A month ago my neighbour became another COVID-19 unemployment statistic. Like my wife he’s an Italian abroad. He decided he wanted to follow his passion and sell pasta online. Fresh, homemade, quality pasta.
The quickest way to hit the ground running in 2020, Shopify.
What is special about their technology? Where do they create value? What can Private Equity learn from this?
Shopify’s Technology is no different to other eCommerce platforms
They run on a mix of AWS and GCP for back end processing and their own infrastructure at the front. To be honest I’m not sure why they do this. Maybe they had bottlenecks in storage or batch processing, needing GCP to help them scale.
Shopify makes the process of starting a business, simple
In 2019 less than 50% of SMEs had an e-commerce platform, this has grown to 72%. Over the same period Shopify has seen a 96% increase in revenue!
Their business model is interesting. You pay a small fee for them to host your web platform for you and small % fee for each item you sell.
In 2020 65% of their revenue came from these ‘Merchant services’.
What does this mean for Private Equity?
Having a great product/market fit backed up with technology that just works is key. You can then use technology to make your platform sticky. This opens opportunities for offensive side disruption.
Imagine you could simply migrate customers away from a competitors platform or product. Imagine if you could align your business model to your customers success. There could be huge upside potential in that beyond traditional value creation.
What will you do next?
What offensive strategies could you use to take business away from competitors? What will you do defensively to stop these things happening to you? How will technology make this possible?
P.S. Belli di Nonna is launching soon. bellidinonna.com