Getting roasted by an app
Shopify has a “Rate your Fit” app that will tell you what it thinks of the clothes you are wearing. Those persons dressed a little too unfashionably will get “roasted” in a hilariously funny way. CEO Tobi Lütke tried it out while wearing a charcoal-grey sweater with white pants and it was so LOL. Here’s the feedback from the app:
“Your outfit is giving off ‘Mannequin from a mid-range department store’ vibes. So bland, I’m already forgetting it.”
A bullish recommendation for Shopify stock
Barron’s reported that a study by Trivariate Research found Shopify to be one of the best U.S.-listed companies at growing its free cash-flow margin (= cash flow from operations minus capital spending, divided by revenue). As an indicator of stocks most likely to outperform the market over the long run, free cash-flow margin growth over several quarters beats other metrics, including upward earnings revisions, revenue growth, net income growth and price momentum, said Trivariate. Such companies have a moat that fends off competitors and bestows pricing power, positioning them to be one of those long-term compounders of value.
Avoid shit sandwiches
In The Shopify Story I riffed on how Shopify’s culture favours frank feedback over “shit sandwiches.” Former Shopify executive Daniel Debow, now one of driving forces behind the Build Canada movement, hammers this point home nicely in a post on X:
“How much would Canadian productivity increase if Canadians valued a culture of ‘Say the thing’? I think most aren’t aware how our indirectness and focus on offending no-one aggregates over time into slower moving companies, healthcare & government . I wasn’t really aware myself until I interviewed a number of Swedish, German, Dutch, American and other founders about their experiences working with Canadians. They said “Canadians are too nice. We leave meetings and don’t know where people stand. This doesn’t mean be a jerk. It means be direct, but not personal. Say what you actually think the issue is. Actually give feedback. It makes everything move so much faster.”
A Shopify strategy: differentiate AI through design
Shopify seems to now be betting on “the primacy of Design as a competitive, sustainable differentiator in the age of AI,” notes Rick Watson, head of RMW Commerce Consulting. The Chief Design Officer position at Shopify has been revived after an eight-year hiatus and assigned to Carl Rivera, previously responsible for Shop App. Among his responsibilities will be to guide a new internal design studio brought into Shopify through the acquisition of the 7-person team Molly Design Studio, which will leverage AI in their projects to bolster its product design team. “We’re entering the most disruptive era yet—everyone will use the same AI models, but design is what differentiates how they come to life,” wrote Rivera on X. Rivera also posted on LinkedIn a 5 minute tape from a recent Shopify Townhall that gives us a great behind-the-scenes look at the inner workings of Shopify. From such glimpses, one begins to understand how Shopify manages to perform at a high level.
The SR&ED program is shredding Canadian innovation
Shopify President Harley Finklestein contributed to the Build Canada movement with a critique of the Scientific Research and Experimental Development program (SR&ED), the largest federal support for business R&D, spending $5 billion a year.
Because of the cumbersome and complex application process, over 80% of claimants file submissions through consultants, many of which work for contingency fees amounting to a third or more of the credit issued. As a result, billions of dollars in taxpayer funding is diverted into consultant revenues.
Much of the money goes go to large corporations that already have steady income for research and don’t really need financial support, or to foreign companies but use the IP created to profit in other jurisdictions outside of Canada.
SR&ED funds are only available for research and experimentation, and there is no support for the commercialization, which is a vital part of disseminating the IP that is generated. As a result, “most Canadian-owned IP ends up being used abroad.”
In short, SR&ED needs to: i) be simplified, ii) award funds to domestic companies that truly lack the funds and iii) allocate a portion of funds to assist with commercialization of IP (or else funded through a separate government entity)
“Rise of AI shopping ‘agents’ set to transform ecommerce.”
SEO and other techniques used by e-commence sites to rank in searches will need a quick revamp as online searchers migrate in droves from traditional search engines to AI agents and chatbots, reports a recent Financial Times of London article, “Rise of AI shopping ‘agents’ set to transform ecommerce ” [limit of 3 views].
Semrush, a search engine marketing company, has found that 60% of European Google searches no longer result in a click because users instead rely on the AI-generated text overview. Gartner analysts project search engine volume will fall 25% by next year.
But will e-commerce sites need to revamp very much? Maybe not. The article says: “AI chatbots or agentic systems primarily select products for inclusion in their results by picking one of the top results in traditional search engines.” Still, marketers are looking to adopt new methods to improve the chances of appearing in AI-generated results.
Thus, advertisers are looking at things like i) creating longer URLs with keywords, ii) obtaining mentions on websites considered to be more authoritative to bots, iii) “specificity” in product descriptions, iv) quick loading of websites, v) reorganization of text descriptions to match “sematic searches” using broad terms and vi) text over images in advertising.
AI agents will handle shopping requests; for example when asked to get the ingredients for a “roast dinner” it will go to a supermarket website, put the items in a shopping cart and present it to the customer to buy.
ChatGPT says it plans to have an integrated checkout to let shoppers complete purchases without having to leave its platform. Judging from the partnership recently formed with Shopify, I’m guessing, that this checkout will be Shop Pay, with part of its transactions fees split with ChatGPT.