With the Shopify App Store’s growth, the app discovery experience needs to better meet merchant and partner needs. Shopify’s done an admirable job of adopting smart recommendations for merchants over the last two years, but more quality indicators are required in the absence of useful reviews to help merchants – especially those on Plus – make good decisions.

The Merchant Choice Conundrum

In the earliest years of the Shopify App Store, you had passionate developers – often technically-minded merchants themselves – building apps to solve merchant needs. Their apps were making some money, but were mostly seen as side income and passion projects.

As Shopify the platform has grown, the opportunity for developers has enabled the creation of countless great businesses. When the API and App Store went live in 2009 Shopify had under 10,000 customers. In 2019 Shopify eclipsed a million of them, and over that period the potential for partners has outright exploded.

Now there are thousands of apps in the App Store attempting to cash in. Small, independent developers building single-purpose solutions have grown in to large companies earning millions of dollars in revenue and spread their wares across multiple ecosystems.

Now there are thousands of apps in the App Store attempting to cash in. Small, independent developers building single-purpose solutions have grown in to large companies earning millions of dollars in revenue and spread their wares across multiple ecosystems. Some of these solutions are now pursuing platform strategies of their own, with companies like Rewind and Shogun exploring integration partnership programs with other players in the space.

Getting the App Store to this point isn’t accidental. From Shopify’s perspective, the goal was always to invite contributions and innovation that helps merchants find success on Shopify and in turn, keep the merchants on it. The App Store was about stickiness. This helped navigate important decisions.

Consider the choice of strict versus liberal app approval. You could emulate Google’s open approach and diminish the role of quality in favour of volume and diversity, or you could follow Apple's and emphasize quality and offer a more closed environment. Shopify opted for the former in the early days.

Charging developers for access to the platform was more open territory with much less precedent, but in a brand new ecosystem with Shopify’s goals in mind, this was a fairly easy decision to make – it was free to build on, and you could distribute your own apps for free outside of the App Store, but there had to be a revenue share agreement in exchange for distribution through the App Store.

It comes down to the fact that not all apps are equal. The App Store is riddled with scattered quality, and the onus is disproportionately on merchants have to sift through it.

If the number of apps is the metric, these conditions have by all accounts worked. At the same time however there’s a growing cost - a sort of debt that needs to be reconciled, and Shopify, merchants and partners are all on the hook for it. It comes down to the fact that not all apps are equal. The App Store is riddled with scattered quality, and the onus is disproportionately on merchants to sift through it.

At the top end of the App Store, you've got genuinely great solutions. They own ambitious plans to define the domain they're in and plan on building great, lasting companies. In the middle, there's a blend of solutions that tick some, but not all of the important boxes of quality: product, support, and sustainable business model. At the low end, you have those looking for a quick win. They're offering a product, but have little to no intention of building a business around it.

In response, we've seen a shift toward Apple's style as more and more quality heightening practices are put in place by the Partner Platform team. Further, Shopify’s curation and recommendation algorithms do their best to help, and while the App Store’s effort on this may even be best in class, these efforts have only slowed the problem and haven't reversed it. It's still a lot of work for the merchant to pick their partners.

This can be corrected, but before delving into solutions, it’s best to understand the invisible dynamics that have to be reconciled.

Post-Infinity

Let’s agree that Shopify has become a force of nature. By publishing their Economic Impact Report, it’s safe to say they think so too. Using mostly their own words, success in the mission of democratizing technology has paved the way to rewrite the rules of our modern economy.

Rewriting rules largely depends on what book and pen you have your hands on. The word economy in the last paragraph is important because it signals a change in the lens through which Shopify views the world and perhaps more importantly, the level at which they consider themselves to operate. When Shopify was founded, the rules they set out to amend were those of commerce, or how commerce happens. Commerce is a feature within economies, but economies are much bigger ideas.

Still, changing commerce is a huge deal in its own right, especially the parts that Shopify changed.

Still, changing commerce is a huge deal in its own right, especially the parts that Shopify changed. They had to attack the laws of retail as they stood and enable a cultural shift. This included where people start businesses (online), where customers discover and interact with brands (online), and how they transact (yep, also online). The result of disrupting commerce was creating what Jeff Bezos might call the infinite mainstreet: a space for as many entrepreneurs the world could surface, but without the barriers to commerce-centric entrepreneurship the physical world imposes. The most important of which being startup costs.

Bezos founded Amazon on this same idea a decade earlier, but instead of commerce or the trade behavior of humans, he focused on the mechanics and constraints of an individual business. Specifically, he attacked merchandising. Starting with books and some nifty programming, Bezos unlocked the particular flavour of infinite that he was pursuing: the infinite shelf.

That shelf would become one of the world’s largest shopping destinations. Bezos created the ultimate merchandising experience by making it possible to find everything in one place, giving buyers virtually unlimited choices, while having no material limits to the volume of SKU’s that can be added. This is true of all digital marketplaces, including Shopify’s App Store, but more on that later.

The infinite shelf redrew the boundaries of how a business can work, but unlike Shopify, it didn’t shift human behaviour. Instead, it exposed it, and by tearing the limits off of choice, Amazon learned that too much can bring a different set of challenges.

A game of choices

Amazon learned about overchoice theory. Or the Tyranny of Small Decisions. Or Hick’s Law. Or analysis paralysis. No matter what you call it, the prevailing understanding we’ve learned is that humans are increasingly bad at making decisions as more options for any given choice are surfaced to the decision maker. This was less of a problem in the real world where limited physical shelf space curbs choice volume.

Unlike the infinite shelf, the merchandising strategy of brick and mortar retail starts with accepting that space is scarce, and out of the gate the retailer inherits advantages because of the limits they face.

First, the limits of space, and subsequent limits on SKU’s increases the chance for the retailer to be increasingly familiar with those select SKU’s they sell. This is an advantage of subject matter expertise; a benefit that can be passed to the customer.

Second, the assignment of space to a product is an affirmation that this product is deserving of that space. We seldom question the qualifications of the retailer’s ability to curate their own merchandise, and the choice to host one product over another promotes trust.

Finally, the limited choices relative to that of an infinite shelf gives consumers a sense of completeness of options. This in turn empowers them to freely assess the options at hand without feeling the need to invest in learning about the options they may have, but are not present when they are trying to make a decision.

Amazon had to face up to the fact their version of retail exposed customers to situations of overchoice and they couldn’t lean on brick and mortar tactics to solve it. They decided that addressing it meant tackling two things:

  1. Exposure: making sure the right products find the right customers, or vice-versa.
  2. Confidence: ensuring the customer feels equipped to make their decision.
This includes Netflix,  Airbnb, and even Shopify’s App Store. All of these companies invest heavily in solving it, and they all call these investments the same thing: discovery and recommendation.

Creating exposure and confidence became and still is an obsession for not just Amazon, but for any credible online marketplace that’s premised on a surplus of choice. This includes Netflix,  Airbnb, and even Shopify’s App Store. All of these companies invest heavily in solving it, and they all call these investments the same thing: discovery and recommendation. We’ve all been beneficiaries (or victims) of Amazons discovery and recommendations efforts, from high-performance search to product surfacing algorithms.

There’s also a third piece: reviews. As much as Amazon understanding what a customer wanted could help a customer build confidence in what they were looking for, they still need to convey trustworthiness. A review is a socially sourced method, engaging real humans who previously made the choice to provide helpful feedback and insight into the experience with that specific product post-purchase.

Improving decision making from there becomes much harder. Barring leaps of innovation, incremental improvement is less likely to be something we can technology ourselves into, and is more likely some sort of high touch system. This doesn’t alleviate the fact that in some cases, we need increasingly better approaches to exposure and more confidence, as in the case of higher stakes decisions.

So this begs the question: how do you improve exposure and confidence for an audience with high-stakes choices in an online marketplace? We know people need more than good discovery, recommendations, and reviews for buying a house or buying a car.

What if that choice feels simple, but it’s actually super important? For instance, what if it’s an integral part of your fulfilment strategy or a major interaction point with your customers that they can’t afford to get wrong.

It’s not a coincidence that Amazon isn’t known as a high-end marketplace - they aren’t designed for that and in doing so, they discourage sellers and buyers from demanding the type of things that would foster the type of trust required to make high-stakes decisions.

Shopify’s App Store on the other hand doesn’t have that luxury, and while most of their story is about breaking free of the rules that govern physical commerce, it might be in everyone’s best interest to consider some merchandising practices that are found there.

Curbing Merchant Risk on Shopify’s Infinite Shelf

In 1984, a new idea was introduced to merchandising. Retailers wanted to make the right call when it came to picking the products they carry and promote, but a boom in the supply of products made it harder.

To solve this, what’s now known as the slotting allowance was created. The idea is simple: for high value real-estate, hopeful suppliers can pay for placement. Suppliers negotiate a lease of space for their products with an advance payment and receive prime placement for the audience they want. This is different from advertising, but the objective is similar. Part of the differentiator is the enhanced relationship the supplier forms with the retailer. Another is the confidence in the product the retailer gains from deepened familiarity with it, not to mention the raw signal that the ability and willingness to pay lends to the suppliers legitimacy.

Over the past 30 years, there’s been ample accusation that this is anti-competitive, but those complaints have largely centered around instances where the process a supplier goes through in order to reach a deal appears mysterious or unfair. The results of transparent slotting practices suffer little criticism other than those of hurt feelings and misinterpretations of it’s intent.

In the SaaS world, even in ecommerce SaaS marketplaces, sightings of slotting have been on the rise.

In the SaaS world, even in ecommerce SaaS marketplaces, sightings of slotting have been on the rise. Magento has been doing paid partnership status for a long time and any credible player in their ecosystem willingly pays for Magento Gold or higher status to open up new growth opportunities. Last year BigCommerce released Preferred and Elite partnership tiers. If you look closely, almost every successful Shopify app that also plays in BigCommerce’s sandbox is paying for the privileges there. Then there’s the Salesforce Commerce Cloud who are taking things a step further, requiring payment to even be listed in their marketplace, with additional tiers above that to gain access to Salesforce's marketing resources.

In this regard, Shopify is late to the game. This may have been an advantage in seeding a rich ecosystem but Shopify’s ever increasing focus on enterprise calibre merchants, many of whom are using the competing platforms just mentioned, causes a need for recalibration. The goal posts have moved as seeding the ecosystem is no longer the mission, and Shopify has a greenfield opportunity to align the interests of partners, merchants, and even Shopify itself in one fell swoop.

Opening up pay-to-play opportunities in the App Store would accomplish things that are a net benefit to all key stakeholders, especially if done in line with Shopify's values of truly wanting the best for Shopify's merchants.

Opening up pay-to-play opportunities in the App Store would accomplish things that are a net benefit to all key stakeholders, especially if done in line with Shopify's values of truly wanting the best for Shopify's merchants.

For partners, this means a chance to be competitive and rewarded for providing a high-quality solution to merchants. The most common items on partner wishlist are a signal of approval, like a badge, and priority treatment within the ecosystem. This usually means a combination of access to promotional opportunities and a dedicated relationship with someone on Shopify’s team focused on partner success.

Although the top app developers are branching out and owning some of their own growth channels (outbound sales, paid acquisition, etc.) the App Store remains the most important channel for almost all. There are limited effective ways to spend money to grow, and the best solutions have that money to spend.

Rather than failed experiments in paid acquisition and event sponsorships, partners can spend-to-grow in a way that provides them concrete benefits and meaningfully increases their relationship and access within Shopify. For newer developers, paid opportunities allow them to compete with legacy solutions who have had years to climb the rankings and amass social proof, enabling them to get in front of merchants more quickly.

What merchants want is to make the best decision for their business with the highest possible degree of confidence. They want to know the solution they hire will do the job they’re hiring for, do it well, and that they’re supported by a legitimate company that cares about them.

Merchants increasingly rely on apps to effectively run their business. Enabling a preferred badge for the best apps in the App Store gives merchants a sense of trust that these apps have both met a standard that gives Shopify confidence in them, and that they have achieved enough success (i.e. social proof) that merchants can trust them to be around for the long haul.

Ranking is ideally a good proxy for quality, but anyone who's spent any time evaluating solutions in the App Store knows that ranking can be gamed.

On top of this, discovery is also aided by continuing the shift away from ranking to quality. Ranking is ideally a good proxy for quality, but anyone who's spent any time evaluating solutions in the App Store knows that ranking can be gamed. The highest ranking apps aren't necessarily the best solutions, but the ones who are able to rack up installs and reviews faster than their competition.

Shopify’s interests should rest in seeing that their attention and support is invested in the partners most likely to help merchants succeed. When given the ability to zero in on partners dedicated to being the best in class, it becomes easier to concentrate their energy into them and gain clarity around how to design opportunities for them. Some of this happens today – it’s no secret that certain partners get preferential treatment from Shopify, and these partners are generally best-in-breed. However, this fails in two key ways: first, the preferential treatment comes mainly in the form of increased access and not through the App Store, and second, the process (or lack thereof) for getting this treatment is incredibly opaque.

Shopify would earn additional revenue to fund additional partnership opportunities that are currently lacking on the platform, and allows them to concentrate appropriate partnership opportunities across a smaller subset of meaningful partners. Monetization of the App Store from Shopify's perspective has grown in importance, but slotting is anything but a money grab. Revenue from a pay-to-play system would likely amount to the equivalent of a rounding error for single month’s Ad Words budget. The increased stickiness the App Store provides the platform will always be the priority.

Usher in pay-to-win

Growth forces all kinds of change, in the pursuit of it as well as a consequence of succeeding. Shopify has proven itself to assert on both sides of this formula. The latter by rewriting the rules of commerce and economies, the former by adopting a higher priority for enterprise customers.

There was a time when being called an app wasn’t controversial, but today, some partners will correct you. It’s time to recognize the maturity of the ecosystem, as more and more partners graduate from products to legitimate product companies.

It wouldn’t be surprising to see Shopify initiate some change in the partner ecosystem to accommodate and account for that, and albeit counter intuitive, it may be less surprising for Shopify to buck their trend of rewriting the rules of commerce as inherited from the physical work, and instead look to it.