Shopify gets read on growing bricks-and-mortar market

Shopify’s foray into bricks-and-mortar business is still in its early stages, but it’s building into something big, the company says.

Last summer, the Ottawa-based e-commerce giant introduced a point-of-service app that let merchants with actual stores process sales through an iPad.

Although most businesses still use more traditional technology such as computer terminals for POS applications, Shopify is signing up hundreds of clients a day for its new service, says Adam McNamara, the company’s vice-president of product development.

“That’s just a huge opportunity for us,” he says, estimating about 30 to 35 per cent of Shopify’s 100,000 online customers also have a physical presence.

Earlier this month, Shopify tweaked the rates it charges on credit card transactions through the POS system. The old rates were 2.9 per cent plus a 30-cent fee on every transaction. The new rates range from 2.15 to 2.7 per cent, and the company has waived the 30-cent fee.

All those rates are now lower than major competitor Square, which charges a standard 2.75 per cent on each transaction.

Unlike Square, however, Shopify charges a monthly subscription fee ranging from $49 to $199 a month. But Mr. McNamara says comparing the two company’s products is misleading because Shopify offers a much broader spectrum of services than its competitor, including all the tools customers need to set up an online store.

“Shopify has always been a platform where you come to build a business,” he says. “Taking payment is only one very small aspect of that.”

Revamping the fee structure was not a bid to undercut Square, Mr. McNamara says, explaining that the volume of sales generated by its POS system has allowed Shopify to negotiate better rates with banks.

“We’re in a really good spot financially, so we’re passing a lot of those cost savings on to merchants and really targeting businesses that are just starting out,” he says.

On April 7, Shopify launched a mobile card reader that allows iPhones to be used for point-of-sale transactions in Canada. A similar device for Android phones is in the works.

“Very, very soon, the minute you come to Shopify, you’re going to have everything you need to successfully run a business, whether you’re selling online, off-line, in store, what have you,” says Mr. McNamara.