Sunday July 26, 2020 |Notes

Shopify's high churn rate is a positive signal

Shopify has made it extremely easy to start and run online businesses. The shopify ecommerce platform powers over 1.4 million sites. Most of these are not successful and that is not a problem. By making it easy to start online businesses, there should be a high rate of failure.

In a 2019 Stratechery post, Ben Thompson rightly points out that a high churn rate is in face good for Shopify.

To that end, I would argue that for Shopify a high churn rate is just as much a positive signal as it is a negative one: the easier it is to start an e-commerce business on the platform, the more failures there will be. And, at the same time, the greater likelihood there will be of capturing and supporting successes.

It is now more meaningful to look at the market share among the top sites. Shopify currently powers 3.6% of the top million and 5.29% of the top 10,000 ecommerce sites. The big wins far outweigh the churn, and generally made possible because of the churn.

Shopify helps businesses by giving them the tools needed to start and run an online store. It's a positive sign that there's a high churn rate because it demonstrates how easy Shopify has made the process.

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