Is it just Shopify’s world and we’re just living in it? Oh, and a Canadian cocktail, eh?
Issue №31 - In honor of the new 51st state…. [record scratch, not]... nah, this is about Shopify in the enterprise commerce segment - paired with a ‘Canadianish’ cocktail - the Toronto.
Welcome to another edition of Cocktails & Commerce. I live in Seattle, and every year for nearly twenty years my family and I have vacationed in the beautiful Gulf Islands of British Columbia - only to be interupted by first COVID and later college-aged and busy kids. It was an annual pilgrimage - going north the same week every year - and nearly every other family at the small, throwback “resort” we went to would be there every year with us - most of which were Canadian from Vancouver, Abbotsford, and beyond. We became close, like family, and every year when I would see them for the first time in the ferry line heading to Salt Spring Island I would seek out our old friends, take in a big breath, look around and make the same joke: “I love Canada, it’s almost like a different country.” It made us all laugh, but maybe its not so funny any more… eh?
This week we focus on Canada and Great White Commerce Platform from up north- - Shopify - and pair that with a classic “Canadian” cocktail.
Cheers, eh!
Our cocktail: The Toronto
In the long history of naming drinks after places, the Manhattan and its many borough-specific variations may be the most famous, with the Moscow Mule and Singapore Sling not far behind. But there’s another city-specific drink that deserves its due.
The Toronto cocktail combines rye or Canadian whiskey with Fernet-Branca, simple syrup (or maple syrup!) and aromatic bitters. It’s unclear if the drink was actually invented in Toronto or just named for the city. It’s also unclear when, exactly, it was created. But the Toronto first appeared in print in Robert Vermeire’s 1922 book “Cocktails: How to Mix Them” as the Fernet Cocktail. In subsequent books, including David Embury’s “The Fine Art of Mixing Drinks,” the recipe was named the Toronto, as it’s known today.
It should be noted though that Robert Vermeire is not the first to combine fernet with whiskey. Louis Muckensturm had already published a similar recipe for a Marine Cocktail, but with far less fernet and added Curaçao. And for some reason, The Mussolini did not catch on - despite as the infamous Judge Jr.’s efforts in 1929 (see note below). Finally, in 1930, William Boothby used the name Toronto for the cocktail, and that stuck.
In the Toronto, many use American rye - which makes a fine drink - but Canadian rye is really the way to go if you have some handy and want to honor our 51st state (Ha! And BTW ‘Canadian whiskey’ is really ‘Canadian rye’ - see note below the cocktail spec below). If you don’t have Canadian whiskey handy though, feel free to sub pretty much any whiskey - Japanese, Irish, or even American rye to spice it up.
Fernet-Branca is a traditional Italian digestif made from (once again) a secret mix of herbs including myrrh, saffron, chamomile and gentian. Its pronounced bitterness makes it a divisive spirit, but one well loved around the world (and even great in a Coke - just ask an Argentinian). Many people, especially those in the bar and restaurant industry, choose to drink it straight, but Fernet-Branca also appears in classic cocktails like the Hanky Panky and many others. When used properly, its bitterness lends a subtle accent to drinks rather than overpowering them. In the Toronto, that bitterness is significantly softened by the whiskey and the sugar (or again, maple syrup!).
Depending who you ask, the Toronto is either a variation on the Manhattan or - for real cocktail geeks - the Old Fashioned. The former camp notes that Fernet-Branca replaces sweet vermouth, while the latter camp says the fernet merely modifies the classic Old Fashioned formula of whiskey, sugar and bitters. However you look at it, the Toronto is a delicious, whiskey-forward drink with a wonderful bitter bite.
Cheers, Eh!
Toronto Cocktail Spec (Serves One)
1.75 oz (~ 50ml) - Canadian whiskey (sub Japanese or Irish whiskey, or American rye)
.25 oz (~ 7ml) - Fernet Branca
.25 oz (~ 7ml) - Simple syrup (or Maple syrup!)
.25 to .33 oz (~ 7-9ml) - Chilled water (unless you are using “wet ice”, see note)
1 dash - Angostura cocktail bitters
Orange twist - for the oils, not a garnish
Garnish - Maraschino cherry (or sub another type of brandied cherry)
The process:
Select and pre-chill a coupe or martini glass. Prepare garnish of orange zest twist and Luxardo Maraschino Cherry and set aside. Stir all ingredients with ice in a cocktail beaker, pint glass or a pitcher. Strain into your chilled glass. Express orange zest twist over cocktail (for the oils), then discard. Garnish with maraschino cherry.
Notes:
In Canada, the terms "Canadian whisky" and "rye whisky" are often used interchangeably. This dates back to when Canadian distillers began adding rye grain to their mash bills (grain mixtures) to add a spicier flavor to their otherwise primarily corn-based whiskies. The flavor became popular, and people began asking for "rye" regardless of the actual rye content.
Judge Jr. was pseudonym of an anonymous, yet influential figure in the cocktail world during the early 20th century. His real identity remains shrouded in mystery, but his contributions to cocktail culture are immortalized in a 1927 book titled “Here’s How” by Judge Jr.
“Wet ice” might be what’s left over in your beaker from the previous mix (and it does not even matter if it was another fucking cocktail, just mix the fucker.). Or add a bitter water. This boozy wonder can use some dilution!
Analysis: Is it really Shopify’s world and we’re just living in it?
In the enterprise commerce tech world today, it seems it's hard to have almost any conversation without Shopify coming up at some point. Shopify has turned into the eight-hundred pound gorilla taking down most of the commerce platform deals - sitting there laughing while it chows down on its ShopPay bananas sucking much of the platform oxygen out of their end of the zoo.
Some in this market argue Shopify have effectively won the commerce platform wars, but have they? In what segment, in what verticals? What could slow down the gorilla, what changes might disrupt their momentum? How should everyone from enterprise-focused commerce tech ISVs, to other commerce platforms, to the services ecosystem think about Shopify? (Skip to the bottom of the article if you are one of those TLDR folks, but if you load this into ChaptGPT and ask for a summary - fuck off, eh.)
At Shoptalk last week we dug in. We talked to ISV after ISV, and we talked to SIs and Agencies large and small. We don’t like to bury the lede… (Editors note: This is paragraph #3 and there are a bunch of bullet points below, so this is not a lede. Me: My ledes eat bullets for breakfast - suck it, eh.)
Here is what we heard, with a little color on top:
Shopify is winning most of what’s in play in the enterprise B2C segment (on down) today, BUT there are relatively few deals up for grabs. This is creating a warped view, a sense that the market is won when it may just be a reflection of what’s in play out there and the relatively stale and frozen enterprise platform market. The enterprise commerce platform market has been stagnant for years now, and frankly that is unlikely to change quickly until the tremors of Gen-AI, conversational, and agentic play out a bit more and the entire market is forced to flip, evolve, and drive a new wave of commerce tech-investment. (Including today’s commerce platforms simply vanishing into a cloud of agents and APIs, eh!?!)
The B2C deals in play - and thus the ones that Shopify are winning - share a common theme: simplification. Shopify is not winning enterprise clients who want more, they are winning clients who need less. Less cost, less complexity, more usability - and ‘just good enough’ capability. Almost all these deals they are winning are in B2C/DTC, and most are still in North America. This has an outsized impact on market perception as the U.S. is (still) the largest enterprise commerce tech market - but it is also important to recognize that in Europe players investing in meeting the specific challenges of serving that market continue to do well. (Though again, the market as whole is nothing like it was only five years ago, eh?)
Though simplification is a key reason why Shopify wins, there is a hint of irony in this cocktail. The irony is that in nearly all enterprise B2C accounts, SIs have been critical to getting clients migrated and up onto Shopify. (Its more fucking complicated than many customer are led to think - just like the old days, eh?!) The project may in some ways be simpler than launching on ATG, or hybris or even Demandware (SFCC), but these projects are not simple. Larger Shopify SIs have many stories of when they had to rescue a project where clients tried to do it themselves or on a shoestring with some small agency partner. This should surprise no one here.
Shopify may have cooled on B2B. After aggressively going after B2B and throwing the ‘product development kitchen sink’ at a number of high-profile B2B clients, it seems Shopify may be backing off. Turns out there is a lot of work needed to support everything outside of simple B2B models (such as small brands selling a bit of wholesale or to corporate accounts, eh) and it seems Shopify may have realized they have a long way to go to support even a modicum of B2B’s underlying complexity - multi-account hierarchies, complex pricing and catalogs, configuration. Some of Shopify’s most important SI partners shared with us that the B2B-meal is not sitting too well at the top at Shopify and they have had a rethink. Hey, who can blame them… B2B is hard and it’s a notoriously slow-moving and stubborn market. (So this might actually be a smart, prudent decision, eh?)
There are indeed gaps in the capabilities needed by Shopify’s enterprise clients, and it turns out that… wait for it… point-solutions and SIs are there to save the day! As I mentioned above, quality SIs are integral to making an enterprise commerce platform/replatfrom successful and there are gaps. These feature and capability gaps range from the banal (catalog ingestion, payments) to the routine (CX, product discovery) to the bespoke (backend orchestration, unique promotions, accounts) - but every SI partner of Shopify’s reinforced this. But given the nature of Shopify’s platform, Shopify often needs to be involved, and here is the funny thing…. The SI’s admitted that one of their greatest value adds was their ability to escalate inside Shopify and get their attention. (WTF? See next point, eh.)
ShopPay is a poor use of FUD. Many competitors in the commerce platform market want to use lines like “Shopify is a bank masquerading as a commerce platfrom”, and the like. While over seventy percent of Shopify’s revenue came from ‘Merchant Solutions’ - and most of that is payments - the reality is that even in the enterprise segment, customers love it. Network effects and often better rates, even enterprise customers who initially passed on ShopPay have come back around to add it later. Payments is a volume game, and is largely commoditized by Stripe… so you can drop that narrative. (Though it matters for different reasons…. keep reading, eh.)
ISV partners can feel a bit bullied - especially if they are in the order-flow. Shopify wants their payments take-rate. Even orders for Shopify-hosted merchants that originate or take place on third-party sites and marketplaces and routed through order management or orchestration solutions must route payments through the Shopify payment gateway or be balanced out on the back-end. Some likened this to a tariff or a tax. Partners in other capability areas have also complained about terms they feel are imbalanced. And of course there is the creepy worry that Shopify could disintermediate ISVs working in their ecosystem - through build or M&A. While most ISVs focused on the B2C digital commerce market need to play ball with Shopify today, this sentiment has developed into a theme that could bind ISVs against Shopify - perhaps encouraging their customers to look elsewhere. (I’m looking at you MACH Alliance, eh.)
If there is an achilles heel for Shopify today it is the service-levels they deliver to enterprise customers - and I am not talking about scalability and platform performance. I am talking about getting someone on the phone, proper enablement, and meeting the unique (ahem, high maintenance) needs of enterprise customers. As I mentioned above, the SIs and agencies we spoke with even shared this was a part of their value proposition - escalation within Shopify to get shit done. Shopify can and should fix this and hire a proper AM/CSR enterprise team and up-level the service and attention the enterprise segment expects and needs. (A proper sit down over a case of Molson might work, eh?)
The other thing we heard from SI and agency partners is more attitudinal, and in our opinion it represents both a positive and a negative. Shopify carries a confidence into the room that borders on arrogance. When you know your shit, this can come across as authoritative domain excellence, but when you don’t it just looks like bullshit. Shopify knows SMB and mid-market in categories like health & beauty, apparel, accessories, and the such - but what we have heard more than once from SIs is that Shopify still has a lot to learn in the enterprise. Thus, that arrogance can sound like bullshit at times. Shopify can and should change this - a combination of culture (harder to fix) and domain expertise (easier to fix) - along with a clearer, consistent signal that they are really committed to coming up-market and serving the enterprise. (And that starts with the CEO & founder, eh?)
Will anything stop the Shopify train?
Shopify has all the momentum in the N.A. B2C commerce platform market right now - mid-market and enterprise - and are doing well in the U.K. and to a degree Europe as well. And while we have to admire what Shopify has achieved, we also have to acknowledge we’ve been here before. Multiple waves of enterprise commerce platforms have come and gone, with clear dominant leaders across each chapter.
Technology change, market-change, requirements changes, and the maturation of what a commerce platform should represent and be capable of led to the various comings and goings or stagnation of various platforms over time. But when they were at the top, it may not have always been so obvious what could impact they had at the time. (For the below graphic, see caption for sources and details - our GPT thinks it matters, whatever, eh.)
Perceived Market Position in the Enterprise Commerce Platform Market Over Time
What could slow Shopify down? What could lead someone or something different entirely from upending the good vibes in Toronto? (Stay paranoid Shopify!) Here are few ideas:
First is the economy. After staving off a recession and easing the landing gear onto the runway, the economy has aborted its soft-landing as the wind-shear of the new U.S. Presidential administrations trade and tax policies are shaking the wings and the storm clouds of recession loom in the consumers mind. Any meaningful slow down in the economy will be felt more acutely by Shopify than by any of its peers - as it is heavily dependent on its take rate from payments through its platform. A vast majority of Shopify’s merchants are heavily dependent on Chinese and foreign made goods - including the offshore factory-direct sellers (principally China) that helped fuel Shopify’s merchant growth. Tariffs and the elimination of de minimus exemptions will pinch them meaningfully and force these merchants to raise prices while consumer confidence has weakened and may (who knows) fall out the emergency exit. The smaller merchants Shopfy serves will not have the same supply chain chops and market-power as larger retailers and brands, and may be overly impacted by the rapidly changing trade and economic environment, while suffering more as consumers trade-down. (Make sure your seatbelt is fastened!) Seventy-four percent of Shopify’s revenue in 2024 came from Merchant Solutions in 2024 - which is primarily payments - while only 24% of Shopify’s revenues came from SaaS subscriptions in 2024 (much of that from enterprise Shopify Plus customers). Shopify is in a great position to weather the storm, but they are highly exposed to a meaningful slowdown in the economy and it could take some lift out of the wings and valuation - impacting their ability to invest.
The rise of social commerce. While many merchants - especially the digital native brands - are using Shopify today are marketing themselves effectively through TikTok and Instagram. But what happens as those channels become directly transactional? Social commerce is growing at over 20% YoY (Source: eMarketer) with TikTok Shop by far both the fastest growing and capturing the lion’s share. As social commerce continues to grow, can Shopify bully its way into getting its share of the payments volume or while it slips-slide away? What if Amazon buys TikTok? We’ll see how this all plays out, but commerce is strategic to both TikTok and Meta. Add to this the rise of off-shore (today mostly Chinese) competitors using a factory direct model and an impressive closed-loop social marketing and commerce game - see Temu and Shine - and you have a leakage of demand from retailers, aggregators, and a platform environment like Shopify.
User experience evolution. We are poised for a potentially massive change in how customers buy online - both through conversational experiences offsite or through ‘shopping agents’. And while in the end consumer facing shopping agents may represent only a sub-set of online, there is also the potential this catches fire. How agents determine what products to show and feature in their recommendations is still a little TBD. This may play to Shopify's advantage in the new world of agentic-SEO or it may not - will the smaller brands that are Shopify’s lifeblood still be featured? Maybe. (We’ll be writing about agentic commerce next, don’t worry. Big topic, eh.)
Technology change. We are entering a new era of agentic and AI-native commerce tech. The platforms may leverage AI technology advantages as native solutions to finally drive a meaningful new wave of commerce tech investment - promising automation, optimization, and deep knowledge, insights, and reasoning to meet a new and refreshed market. Shopify has the R&D resources and opportunity to leverage its market position to invest and outflank here, but it can be hard to run a conventional ground-game as the incumbent while fending off an insurgency. Perhaps Shopify has optimized for commerce as it existed yesterday - and exists today. But tomorrow? Maybe Shopify has built the best internal combustion engine on the planet, but the world is moving to EVs. Just because charging infrastructure and range are not there yet does not mean it is not going to happen, eventually.
The way payments work fundamentally changes. Maybe this is the most far-fetched, but we may well see a meaningful change in payments technology and payment types in the next decade - see crypto and micro-financing. Shopify is already offering its payments products stand-alone, and no-doubt will try to remain on the leading edge as an effective, cost-efficient, contemporary payments solution provider - it is their life blood - but changes in how consumers pay and the power of both consumer tech (see Apple and Google) as well as technological, regulatory, market changes could have a big impact on the fundamentals Shopify was built on (cheap credit, the U.S. dollar, and the ease of international money flows). In my view these are longer-term hypotheticals, but something to consider long-term.
What this means for the enterprise commerce tech ecosystem.
There are a number of domains to consider here, and certainly each of these could deserve its own article (long and paired with a cocktail - because that’s what we do here at C&C). But here are some thoughts:
For ISVs this means playing ball, but watching your back. We encourage our ISV advisory clients to see Shopify as an important channel partner for them. This means having a solution that compliments Shopify and makes it better. But it is important for ISVs to realize that if they focus on the enterprise market, that the real enterprise segment at Shopify remains a relatively small segment of Shopify’s install base today. It is also important to realize that Shopify is still uncomfortable bringing ISV partners in up-front - they simply don’t really know how to partner in that motion effectively yet (but do seem to want to get better, eh). Rather, they point to their app store where there are over nine thousand apps today, with eighty-six ‘certified’ Shopify Plus Certified Apps. Frankly, it's a bit of a dog's breakfast, with most solutions still geared to SMBs and homogenizing everything. The reality for ISVs is that you will be selling into the Shopify install base, hoping for endorsement while needing to differentiate and prove value just like you always do - there will be no fast-lane. Key areas where ISVs have meaningful opportunities to compliment and make Shopify better in the enterprise segment today include Product Content and Catalog Management (PIM, PXM), Order Orchestration (OO, OMS, iPaaS, WMS, Marketplace), Search & Product Discovery, and Marketing (MA, CDP, Market Intelligence). But for any ISV working with Shopify we offer a caution, keep it above the sheets and don’t get naked. Shopify has the resources to disintermediate any of these areas through focused R&D or M&A, turning an important partner into a competitor overnight.
For SIs and agencies, turn up the music and build domain specific capability. Everyone is piling in here. If you are an agency or SI, consider how you can bring domain expertise, a composable stack of solution providers, and your service-delivery model to the table to differentiate. But just like the mistake Commercetools made by over building their SI ecosystem too fast and too big over the last five years, realize there will only be so many deals to go around. But an effective Shopify practice helping them climb into the enterprise segment, fixing the gaps, and bringing an enterprise level set of services and delivery model to the table has value. These projects will be small relative to the past, but for the time being they are about the only game in town. (For now, eh.)
For commerce platform competitors…. You know what you need to do. You need to be different. It is not enough to target prospects who would otherwise buy from Shopify if they did not find Harley so annoying on CNBC. (BTW, I think he is getting better at toning it down, eh?) If you focus only on core, basic B2C retail eCommerce you need to realize that the DTC eCommerce website has indeed been commoditized. Every business, every design agency, and every consumer all knows what an eCommerce website and app should look like and how it should work - the UI, the features - and Shopify has focused on optimizing that for merchants both small and large. If you are in B2C and are a commerce platform, what can you do or deliver differently from Shopify? Service? Capabilities beyond the site, a better back-end, a novel approach to AI? Realize that differentiation may be both temporal and a small segment of the market today, but that may change. There are bets you can make today that will explode into opportunity. Maybe that opportunity is two years out, maybe it is five, and maybe it is not being a ‘commerce platform’ at all - but rather bring a new model or complement all the legacy shit (maybe even Shopify) or connect directly to the source systems and disintermediate the whole stack. If you focus on B2B, just fucking ignore Shopify and sharpen up your battle-cards and qualification criteria because one of you does not belong in the room - you or Shopify.
Let us be clear: We are bulls on Shopify, but that does not mean the game is over.
I am sure there are a lot of people who will read this article and kinda come away with the idea that it is negative - that we are taking shots at Shopify. I hope not - because it is not.
Over the past five years, the total merchandise value (GMV) sold through Shopify has grown from $61.14 billion in 2019 to $292.28 billion in 2024 - nearly 380% growth over the five year period. During that time the number of unique online shoppers purchasing from Shopify hosted stores grew from 300 million to over 875 million. Shopify’s own estimates claim it now has ~12% of U.S. B2C eCommerce running through its platform. (Whoa. If you are wondering why the drinks are flowing south from the border… oh wait, bad analogy…. tariffs… fuck. Better run out and buy some Canadian whiskey now!)
What Shopify has done is impressive, and to be respected. Are they perfect - no - and I am not sure any senior leader at Shopify would claim they are. Like any business chasing a new market or market segment (which coming up market entails, eh) - they have work to do. Good news for Shopify and their ecosystem is that much of the challenge Shopify faces today in the core retail B2C enterprise commerce platform market is fixable. That makes them a critical, important player today - and one to be respected.
But as we outlined above, any digital technology solution provider (in commerce and beyond, eh) has to stay paranoid and keep building for the future - which may look very different from now in a few short years. That leaves openings for others - ISVs and platform competitors - to operate and serve a large meaningful TAM outside and within Shopify’s room in the zoo. (Back to Gorilla’s! See we got there eventually! Eh!) And for services firms, well, you need to transform too (Obvs, eh!).
We hope this article reaches you well, that you enjoyed your Toronto cocktail… and reach out to us if you want to discuss any of these and more or submit a question we might address on an upcoming pod.
Hope you're doing good and like your Toronto, eh? Hit us up if you wanna chat at the local Boozer or shoot us a comment or even question we can tackle on the next pod.
And to close in the style of Bob and Doug McKenzie from the Great White North…. Hope yer havin' a beauty day - and though a ice cold can of Molson we fished out of the hole we cut in the lake may be our beauty-drink, eh - we enjoyed yer time sipping your fancy Toronto, eh? Fire us a DM or some shit if ya wanna shoot the breeze down at the local boozer, or send us yer questions or any other things stuck in your toque - we might just yak about ’em on the next pod, eh!
Cheers, eh!
And if you want a laugh…
If you are looking for Brian online, you can find him here. And find Bill here.
Be well, drink well, and here’s to good business, eh!
Cheers! - Brian
Cocktails & Commerce™ is a wholly owned subsidiary of StrategyēM, LLC.