Remember, I told you in the last week's newsletter that we need to study Shopify Plus deeply to understand the medium-term outlook for Shopify? Shrikanth, my co-founder, did just that. But we both are travelling and could manage just 50% of what we planned to get to. So here is our deep dive.

1. There are about 17230 Shopify Plus merchants – both active and inactive.
2. Shopify claims 14000 merchants use Shopify Plus. We could only validate 10250 to be active. Based on our experience, Shopify counts installed base, which is irrelevant for most analyses and inflates the user base count.
3. Here's the catch – 7500 of 10250 are tiny websites (website ranking of over 1M, indicating very little economic activity). That is 73% of the active Shopify Plus user base or 50% of their installed base.
4. Of the remaining 2750 Shopify Plus users, nearly 250 are B2C services companies (Education, Finance, Law, etc.)
5. Less than 500 new Shopify Plus users were detected between 2020 and today.

I notice that the merchant count growth rate for Shopify Plus is 20% (give or take) between the onset of the pandemic and now. So the pandemic seems to have increased eCommerce adoption, but enterprise usage has had lacklustre growth so far.

There are two other dynamics we will explore:

1. Many scaled-up websites don't switch from Shopify to Shopify Plus. Why?
2. A good chunk of the merchants seems to use both Shopify and Magento. Why?

More stats following up:

1. Guess the company with the biggest market share among eCommerce platforms in the $100M+ GMV merchant category. The answer is 'Nobody'. One in two big eCommerce merchants builds their eCommerce backend. They sometimes cook a bunch of enterprise systems into a soup, but the end result is custom software.
2. Until we drop down to the cohort of $25M or lower in GMV, custom software dominates as the option for the core eCommerce platform.
3. Shopify Plus's sweet spot is the $5M - $50M GMV cohort.
4. Interestingly, above the $50M cutoff, WooCommerce is preferred as much as or more than Shopify Plus and Magento is a very close contender.

The long tail of eCommerce is a platform moat for Amazon and Shopify, but they are not where the revenue is. The best sellers on Amazon and the top merchants on Shopify are the ones who would spend on solutions that turn the flywheel of revenue growth for these platforms. Advertising, payments, fulfillment, lending, and you name any such revenue stream – the long tail is the stalk. The real meat comes from the users who go beyond the $25M GMV mark.

Why would Shopify consolidate fulfillment? Why would they do payment processing themselves? Every question can be answered through the lens of keeping more the revenue from the pie of a market where they are not the dominant player. Benevolence at the bottom and monopoly at the top is how I'd think the Shopify App Marketplace will evolve.

If you are an operator in this space and have insights on why the enterprise segment market shares are the way they are, I'd love to host you on our podcast.

On that note, expect a new episode drop within the next two weeks.