Shopify's E-Commerce Empire is Growing in Amazon's Shadow

Some students wait tables or landscape gardens to pay for college. Jack McCarthy scoured Midwestern vintage stores for the ugliest Christmas sweaters he could find. McCarthy, 22, bought whatever he could get his hands on, usually for a few dollars apiece, then sold them online for more than $20. At one point the operation was pulling in $100,000 a year—money McCarthy used to graduate from Babson College debt-free.

Shopify Inc. helped him do it. The Canadian company provides websites, payments, shipping and more for 500,000-plus online merchants and, less than three years after going public, has a market cap of $10 billion—making it roughly the size of Twitter Inc. or Square Inc.

Shopify’s thesis is relatively simple: People all over the world have the brains and energy to start successful online businesses, but lack the tools. Shopify lets them try out online store ideas for $29 a month, and the first couple weeks are free. Many fail, but those that find a market start to grow. The more successful they are, the more money Shopify makes through transactions fees and higher-priced subscription tiers.

“Such a minimal barrier to enter is one of the reasons why Shopify is growing like crazy,” McCarthy says by phone from Holland, where he’s traveling and doing e-commerce consulting on the side.

Shopify is the best-performing U.S.-listed tech company with a $1 billion-plus market cap so far this year. And the shares have returned more than 500 percent in the 27 months since Shopify’s initial public offering. By contrast, Facebook Inc. and Netflix Inc. returned about 100 percent over the same period after their IPOs.