Shopify launching new revenue model, speeding up transactions and more

Ottawa-based Shopify will launch a new revenue share model for developers this summer. The company also plans to increase the speed of transactions.

Starting August 1st, the company will no longer take a share of the first $1 million USD (about $1.24 million CAD) in revenue a developer makes. Further, once developers cross the $1 million USD threshold, Shopify will take a 15 percent cut of revenue (down from the previous 20 percent).

The Globe and Mail reports that roughly 6,000 developers create and sell tools that can be integrated and used with Shopify’s systems — Shopify’s new revenue share model would apply to these developers.

“We believe that developers can build big businesses on Shopify and so we hope to signal that the revenue potential extends much upwards of $1-million,” Ian Black, Shopify’s managing director of Canada, told The Globe and Mail.

Shopify detailed its plans for the new revenue model at its annual Unite conference, which took place virtually this year due to the ongoing pandemic.

Black also acknowledged the changing revenue share model was designed to attract more developers, noting that developers create “much of the innovation that happens online.”

As for the changes to Shopify’s transactions, the company says that checkout will be twice as fast and will be able to handle seven times the volume of simultaneous buyers. In other words, individual stores will be able to process tens of thousands of checkouts per minute. Decreasing the time it takes for checkouts to happen can help secure purchases since research shows that customers a more likely to abandon a purchase the longer it takes to process the transaction.

Shopify plans to launch the ability for developers to build apps directly into checkout, which will help accommodate upselling, donations and other features. Plus, developers will get access to more options for altering the look and feel of storefronts and new integrations for third-party payment providers.

Finally, as of Thursday, Shopify’s API will be able to facilitate international pricing, estimate the cost of products with taxes and discounts, handle preorders and schedule a local pickup.

All these things should go a long way to making Shopify a bigger contender in e-commerce, leading some to call the company a rival to Amazon. Black told The Globe and Mail that he didn’t necessarily agree about the rivalry. However, it’s hard not to draw parallels. Amazon recently announced it will take a 20 percent cut from developers who earned over $1 million USD in the prior calendar year, but those who make less can get 10 percent back in credits to use towards Amazon’s web services offerings. Previously, Amazon took a 30 percent cut.

Moreover, Shopify’s new revenue model loops the company in with several other massive tech firms that have announced similar revenue models. Along with Amazon, both Apple and Google take 15 percent from the first $1 million USD developers make on their respective app stores, then up the amount to 30 percent for revenue beyond that first $1 million.

Source: The Globe and Mail