Shop Pay. I think people more and more know what those words are, but if they don't, it's part of Shopify's ever-growing empire. I've been using both of those a lot. Over the past few months, the name "Shop" has become a much more important brand within Shopify, I feel like in the past six months than ever before. Describe a little bit about what you oversee at Shopify. 

Carl: Sure. So the Shop brand and the products are kind of coming through that represent the sort of consumer flagship products or Shopify. It's our consumer strategy and the approach we've taken a spin — a utilitarian one — where we want to enable a shopping companion that goes with you, wherever you go. And whichever story you decide to support and Shop from, we want to be that companion that helps make that an even more delightful experience. Through better payments for order tracking, order management, that kind of stuff.

Stephan: Tobi, the CEO of Shopify. He just said this on Twitter and it made so much sense, Shopify is the tool for merchants to sell. So it's helping you turn your company into a shop. It's Shopifying your company, and Shop is the thing that people do. It sounds so simple, but I didn't make that connection until he brought it up.

Carl: Yeah. We liked this idea of going for a very simple name. We're a mobile-first product. And I think in this world of mobile-first products, the need to sort of be able to Google something it's, it's, it's changing, right? We're discovering these apps through the App Store or through friends if recommendations, and we wanted to have a name that really represented what we're about much more than just a weird name that no one's ever heard of before. Like I dunno, Tictail.

Stephan: Well, we'll talk about, we'll talk about all of those things — Tictail which was your previous company, which I want to explore in a second, but Shopify Pay was the old name for Shop Pay and Arrive as the name for the Shop app, and those both got rebranded in the past year, I think, is that right?

Carl: Yeah, that's right. So in April this year, we relaunched Shopify Pay to become Shop Pay, and we relaunched Arrive to become the application called Shop.

Stephan: Do they actually work together in some way? Because you can use Shop Pay without using the Shop app.

Carl: Right. So both Shopify Pay, now Shop Pay, and Arrive started off as experiments inside of Shopify. You know, they were like garage projects. That's rogue product teams built up, without supervision, far away from the official roadmap, sort of thing. And then all of a sudden these two products became wildly successful, and customers loved them. They really craved for them. And we discovered that we have these incredible assets that are catering to the same audience, but they have completely different names and they have no connection to each other. And so with the introduction of Shop, we really wanted to bring these services together so that all of us consumers that were benefiting from both could access both using one user account, being part of the same universe, the same platform.

Stephan: Yeah. And it's been so convenient to use both of those because I think everyone — I mean, we've seen, we talked about this with Dan Frommer a couple episodes ago. There's been such an explosion in eCommerce over the past several months. We're all getting so many deliveries almost every day that being able to keep track of that, but also facilitating the checkout process is such a beneficial thing. I remember the first time I used Shopify pay and I just put in my email address and suddenly it's filling out all of the stuff for, for a checkout experience. You know, my payment information, it's just so much, so much simpler. And that is a really exciting thing to be able to enable at scale while still giving the different merchants their own cart and browsing experience, but having that ability to simplify that transactional part, that's kind of less interesting, I suppose.

Carl: Yeah. And I think it's really interesting. We find all of these individual independent brands, merchants on these different store fronts, and we want to support them. We want to shop unique products and want to have a closer relationship to the brands that we buy from. But we also love the convenience that we've become accustomed to from buying from marketplaces. How we can expect or anticipate a one-click checkout. We can anticipate that it's going to be a really good delivery experience and that if we have an issue with the product, there will be a single destination where we can resolve that issue through great customer support. And so really the strategy of Shop is to take all of the great things that we have become accustomed to using marketplaces and say, Hey, you can have all of those things, all of those conveniences and still continue to shop in the way you want to shop and support brands directly by going directly to their storefronts.

Stephan: You've been thinking about these kinds of problems for a long time now. You started Tictail in Stockholm in 2011. I don't know how familiar people will be with Tictail. I think in the beginning you were positioning it sort of like a Tumblr for ecommerce, and then it became something that maybe people would recognize as more similar to Etsy near the end. Is that a fair description? What were you trying to do with Tictail at the time?

Carl: Yeah, for sure. Ultimately the vision for Tictail was to create the world's most used and loved ecommerce platform. Now we didn't get there. The way we tried to accomplish that goal initially was, similar to what you said, to create a more, more social version of Shopify, a faster way to create a blog-like online store for all of the people that don't really care about ecommerce, but really just wanted to find the fastest platform to get online. And we're more focused about, “How can I connect to my customers?” So you could save products or subscribe to brands and get updates when they launched new products or discounts. And ultimately what happened was that this consumer aspect of Tictail — how buyers could subscribe to brands or save products — almost became more popular than the merchant platform itself. 

As we started to lean more and more towards the buyer side of the marketplace equation, we discovered that the right next move for us, was to evolve the ecommerce platform to be more of a marketplace experience, and we call it sort of an Etsy-like experience. But the way we thought about this was that we wanted to bring brands that weren't necessarily, you know, handmade or do-it-yourself, but that were still sort of independent, upcoming entrepreneurs and makers.

Stephan: And so that company was acquired by Shopify in 2018, and then Tictail as a, as a brand was phased out. But what happened for those merchants? Did they get converted over to Shopify? How did that work?

Carl: Yes, exactly. So the first six months of our time with Shopify was really to create the most seamless transition we could. Have all of the merchants that have come to love Tictail and enabled them to continue their success on the Shopify platform.

Stephan: What I remember the most from Tictail was just the user experience, overall. I have a lot of screenshots on my computer and in different folders where I keep inspiration and ideas from other companies doing really great stuff. And I have a whole Tictail folder in there still. I have an archive of some of the stuff that you were doing. I thought it was just very simple, easy-to-understand for people. And it seems like in some ways that's been one of the areas that you've been thinking about the most over your career is just how do we make these things as accessible as possible?

Carl: Yeah, I think that's absolutely right.

Stephan: What were some of those things that you felt were confusing about it back then and how does that play into what you're doing now?

Carl: When we came into ecommerce in 2012, it looked so different than it looks today. And I think it's easy to forget just how different it was back then in 2012, there were hundreds, if not thousands of ecommerce platforms, and it wasn't clear that Shopify was going to be the winner, the leader. You looked at them and they all looked roughly the same offering the same features at the same price catering to the same merchants. And they all use this very heavy technical language. And this was around the time when, you know, eCommerce started to truly shift from desktop to mobile. And what we sort of saw then and what we were going after ... Is there an opportunity to leverage this shift between platforms to create a more lightweight, fun, easy to use ecommerce tool?

Carl: I think what we underestimated back then was the enormous execution capabilities of Shopify. You know, what's been so exciting about this company is that it's one of those behemoths. It just moves slowly, but it picks up speed every day, every week, every month. And as it's picking up speed, it's also picking up force and, that was hard to tell back in 2012, because it was still early in that acceleration. I think it's clear to everyone at this point. What we hope to do inside of Shop is to say, okay, when we invented Tictail in 2012, we really tried to leverage that shift from desktop into mobile web. And I think we're going through a very similar shift at this time, which is from mobile web into native apps. And if you think about it, you have these phases, these waves, and the wave from desktop to mobile mobile web was as clear to me as the shift right now from mobile web into the app era of commerce.

And when you think about that app era of commerce, it has a lot of interesting implications for independent brands, which is really what I am passionate about supporting. Because for most independent brands they can't afford, or it doesn't make sense for them to go out and create their own native app and push it into the app stores and try to build an audience. Like for us as consumers. If we look at our phones, we'll use maybe five or six apps on a weekly or monthly basis, and the rest are just sort of there in the background. We never reopened those apps. And so what I think that we are trying to do with Shop right now is to say, we're going to create that home to independent brands that they can call their own, that gives them a space to compete in this next wave of commerce.

Stephan: Do you ever see digital brands wanting to be able to have their own little app in someone's phone or is that only for the type of product that has a lot of recurring behavior? Do you see Shopify eventually powering that for people? Allowing people to spin up a new app that they can put up on the App Store that has their own branding and experience, that feels a little bit more like white-labeled to some extent?

Carl: I mean, there are definitely a ton of brands that want that, and that should have that. And there are a ton of great startups and platforms that enable exactly that. That, however, it's not the track that we're on or that we're going after with Shop. Because to your point, we're really trying to create a platform that brings all of these brands together in a single space so that we can create a density of consumer value where I go into that app and check in on that app every day, because I track all of my packages, regardless if they're from Etsy, Amazon, or from our Shopify store. And I have all of these different consumer benefits that bring me back into the app. But then when I want to connect with a brand or want to connect, discover a merchant, I connect with them directly. We're not this marketplace layer that goes in between and tells you, these are the products you should like. These are actually in fact, some of our own products you should also buy while you're at it. We're trying to get out of the way between the buyers and the brands and really say — hey, you can build a direct relationship here, but this will be the single container that you can go to to have that relationship to all of the brands that you care about.

Stephan: And I think that really speaks to a tension that exists maybe between smaller companies and larger companies, but also between the goals of a marketplace versus the goals of a B2B SaaS software, where in a marketplace, if your goal is broadly to increase the GMV, like moving more things and enabling more commerce to happen, there's an incentive to create a user experience that is consistent across every company — making the checkout the same, making browsing products the same, making filtering the same, because now the user gets used to using that and they don't have to go to a separate app and learn everything from scratch all over again. And that is probably going to facilitate a lot of commerce happening much more smoothly for consumers, but the bigger a company gets, and the more they're investing in their stack, the more they want to differentiate, the more they want to have these different opportunities to display their products in a unique way, or do something unique with checkout.

Lumi is obviously in the packaging manufacturing world. And so a lot of companies think of packaging as a way they want to differentiate themselves, so they're looking for every point that they can have to create something that feels unique to the consumer. And those feel like sometimes they're at odds because one is really trying to optimize the convenience and seamlessness. And the other one is trying to optimize the uniqueness and interestingness of the experience. How do you make something that works well for both? Or do you just think that it's just a phase, the different brands go through and, and once they grow to a certain point, they want to be unique and different in that particular way?

Carl: You know, I think when you look at Shopify and you look at the success of Shopify and the fact that Shopify as a platform cater to over 300 million unique buyers last year, and you realize that, wow, if Shopify was the single destination, it would be the US second largest ecommerce destination. You realize that it's not just brands that want this, like consumers want this too. They just don't have a destination for it yet. And that's really what we're trying to solve with Shop. We're trying to bring what makes Shopify successful as an online platform, into what we call "the app era of commerce", where we believe that brand expression like direct relationship between buyers and brands, you know, are really important things.

Stephan: To me, it seems like the next frontier is the cart because the cart is the thing that if I'm, if I'm using Amazon or other multibrand retail platforms, that's what makes the experience more seamless to me is that I can shop across multiple different brands and add them all to my cart and then purchase that. Is that something that you see as eventually coming to Shop? What is the point where you're gonna stop, in terms of still allowing the brand to retain some control?

Carl: Yeah, well, I think you're right in that the core value sits higher up in the funnel than the actual checkout. You know, the checkout has become commoditized where, regardless if we're using PayPal or regular checkout or Shop Pay, we're all checking out with the same credit card and moving it up a step in the funnel, I think we realized that it's not so much about the checkout option on a website. It's more about the consumer identity. And I think that's what we're trying to solve. It's sort of one level over the cart. It's to say, "Hey, we recognize you. We understand who you are. We understand what your preferences are, and we're going to make it easier for you. Be it through payments, be it through sizes, be it through customer support, be it through guarantees — whatever it is. We're going to make your life easier across all of these different destinations, these online stores, these brands that you want to Shop from. And I think cart is a part of that story. It's a part of that journey to sort of say, Hey, you can have a single cart across all of these different brands and so forth, but I really think it's about saying, Hey, we, we give you a single identity across all of these different destinations.

Stephan: And when you say you, in this context, you mean the consumer, right? Yeah. Because the way that Shopify makes money is primarily from merchants. And so the customer of Shopify from a purely revenue standpoint is primarily merchants. How does Shopify internally think about adding this new... I mean, I guess it's not a revenue generating entity, but you've always been designing for it through the checkout experience and so on, but it becomes a more and more important voice in how you prioritize your products.

Carl: Right. Well, ultimately I think what makes Shopify successful is that it's a truly merchant-obsessed business. And I think the insight here is that if you believe in this sort of next phase of commerce, the app era of commerce, where consumers are spending all of their time in a decreasing number of apps, then we believe that for us to truly be merchant-obsessed and truly give merchants the success they deserve in the future, and the next paradigm, we need to have an arm of the company that is really consumer-obsessed. And, that's the arm that Shop represents. And, you know when we were talking to Tobi and before the acquisition, — I've known going back to 2014 — that's what he expressed as well. I know that as a company, we've done an extremely good job being merchant-obsessed. I truly believe that, for us to get this consumer angle, right, we need to create a like closed group that's consumer-obsessed, that can really think about how merchants fit in, in this consumer paradigm — in this app paradigm, and then he created a theme around that.

Stephan: I think that one of the topics that has come up the most over the past couple of years of doing this podcast with a lot of founders of ecommerce companies has been the problem of discovery. And I think that is somewhat a connection point between those two, because in this particular way, consumers and brands are very aligned brands and consumers are not always completely aligned, right? Sometimes brands want to do things that consumers don't, and consumers always want to be able to compare products and say, which one's the best shoe? Is it this one, this brand or that brand? Whereas a brand doesn't really want you to compare its shoe to another different shoe. It just wants you to compare among the shoes that it offers. So there is that tension. But I think we've seen over the past few years how expensive it's gotten to acquire customers and brands seem to be looking for any way that they can get more eyeballs.

And in a way, in, in a strange way, it's kind of the problem that Shopify has created. It's the challenge of having this really successful platform, which has made it so easy for anyone to start a brand that it's harder and harder to stand out. And so, can Shopify help solve that problem in some way, and create matches? 

What marketplaces are really good at is creating matches. How does the right consumer find the right product or brand? And so do you think of discovery as something that you're going to get more and more into. Today's Shop helps you discover local companies that are in your area, and you can follow brands that you pick out yourself, but it's not yet going fully in that direction. Is that something you see doing more and more?

Carl: Right now we're fully focused on the post-intent world. Meaning we're not in the business of trying to build intent from out of nothing. We're saying, okay, after you've already built the relationship to a brand, to a product, to something that you want — at that point, we can step in and help out. But really the main challenge that we're trying to solve is this, remarketing, retargeting, loyalty building aspect of ecommerce where we, as consumers are already buying from so many different online stores. And this is the platform where we can stay in touch with those online stores, the stores that we have already opted into, to care about. And from that point of view, our main competitor today as a platform, isn't another marketplace it's really email, right? It's almost crazy how today in 2020, the amount of things in ecommerce where we still rely on email, right?

We go into our inbox to figure out the package tracking. We go into our inbox to find the receipts, to manage our return. We go into our inbox when we have an issue, I want to reach buyer support. If we want to stay in touch with a brand that we really care about, we sign up for their email newsletter and guess what? You'll never see that newsletter because Gmail does a really good job of making sure that that ends up on a tab, that you never access. Right? So we rely on email as our primary tool to be closer to brands that we have found and invested in. And that's not a good tool to solve these things. And we believe that for Shop, we have a long journey to just solve that one problem before we need to start to get into the messy territory of thinking about, discovery and marketplaces, and all of that.

Stephan: So it sounds like what you're saying is retention is one of the key metrics that you're looking at helping brands with. .

Carl: Yeah. For sure. I mean, there are two parts to it, right? One, we want to enable brands to move their audience into the Shop app so that they can have an audience to speak to through our app. And then the next step of course, is what are all of the ways that we enable those relationships to happen and drive retention between the buyers and the brands?

Stephan: Yeah. And retention is a very merchant-facing thing. A consumer is not looking to be retained. They will choose to be retained if, if I keep providing value and my customer service is good, I'm just poking at it because if I were completely consumer focused retention, wouldn't be the first metric that I would think of.

Carl: Well, I disagree with that. I think we use all of these silly words to describe things that we want to accomplish. But when I go to my favorite cafe, a block away from here, my mental image isn't that I'm retained by that cafe. It's just a cafe that I really enjoy going to, and I come back to it often. Right? And so we have all of these terms to say, okay, are we building a product that people want to come back to? And we call that retained users. But really what we're saying is can we build something inside of Shop that creates so much consumer value that you, as a consumer, as a buyer, you choose to open that up over and over again. And the reasons that you open up that app over and over again, is because you care about the brands that you follow, you care about knowing where your orders are at. You care about customer service, whatever it might be like. Those are the features that we should invest in.

Stephan: So when you were mentioning email as a competitor... We use email, of course, for all of the post-order, transactional email, for order tracking and then customer service. Do you see the beginning of the experience happening through Shop more and more as well? The other obvious use of email that brands are using is trying to get customers to come back to the store, and purchase something or launch a new product and say, "Hey, we've got this new thing that you might be interested in." You can initiate new transactions through Shop, but are you seeing that happening? Are you seeing people begin the exploration of purchasing through Shop at all?

Carl: Yeah, so, I mean, we see people begin the repurchase journey, right? And if there was one thing we learned over the course of the years with Tictail and building a marketplace, it was how important the repeat layer is. Because as you mentioned, acquiring a new customer is extremely costly. And ideally you want to have a long time when you can continue to see that customer come back and build additional value and give you better margins and so forth. And with Shop, that's really what we're trying to enable. So we'll say, okay, we're going to create a great first purchase experience that starts somewhere else. That starts in an online store. It starts in a different destination. But as that consumer comes into the Shop platform and they start thinking about buying something new, maybe from that same merchant, then we want that journey to begin inside of the Shop app and make that journey as good and engaging as it can be.

Now, we're extremely early into that. We launched Shop in, in April. And what we launched in my opinion was version 0.5. Really just saying, like calling our shots. This is an area that we're excited about. This is a direction that we're going to move towards, but really saying, this is the first version. And I think what we didn't anticipate was just how quickly that product would start growing. And the growth that we've seen since April has been nothing, but you're insane, crazy. And so we're focused on as a team is to one, try to keep up with our user growth and just make sure that you, as a user can continue to expect really, really fast tracking updates and really reliable payments while also making sure that these core journeys like repurchasing become more seamless.

Stephan: Are there other problems that are on your roadmap that you really want to explore that are not payments or order tracking?

Carl: Well, I think a key thing, right? Which is the obvious, that we want to create a much better merchant interface for Shop. The first thing we heard in introducing Shop to the world was from our merchants, not very surprisingly. And they said, well, this is all good, and what nice, but how can I reach my audience for this app? How can I get better control over how I appear in this app? How can I have more control over which products up here and to whom? And so over the past several months we spent a lot of time speaking to our merchants and, and understanding their needs, and also building the beginning of the merchant product for Shop that will really enable them and give them more control over this experience.

Stephan: Yeah. What does that look like? Cause it goes back to that tension between making it as usable as possible across brands versus making it as customizable and interesting for the purpose of storytelling from a merchant's perspective.

Carl: Yeah. You know, we really break it down into three parts. I think one of it is just education. Like, we're introducing a new kind of platform. We're calling it a shopping companion, but who knows what a shopping companion is. It's not something that you really dealt with in the past. So we're trying to explain how we're trying to bring all of these different utilities and buyers and introduce this app era of commerce and blah, blah, blah. And it's a lot of things to grasp. And I think the best way to manage this education is by showing the data — of showing how much better Shop Pay converts. Showing how much higher the repeat purchase rate is for Shop consumers. And so one part of it is just education and specifically education through analytics. The second part is to give brands better tools to control how they appear, because as we mentioned, we're not trying to create this one-size-fits-all marketplace experience where you're really just looking at the same page with different logos.

We're really trying to enable this brand expression. So giving the tools to brands to really, really be able to express themselves. And then the third thing is obviously the engagement piece, the buyer brand engagement. What are all of the tools in which buyers and brands can engage? How can brands communicate to their audience using Shop? How can buyers contact the brands that they've shopped from in the past and how can those interactions happen? So those are the three buckets that we think about when we develop our merchant experience and it's going to be, it's not one of those projects. That's going to go live on a specific date and then it's done, you know, it's, it's an important arm of our product line that we're going to continue to invest in for all of the years that are to come.

Stephan: If you flash forward five or 10 years from now, what are the things that you think Shop will enable that it doesn't today?

Carl: Well, look, I really hope that what Shop enables is a platform that's not all that different to the open web. That really is open to different partners to tap into, that's open to different brands, to tweak, and turn and make into something they can call their own. Where curators can come in and can create multiple different versions of marketplaces, tailored to their specific tastes and needs, but really not to think of this one-size-fits-all solution, but much more take that platform approach that I believe made Shopify so successful, and apply that to this app era consumer product

Stephan: Tobi likes to use the phrase "Shopify is arming the rebels." I think he specifically called it out against the "empire" of Amazon. How does Shop play into that? I think some of the features like Shop Pay are very obvious because Shopify can have its hundreds of engineers optimizing this thing that no individual brand could invest in at any scale that is even comparable. But are there other things that come to mind? Do you think about that idea when you're thinking about where Shop needs to go from here?

Carl: Yeah, for sure. I mean, it goes back to some of the things we've touched on, which is this idea that consumer demands are growing. Our expectations of ecommerce have changed dramatically over the past 10 years. 10 years ago, I would shop from Craigslist. And that was fine. That was okay. And nowadays I expect the products that I buy online to arrive like tomorrow or today, hopefully, you know, it's turned into this retail-like experience. And so what I think that we're trying to do with Shop is really to say, you know, on the Shopify side, we're going to give brands all of the different tools that previously only billion dollar businesses had access to. And on the consumer side, we're going to bring all of the conveniences that we have become accustomed to marketplace-like conveniences that you can bring with you to whichever Shop you go to.

And I think that's how we fit into the arming the rebels narrative. And what I think is so exciting about this specific phase in time for Shopify as a company is that when I came to know Shopify first, it was pure, it was an online store builder. And that's really how most of us think about this business still. But when you take a look at the company and you take a step back, you realize that at this point, we're doing finances, we're doing banking, we're doing shipping, we're doing this consumer thing. We have all of these different channels integrations. We're providing a better payment tool. And it's really not just how we're doing all of these things, but it's how these things are starting to come together. And it's pretty exciting to think about how we can bring, marketplace level of convenience through the Shop app that ties into SFN, our delivery network, to provide same-day shipments to consumers that we tie into, you know capital where all of a sudden brands, you know, liquidity needs are significantly lessened because they can rely on Shopify for some of those. And then you have this flywheel where all of the pieces come together and the output is exponential.

Stephan: Where does carbon offsetting fit into this? Because that, I think has been a really interesting thing we haven't touched on. You've built that into the app — first of all, how does it work? Does the merchant have to opt into that? Or is it something that Shopify is taking care of? How does it actually work?

Carl: Yeah, sure. So Shopify offers a merchant facing carbon offsets app, which allows merchants to say, "Hey, we're going to offset all of the orders that happen in our store." And that's one thing. A separate thing is that within Shop Pay, we decided that every order that is placed using Shop Pay as the checkout option, we're going to take responsibility for the carbon offsets of that order. And we're going to make sure that the delivery was carbon neutral. And I think it was just an obvious evolution given the position that Shopify has taken in the system, the question of sustainability and specifically how it relates to ecommerce, but also the fact that, within Shop, we understand both the payments step, but also the delivery step through the tracking that we provide. And so really having both those pieces allow us to get a very sort of good overview of what is the impact that we have.

And looking at that impact, it was clear to us that we needed to take action. Now, one of the things, the way I view this is that I'm really psyched about this feature. It's a really cool feature that we're bringing to the world and I really love the execution that the team brought to that feature — how you can see your own little forest and how many trees you have protected. And in close to real time, you can see the community impact that we all have using Shop Pay together all around the world. And ultimately why I'm so excited about that product execution is that I don't think that features like this are necessarily, what's going to change the world, we need a lot bigger and more decisive action, most likely at a governmental level to really change the trajectory. But what I do think features like this can do is to start conversations. They put it in context and they make it into something that's fun and that's shareable and that's interesting to talk about them to start to pay attention to. And that's really, I think why we did this feature and why we put it into Shop. To start that conversation and to help create some activism around, probably our time's most important question.

Stephan: I totally agree. And we had the director of sustainability at Etsy on the show a few episodes back and they did something similar, and so I think it's very, very exciting to see that this becomes kind of an assumption that we have in the world of ecommerce. And so just to clarify, whenever someone purchases something through the Shop app, it's always covered by Shopify. That's part of the transaction fee somehow?

Carl: Well, whenever you're using Shop Pay as the checkout option yes.

Stephan: Shop Pay. Okay. So even if I'm using Shop Pay without using the Shop app, so if I'm in the checkout...

Carl: That's correct. All orders we've with Shop Pay are carbon neutral

Stephan: For the shipping portion of the carbon offset.

Carl: Yes. And that's an important clarification. We do not look into the entire production of the product and all of the things that happened before.

Stephan: And so who is on the team that is making sure those are properly calculated. How does that work? Is that something that you're collaborating with?

Carl: Yeah, for sure. So first of all, Shopify has invested significant capital in setting up the Shopify sustainability fund. In fact, we just launched a fantastic website that I think is stunning that shows some of, all of the work that we've done over the past 12 months as it relates to our sustainability initiatives and just Google the Shopify Sustainability Fund that I'm sure that that page will pop up in the top search results. When it comes to this specific product implementation, we worked very, very closely with a team inside of Shopify that runs the Shopify sustainability fund, as well as with an external partner called Pachama that makes sure that the projects that we donate this money to are in fact doing what they should then and are kept to the highest standards.

Stephan: Yeah. It's super exciting. I haven't spent very much time on that website, but I will put it in the show notes so that people can explore it. I want to come back to Tictail a little bit and just think about what are some of the things that I guess didn't work with Tictail that you took those lessons away and maybe are building things differently now with Shop than you would have, like having not had those experiences. Is there anything that comes to mind there?

Carl: Well, at a high level, I think we were just always too much in a hurry. I think, I think we were right about a lot of things, but we didn't have the patience or the maturity or the experience to stay with those problems for long enough. And we kept moving into the next interesting paradigm, the next interesting trend that we saw. And one of the things that I've come to appreciate a lot is how deep you can really truly go into a single feature. And I think the Arrive team that was the sort of predecessor to the Shop app was a great inspiration for that. How would you take something like order tracking, that to most seems like just a separate feature of an online store or something that you think about last minute, and you turn that into a singular, really deep, incredible engaging user experience.

Carl: And so I think that was the biggest learning from Tictail to slow down a little bit, see the trends, hold onto the trends, but stay where you are and try to go much deeper into every problem. And then of course, I think with Tictail, we became a much stronger product organization and develop a much better sense of how to drive growth at scale, how to really understand and speak to customers, how to balance quantitative and qualitative inputs, you know, all of this sort of foundational things that are just required of a modern product organization. But the thing about Tictail is that when we started that company, we had no product experience whatsoever. And we had this vision for, for this platform and we got the version one, perfect, version one was like, perfect.

And that was the worst thing that could have happened to us because we introduced Tictail to the world and it immediately just took off. It was growing like crazy. And it tricked us into believing that we knew what to do, when in fact, for any product organization, no matter how many years of experience you have, at best you have good guesses. Right? And, and I think we ended up listening too much to each other and not enough to our users. And I think that's one of the things that we're definitely reversing here as part of Shopify,

Stephan: What led you ultimately to selling the company? I was trying to find some figures, but it seemed like you had around a hundred thousand merchants on Tictail in 2015, you sold in 2018. So I'm assuming it was growing. What was the thought process like for you?

Carl: Well, you know, when we set out to build Tictail, as I mentioned, our goal was to create the world's most used and love the ecommerce platform. And we were on that journey for seven or eight years. And after seven or eight years, I think it became clear to us — we're not going to become the world's most used or love the ecommerce platform. And at that stage it was our decision to say, what is a platform or partner that we can join and where we can continue to drive towards that vision? And Shopify became that partner and I could not be more excited. In fact, Shopify looking at it, is the only partner that could really enable that.

Stephan: Something you were doing near the end there of Tictail was exploring retail as an avenue, and I know that Shopify has done a few experiments there. This is a really tough time for retail, but where do you see that going? And is there a piece of that that's still interesting to you?

Carl: For us, when we did retail at Tictail, it was never the idea to think of that as a scalable business unit. It was really just an extension of our marketing team, of our product team. An excuse for us to engage with our community, with our buyers. An excuse for us to engage with our most successful brands and invite them into the store to meet in person and to understand what's up. In a way, it was our most successful brand marketing initiative because it paid for itself. And we got to know all of these incredible creators. And I think that's very different to think about retail from that lens and to think about what's the future of retail and how does this industry need to change to support entrepreneurs going forward? I think this idea, and it's, you know, a very overused word, but this is sort of omnichannel hybrid commerce model seems like directionally the right trajectory for retail, where you have destinations that in ways act as a place to go in and to discover a brand and to pick up products that you can buy right there and then. But they also second as distributed warehouses. They second as return centers. They help you become more successful in ecommerce. And I think that mixed benefit is what we need to get to for retail to, to fully make sense in this new ecommerce dominated era.

Stephan: Well, you're in New York city, which was a hotspot for COVID, but is also one of the most exciting places in the U S to be if you're thinking about retail, because there's so much experimentation that happens there. But at this point, you know, we're recording this in September 2020, it's just up to anyone's guests, sort of speculating about what's going to happen next. Do you have any guesses around that? Around how brands should navigate this new world and what retail should look like if they're starting to plan for next year or the years subsequent to that?

Carl: Yeah, my guess is as good as anyone's, but my instinct, is that the future was pulled in 10 years and the shift to ecommerce happened much faster than anyone anticipated. And I believe that that's where we're going to continue to see most growth, then if I was a new brand today, I would start by thinking about my online strategy. And then I would, in the next step, start thinking about whether retail can accelerate my online strategy or not, but that would be sort of the lens to which I would approach retail. If you are a more established brand where you already know that retail was an important part of your footprint, I'm sure that right now is an incredible time to get some incredible real estate commercial deals. And I very much, I'm an optimist. I believe that the world is going to figure this out and eventually open up again. So I guess that's how I would view it. If you have had a successful retail footprint in the past, I would say that it's probably a good time to start negotiating good rates for real estate. If you're a new brand, I would not start thinking about retail at all yet. And, and put all of your focus and emphasis on your online channel.

Stephan: It's interesting because at Lumi we have our own data and viewpoint into that. And for many of our biggest customers are also big merchants on Shopify, and it feels like for some of those larger brands who are seeing diminishing returns in certain channels, 2020 was going to be the year of retail. At the beginning of the year, there was a lot of work happening on structural engineering for packaging, for retail purposes. And a lot of those projects got canceled across many brands that use Lumi. And so who knows, like maybe that's just something that we're going to have to come back to in a year or two from now, as far as the ecosystem is concerned, but it does seem like that was something, like you said, using the word omni-channel that once you hit a certain level, it feels like that's an area that you should invest into and start to explore. But it's hard to tell when that's going to come back and what it's going to look like, but I like your idea of looking into commercial real estate. It's probably a pretty good time for that.

Carl: Yeah. And from a New York perspective, I'm excited to see the resurrection of New York. The real estate prices, commercial real estate prices, had become crazy— like sky high, right? And now as you walk down Broadway or Lafayette, like all of the storefronts are closed. And I hope that New York can reimagine itself to maybe at least for a brief moment in time, give back some of that valuable space to more creative, more up-and-coming brands, so that we don't only see the world's largest retailers and chains across those storefronts.

Stephan: One of the things that was also happening before COVID became the main story of 2020 for a lot of these brands, was the conversation that was happening around direct-to-consumer and how well it was doing as an ecosystem — the health of it as an ecosystem. And I know that direct to consumer, maybe is not even the majority of how Shopify thinks of its business. I don't actually know how Shopify thinks of that group of brands as part of it. But what's your take on that? I think the criticism has been that it hasn't been maybe as good of a VC-backed type of ecosystem as people might've thought. That doesn't necessarily mean it's not a good business to be in, but maybe it's not a VC-backed kind of business. What's your take on all of that?

Carl: I mean, I'm no VC, but I would probably lean towards the same perspective that, that you were alluding to, which is that these are probably really, really great businesses, but perhaps their models aren't the best suited ones for like traditional VCs, and in a way I think that means, if I took a step back and looked at that dynamic, I would be less worried about that as a brand and more worried about that as a VC and the point I'm making here is that as a new brand today, you can offset some of your capital needs to companies like Shopify that will, happily extend capital using our capital service to companies that are in a growth. And from that lens, for these new, more predictable models, capital becomes much cheaper. Whereas for VCs, I think that there are going to be a ton of really, really great companies that are going to be created in that era where their money, their type of money, their currency doesn't really fit into those models.

So, you know, I think that's one take on it. I think there's another part to it, which is that it all depends on [what] the current acquisition channels are. So much of this sort of anticipated success of these brands [is] hinging on the assumption that you will be able to continue to acquire customers at the same or at a lower cost. And I think as the landscape, the social landscape, the marketing landscape is changing so rapidly, the dynamics of those businesses are going to change very rapidly as well. And from that lens, I think it's very good to have conversations about enabling more channels and new destinations where you, as a brand can go out and acquire customers, places like, I don't know, TikTok and so forth, because it creates competition in the market that continues to keep, advertising costs for brands at a reasonable level.

Stephan: Yeah, I think it was Ben Thompson who described it this way from the blog Stratechery, that in some ways Facebook and Instagram, and some of these platforms for advertising have become the new middleman for direct-to-consumer. Like direct-to-consumer, had the promise of being able to allow brands and consumers to connect with each other without relying on a retailer or a distributor in the middle. But now you have this layer of, I've got to pay however much per customer to acquire a new customer, and that's creating that same sort of friction and cost to your margins. And I wonder how we get out of that or what that looks like in the future.

Carl: Well, honestly, a big part of that is the reasons for assistance for Shop, right? Like we see a world where brands need to go out and spend a fortune to build an audience, and then they need to continue to pay a tax each time they want to engage that audience. And that's really like the dynamic that we're trying to reset the shift through Shop, right. We want to give that power back directly to the brands and directly to the buyers. So that by being powered by a company like Shopify, our business model, our business dynamics are fundamentally different. We're not an advertising led business. We're not a commission led business. Like if we help to facilitate these real connections, if you can call them that, then we are doing a good job for Shopify and we're doing a good job for the buyers.

Stephan: So you see Shop as becoming a channel in itself, or what has the conversation become on the Shop app? Like what is that? You've talked about a few times, like creating really beautiful and interesting user experiences. I wonder what that becomes in the long term.

Carl: Yeah. I mean, in competing with email, we absolutely see ourselves becoming a channel. In fact, we already think of ourselves as a channel. Sometimes internally, we refer to Shop as the third owned channel. And we think about it as you know, the online store, the retail strong then, and this is the third owned channel, which is a home that brands can truly call their own. Our principle focus at our current stage is what we call retention, or remarketing or loyalty, or just creating a great buyer experience, but it's really that repeat purchase that is our principle focus. And we want to go really deep into that. And that is not to say that like, there's no future whatsoever when we won't evolve this platform to also move up in the funnel and drive new user acquisition. But that's not in our cards right now. That's not something that we're sort of planning to roll out. What we're really working on is to create a better re-engagement experience.

Stephan: The Twitter account on Twitter tweeted, "You can have an edit button when everyone wears a mask," to which Shopify's Twitter account replied, "You can have a marketplace when everyone wears a mask." So if that's the bar for when this part is going to come, I think the answer is never, I'm not sure.

Carl: [Laughing] There you have it settled. And that's how we make all of our roadmap decisions. We just look at how well we, as citizens are behaving, and then we have different bars for different features. And when everyone wears a mask, we build the marketplace

Stephan: As a Swede, getting into politics. What was your point of view on the way Sweden handled the pandemic versus the US? I don't know if you feel like you have enough information to comment on that, but that was a very different approach, right?

Carl: Yeah. Well, look, I think at the end of the day, it's too early to say, right? I think how different countries handle the response to pandemic is something that we're going to be debating for years and looking at Sweden as a Swedish person who lives in New York, I think there are parts of what they have done that seemed to have been really working for them. And there were parts of what they did that were clear mistakes. And I can appreciate as a Swede, how we are very open about what we thought were good and what we felt were mistakes. And I can also appreciate how, when the person responsible for our strategy speaks openly to both the good and the bad, that will be interpreted by the press in all kinds of ways.

Stephan: Yeah. I agree with you on that. Do you think that there's anything interesting about Shopify being a Canadian company and your background and the team that you brought coming from Sweden? I'm actually a quarter Swedish. My mom is half Swedish, but I don't speak Swedish. I have a lot of family in Stockholm and around Sweden, but two very, I would say friendly cultures. I feel like they would mesh really well internally. I know that you have people from all over the world who work at Shopify, but is there anything about the culture internally bringing those kinds of experiences from different countries that you think is valuable?

Carl: Well, I do think that Shopify and Tictail, we had very similar cultures and I do think that's part of why this acquisition turned out so great, in my opinion. I've been thinking a lot about why that is, and I'm sure that part of it is Swedes being Swedes and Canadians being Canadians, and these two cultures being fundamentally quite similar. I also do think that sort of, we have operated with the same mindset pursuing the same vision for enough years, that the way that we were all programmed to think about independent brands and that, you know, the full commitment to their success just helped us all speak more or less the same language. It's a huge company in my opinion. Right. And yeah, for being such a big company, it's incredible how small it feels in the best possible way. It really feels like a startup. It really feels scrappy. It really feels like we have this secret that we're going to change the world and people are just about to find out, but we were in on it first.

Stephan: What's the secret to that? How does that work? Like logistically I don't even understand how that's possible.

Carl: I believe that it's the same secret that makes New York work and when you come to New York, it's a city, that's the same science as Sweden, like all of Sweden. And it's sort of overwhelming, it's daunting, but then you spend like a week in New York and all of a sudden, you're a frequent at the bakery and you say hi to the person. That's always waiting outside of the grocery store. And all of a sudden you have these people, this neighborhood, around you that you come to recognize and feel like you're a part of, and the reason that New York works like that is that New York, isn't the city, right? It's just a constellation of many small little towns in a way. And Shopify, feels like that too we all share the same, you know, demographic.

And, but in this case, I'm referring to the same company, the same landscape that we're operating within, but it's a company that consists of many small towns. And it feels very small at all times because you live your life, you spend your days inside of your little town where you recognize all of the people. You have your habits and rituals and the things that make you feel at home, but then you belong to this larger system that somehow maps together to a bigger vision that I think no one but probably Tobi fully understands or appreciates. And, and it kind of just magically works out.

Stephan: I think that's very exciting and inspiring the way you describe it. There are a lot of entrepreneurs and founders who sell their company and sometimes it's just really purely from a transactional purpose that they're doing that. It's not necessarily a personal desire to keep working at that company forever or anything like that. And I don't know how many people Tictail was when you sold. How many employees did you have at the time?

Carl: I want to say like 60 or so.

Stephan: Right. So going from 60 to thousands is a very big shift. And I think sometimes it's gotta be kind of somewhat uncomfortable to feel like it could be chaotic or there's so many different things happening when you can't keep track of what's happening at Shopify. No one can really, because it's all sort of happening independently, all over the place. And I just wonder how you adapt to that and how the processes internally, even conversations. I don't know if you use Slack, but I've never been in a Slack group that had 8,000 people that made any sense. I've been on some public ones that you can access and it seems totally chaotic, so I wonder how you keep that whole group rowing in the same direction.

Carl: I think they do a really excellent job of breaking down the problems into smaller problems and creating fully autonomous groups that they give a lot of trust to solve those problems. So you sort of feel like you have complete ownership and complete autonomy within the space that you operate in. And then the leadership group of the company does a really excellent job of making sure that these different work streams map together and move us towards a singular goal. And, you know, there's no Slack channel, I think, that includes every single person in the company. And instead you break it into smaller groups where some are pretty big, like hundreds of people, but they all have a shared theme in common, which unites that group and doesn't make it feel too unwieldy. Although I will say that I can agree with you that Slack does become a little bit overwhelming when, when you have more than, I don't know, a hundred people in a group.

Stephan: Yeah. Well, Carl, I could keep talking to you for hours. And so I want to spare our listeners, but I think that I would love to have you back on in a year or two to check in on how Shop is going, because I'm sure there's so much more,for everyone to explore and grow on top of. If people want to download the app, just go to the app store, search for Shop and it'll pop up for you. Is there anything else you want to point people to?

Carl: No, I mean, go to shop.app to check out our website from there, you can also find the download link. And if you add that link to the podcast description, I would also recommend everyone to check out the website. We just launched on our sustainability initiatives.

Stephan: Yeah. We'll put that link in the show notes, and you'll know if you're using Shop now that it's live. I feel like almost every checkout experience I have has Shop built in now, and so I've been using it a lot and really enjoying it. And I really, really appreciate the work that you and your team does to make that experience like so fast and seamless. That's such a big deal, I think, for the industry. So thank you for that.

Carl: Thank you so much for sharing that. I appreciate it. And thank you so much for having me on your podcast.