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Book Excerpt: The Shopify Story — How Shopify Plus was born

December 17, 2024

Larry MacDonald is an economist, freelance business journalist, and author of several business books, the latest being The Shopify Story. It was published in October 2024 and recently was named as one of the best business books of 2024. Chapter 13: The Retail Operating System II Shopify catered mainly to small- and medium-sized companies during […]

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Larry MacDonald is an economist, freelance business journalist, and author of several business books, the latest being The Shopify Story. It was published in October 2024 and recently was named as one of the best business books of 2024.

Chapter 13: The Retail Operating System II

Shopify catered mainly to small- and medium-sized companies during its early years but another growth engine was strapped on when Shopify Plus was birthed in 2014 to service large companies. Within five or six years of its launch, it was contributing more than a third of the platform’s revenues. When Loren Padelford saw an ad in 2014 on LinkedIn for Vice President of Sales at Shopify, he was confused because Shopify was gaining notoriety as a fast-growing technology unicorn headed for an IPO, so it should have been an easy matter for them to pick up the phone and headhunt talent at other software firms. Padelford had no connection to anyone in Shopify he could speak to about the job; nonetheless, he still applied — even though it would have been an exercise in futility where he had previously worked because high-level jobs were mostly filled via personal or business networks. In his college days, the six-foot, four-inch, 275-pound Padelford played football as an offensive lineman at the University of Guelph, and nearly ended up in the professional leagues when he was selected by the B.C. Lions in the fourth round of the Canadian Football League’s entry draft of 2000. That scenario was not to unfold, and Padelford returned to the University of Guelph to graduate with a BA in psychology, followed by an MBA in marketing at the University of Liverpool. He went on to land a job in marketing and worked his way up within a Toronto-based software company to managing sales teams that put together nine-figure deals for clients in the government and corporate sectors. His employer was acquired by another company, as were the next two companies he worked at, leaving him looking for work in 2014. After he answered Shopify’s ad, Padelford was not expecting much to come of it. “I just figured no one’s ever going to call back because they must have their pick of whoever they like,” he told Zubin Mowlavi, host of the Coffee & Commerce podcast. But he did get a response, although it took a long time: “Nothing happened for nine weeks and then I got a call and they were, like: ‘Hey, you want to come talk to us?’ That started a 16-week interview process.” The weeks of interviews for Padelford were a “fascinating journey into the psychology of Shopify and what they were thinking.” Lütke, Finkelstein and Miller were confounded by their most successful and largest merchants thinking they had to leave Shopify and buy enterprise software from other companies. They thought it was a false stratification of the market and merchants would be better off staying with Shopify if they wanted a comparable level of service at a much lower pricing point. “‘That’s crazy, let’s stop that,’” Padelford recalled them saying. “And so, they’re like, saying to me: ‘Do that — figure out how to stop that from happening.’” Padelford was somewhat puzzled. It seemed to be a different job than the one he applied for. “I was, like, ‘Sorry, what? Is that a job? I’m not sure I follow — you didn’t actually say . . . what do you want me to do? You want me . . .’ and they are, like, saying: ‘Stop this problem from happening. . . . We have this nascent thing that we’re not quite sure what it is and we’re not quite sure how to scale it up and we don’t really have a ton of experience with the, you know, quote-unquote enterprise level — so, see what you can do with it.’” And that is how Padelford became general manager of Shopify Plus in 2014. Lütke wanted Shopify to be a platform where companies could scale up without having to go somewhere else. He also felt there could be a growth opportunity in signing up more companies already at the enterprise level: indeed, some had already done so, including Anheuser-Busch and Nestlé. But he didn’t want to launch an all-out effort to go upmarket until there was a stronger signal. He had seen how many companies had run aground when they tried moving upmarket too soon and too fast. His thinking seemed to be, let’s get it up and running to retain some of Shopify’s larger merchants and see where it goes from there. In the meantime, he was going to have it “walled off ” separately from the rest of Shopify, in an office by itself in another city. It seemed as if Shopify Plus was an experiment that needed to be conducted in a secret lab far away from the rest of Shopify. Shopify executives informed Padelford that the Shopify Plus team was to be located “anywhere in the world as long as it’s in southern Ontario and it’s not Toronto and it’s not Ottawa.” It seemed obvious to Padelford that Shopify Plus should then be located in the Kitchener-Waterloo area, near the tech hub and the University of Waterloo — with Wilfrid Laurier University and the University of Guelph close by. They would be able “to feed off that ecosystem and hire great people.” So, in January of 2015, office space was rented in Kitchener-Waterloo and the first five sales reps were hired to complement a small crew already chipping away at the project. The subscription fee for Shopify Plus would be much higher than Shopify’s regular plans but still far less than what a higher-end e-commerce platform or IT team would charge. The trouble was, Padelford did not have “any real idea of what” he was actually doing. “It was kind of like the executives were saying, ‘Hey, we have this thing that might be another thing and you should try that.’” But this was Shopify, and “when someone offers you a seat on the rocket ship you don’t ask which one you should take.” Padelford began by hiring five sales reps straight out of university with no sales experience and “no idea what we were doing.” Padelford didn’t mislead the new hires about the state of affairs and warned them they were kind of like test pilots for an aircraft still not yet built. “I scared them as much as I could about the job and I was, this will suck; we don’t know what we’re doing and you shouldn’t take this job because you’re probably gonna get fired in eight months and we’re all gonna get buried.” That was more or less how the interviews were conducted. “I mean what I really found fascinating is that for some people, the more you tried to scare them, the more excited they got and so, like, the people who were left at the end were the ones prepared for this amazing death-like experience,” he added. Later, some of them told Padelford that they thought he was scaring them on purpose because he was looking for people who didn’t care what they did on the job — they just wanted to be at Shopify no matter what. The space rented in the Kitchener-Waterloo area was a “crappy little office,” in stark contrast to the tony settings in Ottawa and Toronto. Padelford told his staff it was intentional: his unit wouldn’t get a nice office until they proved themselves. “What I was saying is we’ve not done anything yet. Ottawa and Toronto deserve their big offices because they have been around for a while and have hundreds of thousands of customers whereas we have nothing done. So, it was also a goal; I wanted the team to own it and to feel, like, if we did this thing they could look back and say, ‘I did that right,’ which creates a different emotional state for people.” On the first day of work, Padelford told the new hires: “I really don’t know anything; I have no sales training for you, so what I’d like you to do is, like, pick up the phone and call people and then come back and tell me how it worked out.” They first targeted existing Shopify customers who were getting big and thus at risk of jumping ship. The new hires were told to ask them: “‘Like, hey, do you want to upgrade to Shopify Plus?’ They just were calling people cold and learning, and we were developing the scripts on the fly and trying to figure out what worked and what didn’t. It was a ton of fun,” disclosed Padelford. This excerpt is from The Shopify Story by Ottawa author Larry MacDonald. Copyright, Larry MacDonald, 2024. Published by ECW Press Ltd. www.ecwpress.com