Shopware live from eTail West with Jason Nyhus

Discover how Shopware's open source platform and innovative features like AI Copilot are empowering merchants to compete with their larger counterparts. Jason also dives into the importance of serving the often overlooked mid market segment and how Shopware is tailored to meet their unique needs. Stay tuned as I explore the future of ecommerce with Jason Naijus. Don't forget to subscribe to Talk Commerce for more game changing ecommerce insights. But first, a word from our sponsors.

And and it's just a powerful combination of how you can have 2, yin and a yang basically creating a a really cool company. About a year and a half or so ago, I was introduced to Shopware through a recruiter. And my first reaction when I saw it come in is, who the heck is Shopware? I've been in ecommerce 25 years and I've never heard of them. And why does the world need another commerce platform?

So that was kind of the way I went into the call. And after a few calls with the team, I realized there was something special and different about the company, the culture, and all those things. And and I know a lot of people could easily say that, but it it frankly, it's true. Couple examples is, these guys are not afraid to do hard things. I don't know.

15 years ago, they decided to go open source. That's a massive decision, and it it had ballooned their overall customer growth. A few years after that, they decided that they needed to, transition the language of the business to English, and nobody spoke English. It's in, you know, rural Germany. And then then the last thing they did is they said, hey, listen.

We've noticed that innovation in ecommerce, not not a lot of new features are being developed for platforms. Most of the, research and development dollars were going to making things work a little bit better in commerce platforms, not around new innovation. And so they raised a $100,000,000 with Carlyle and PayPal, to really take this this world market leading product in Germany to the rest of the world. And that's why I'm here.

A a story I like to tell is around 2016 is the year that commerce was supposed to go big software and go corporate. K? 2016 is the year. In the Gartner Magic Quadrant, in the upper right, it was IBM and Oracle. And it and because an SAP bought a Hybris, which put them in the upper right.

Adobe bought Magento, which put them in the upper right. And, Salesforce bought Demandware, which put them in the upper right. And so the market was basically saying that the world is going corporate. And by the way, my previous employer, Digital River, was also in the upper right. And it was at that time, on that same chart, you look in the bottom left and you see companies like Shopify and BigCommerce were in the bottom left.

So these guys were considered niche players back then in a world where the market said commerce was gonna go more corporate. Well, the opposite really happened. You have companies like people, brands voting with their wallet and where they're signing up going to great platforms like Shopify and BigCommerce. And over time, these big software companies, commerce we thought was gonna be a first tier priority. It hasn't proven to be the case.

The investment in r and d to continue to drive the platform innovation hasn't been there. And it's allowed Shopware, as an example, to go from not being on it as quick as recent as 3 years ago to being a visionary this year. And so what history tells us is the ones that are moving up into the right are the ones with staying power, and the ones that are kinda stagnant are the ones that will over time kind of fall out of relevance.

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The the the, the visionary part of it and the open source part of it. The Magento was a, a great example of of an open source platform getting a ton of growth around that and then maybe not using all of those customers as a pipeline to their enterprise product, and it's that's only dropped off. The visionary part, tell us well, first, look, first comment on the open source and tell us a little bit about how the open source does drive innovation for the for the commercial product.

Okay? Yet we have a 100,000 certified developers who are able to build and monetize and utilize Shopware. And in addition, they're able to create capabilities and, check them back into to Shopware to put them in our core product. So the fact that we've got an it would be almost impossible for any company, no matter the size, to have an innovation base that large that can contribute to to the core product evolving over time. And so because that's the case, we have this massive network effect where we can bring new features and functions to our merchants faster than anybody else.

And we could not do that unless we were open source.

But and they are purpose built to serve some of the largest companies in the world. If you look at their roster of clients they're proud to work with, they're really large. And so, to support those customers the way they need to be supported, Adobe has a relatively high cost, to serve. Well, it's hard to take something that's a relative high cost to serve down market because the model starts to break. And so, again, Adobe, one of the best companies in the world.

They're purpose built to serve enterprise and they're probably one of the best to do that. But as it goes down market, it's hard for them to, change their go to market model, change their pricing model, and do the things that they have to do to really serve the mid market. Classically speaking, in any industry, the mid market is the hardest to serve. We like to say it's the flyover states of e commerce. You know, people think about LA and New York, and there's a lot of land and people in between, and a lot of businesses.

And that's the same thing with with the mid market. So, to serve the mid market, you have to be really really focused on giving enterprise class capabilities at the budget of an SMB. You have to lean really hard on having, a community of developers who can come in and out, as they are needed or tapped or or wanted. You have to have training and certifications and support to make sure that you're rising everybody at the same time. You have to have really scalable marketing stories and processes to drive adoption on new features.

It's not a just a pricing conversation around tech. It's how it is managed and supported, which makes it a tough market to serve and one we're purpose built to serve.

And we don't charge more to utilize it. And and the the real focus we have you got I think we gotta go up a level and talk about what the strategy is around, the mid market merchant and and what we're doing intentionally to empower them. The first thing we're doing is we're trying to give them tools and capabilities that allow them to compete with their Goliath competitors. We view them as David versus Goliath. And so to do that, we need to we need to launch new features, AI Copilot, Rule Builder, Flow Builder, Digital Sales Rooms.

These are capabilities that don't exist in other platforms, that do exist inside of Shopware. Secondarily, if you're if if you've been paying attention to the cost of commerce over the years, it actually costs more to do commerce today. Well, let me say it differently. The cost of commerce has continued to accelerate. The cost of capital, the cost of the teams, the cost to produce goods and services, the cost of of meta, the cost of your Google Ads, all those costs have continued to rise.

And so, what Shopware is focused on is how do we make the merchants more efficient. And AI Copilot is part of how we deliver against that vision. You can do more faster be being an editor than you can being a creator. And so that means you can launch more promos, launch more stores, and so that's just part of how we deliver the vision. The other part is around pricing.

So we have the ability, to really deliver the best economic value to a merchant where we give them rates that decrease as their sales increase. We call that, not platform economics, benefits of scale. We know how to give a mid market merchant benefits of scale. So, you know, when you when you boil it back up to the strategy, everything does come back to this mid market merchant and the things they are trying to deal with.

I think the point I would wanna emphasize that you you hit on was, you know, recently Shopify announced their price increase. Right? And again, Shopify is the one of the greatest boxes ever invented for e commerce. And if your brand fits inside of that box, you should probably buy from them. However, when you get to a spot where you have economic scale, when you actually are doing 25, 30, $50,000,000 of GMV, what you're actually doing is you're gonna overpay for payments.

You're gonna overpay for email. You're gonna overpay for cross border because of the convenience of how easy Shopify makes it. Again, credit to them. If you're a $1,000,000 merchant, it makes a lot of sense to go on Shopify because you get the punt you get to to punch above your weight. You get the capabilities of a merchant who's doing 20.

Tell it to like, just I wanna explore that a little bit. To the that that jump where you whatever that basic price is, 25100 a month, suddenly it turns into a $100 or whatever the the 20 or 30,000 a month.

So let's let's take that and and dig deep. So a merchant doing $50,000,000 is likely to be paying 2.15% plus 30¢ to use Shopify payments. Again, really great service. It comes with a lot of capabilities that you don't have to deal with. However, if you took that $50,000,000 GMV and went to other payment providers and you said how much would you charge me?

They'd probably save you between 30 50 basis points depending on your payment mix and geographies. Okay? Let's just say 50 basis points times 50,000,000, you're overpaying a quarter of a $1,000,000 a year for payments. Well, Shopify knows this. And that's why if you wanna bring your own payments to Shopify, you have to pay an additional 20 basis points to do it.

So they're smart enough to know that they make 70% of their revenue on their payments relationships. And if you wanna bring your own, you're gonna pay for it.

We we did sign a whole bunch of new logos as well, which are in the process of launching, which which is great. But the fact is 2023, because of the uncertainty, uncertainty equals pause. Wait. Let's go we'll do it another time. And what we saw, in 2023 was a lot of companies who know they need to replatform, but it's just not right now.

And so they made investments in other capabilities to maybe make their current Magento implementation headless, so that they don't they have to deal less with some of the pain. Or or maybe a a bold checkout to to take away some of the check out pain that they have to deal with. Or or or they're not those, other type of, companies. What we're seeing now is people saying, okay, now the the pain is acute. It's been here for a while.

We know we have to solve it. And they're starting to really take a a a view. And this is where these agencies play such a critical role. Most software companies, because 2023 wasn't the best year, are willing to serve customers outside of their ICP. And they're willing to do things they wouldn't naturally do.

And the long term effects in that is actually quite bad. It it it drives a lot of churn and and and bad outcomes, merchants or for platforms. So this is the role that I think is so critical with these agencies to be a true trail guide, to take an unbiased view and make sure that the customer's needs are actually addressed and the price that they're paying for is actually fair.

There's a reason for Shopify. Ify. There's a reason for BigCommerce. The, the trying to fit everybody into one mold doesn't work anymore because we have so much diversity. That that b to b example that you gave, tell us a little bit about the strengths of b to b and Shopware and even some people don't quite understand that you own, like, you own the code with Shopware.

You you can you can make that code whatever you want. And in that environment where there's so many different moving pieces and so many things that have that need to be changed to make it work for you Yeah. Why does that matter?

They're not actually building core useful b to b capabilities into their platform. They're they're trying to make you adapt to a trend they're trying to create. True b to b, for the most part, is messy. I I would say done right, it's probably 80% out of the box features and 20%, creating unique capabilities that really fit into the way corporations or companies wanna do b to b. And to give you another example, we have this capability that's unique in the market called a digital sales room.

And the reason we invented it is because we had customers who would over serve their top 5 clients, but then they'd underserve the other 95. The reps would self admit that that's the way it works. They over visit ones that give them all their revenue and they underserve the lion's share of their customers. The old 80 20 rule. So we built this digital sales room, which is a b to b capability that allows the rep to give the 95 customers really good virtual selling experience.

And you get all of the kind of complexities of b to b that's been operationalized in a really cool portal in a way that's gonna be similar to what telehealth has done with virtual visits that digital sales room can do to brands in a b to b selling environment. So b to b is hard. If they're telling you it's consumerization, they're trying to make you fit in a box you probably don't fit in.

The what I've seen is that the attendance here is up. Yep. And and I've heard that first day badge pickups were huge this time. I feel like the optimism around this event and now events in general and, is a good indication of what's to come. How do you feel? Do you feel like there's a correlation there? And and are the is the e commerce plat or industry sort of maybe lagging behind some of these other things that are happening here?

And we're pretty optimistic last year. And so I, you know, I feel really really good that there is this underserved mid market merchant who's finally realizing that they they they it's time to digitally transform their business. It's time to adopt new tools and technologies. And yeah, I think the future's bright for our industry, and I I think this is a big year for commerce platforms.