Shopify opens e-commerce platform to enterprise ERP vendors

Pandemic shows the need for e-commerce

Shopify has been steadily growing since it was founded in 2006. The company's total revenue in 2020 was $2.9 billion, an 86% increase over 2019, according to its end-of-year financial results. Shopify is working with 1.7 million businesses worldwide, according to its website. Its push to attract larger customers is being spurred by the business trend to move from legacy systems and become more flexible and data-driven, according to Mark Bergen, vice president of revenue at Shopify.

Mark Bergen

"We want to become the e-commerce operating system for our customers," Bergen said. "Smaller companies use it to develop an e-commerce presence and scale up their business, while large businesses like Heinz are using it to go direct to consumer, quickly launch sites, test, iterate and find new ways of getting in the market."

Shopify is seeing more interest from larger businesses, particularly traditional retailers and consumer packaged goods companies that use on-premises infrastructure and more legacy systems, because of the COVID-19 pandemic, which brought a new wave of interest in e-commerce, he said.

"They need to find new and more nimble ways to move into markets," Bergen said. "Many very traditional retailers are saying they need to find faster ways of implementing and moving into e-commerce markets."

The Shopify Global ERP program enables businesses to integrate their ERP systems directly into the Shopify e-commerce platform using vendor-built apps. These apps, which are certified by Shopify, eliminate the need to build integrations using third-party tools, which saves on time and costs, Bergen explained.

"This simplifies life for the merchant because they're no longer maintaining third-party connectors, there's fewer customizations and lower cost," he said. "But they also have more trust in the data because it's being maintained by the merchants themselves."

Two-way data exchange

The data flow between the ERPs and Shopify will be two-way, as Shopify can receive ERP data relating to inventory, SKU (stockkeeping unit) counts and pricing changes. The Shopify platform can send ERP systems up-to-the minute data on KPIs such as customer experience and sales, Bergen said.

More than 10,000 companies currently use Shopify Plus, Shopify's e-commerce platform for larger companies, he said. This includes sustainable shoe-maker Allbirds and athletic apparel maker Gymshark, both of which have started and scaled their e-commerce sites on Shopify, as well as large brands Heinz, Schwinn Bicycle Co. and Lord & Taylor, which are implementing smaller-scale sites.

J.Lindeberg, a sportswear retailer and wholesaler based in Stockholm, expects that the integration of Shopify with its Microsoft Dynamics 365 Business Central will help the company deal with growth and rapidly changing markets, according to David Morgan, senior director of e-commerce at J.Lindeberg.

Connecting the Microsoft Dynamics 365 Business Central ERP with J.Lindeberg's Shopify e-commerce storefront will improve data-driven decision-making for the company, Morgan said.

"Selling apparel brings challenges with the volume of SKUs that we deal with," he said. "Integrating [Shopify] with our ERP has helped alleviate issues surrounding inventory updates, item creation and third-party warehouse communication for order fulfillment."

Shopify inches toward the enterprise

The ERP collaboration makes sense for Shopify, said Jordan Jewell, research director for digital commerce at IDC. But he said he also found the move surprising because Shopify has not previously shown much awareness for what larger enterprises need.

Jordan Jewell

"Shopify has mainly been very much focused on smaller businesses, and the vast majority of their customers are quite small companies," Jewell said. "SMBs don't need an ERP; they typically use QuickBooks. But this move shows that they made an effort to build closer partnerships with those five providers. The ERP vendors built the integration apps themselves and there's not anything groundbreaking at this point, but this does show that Shopify has made an effort and taken steps to help companies [with more complex ERP integrations]."

Even so, the Shopify-ERP integrations are being used for fairly simple use cases, he said. For example, Heinz and Staples are using the integrations for limited purposes, such as setting up an e-commerce site in a particular country or region. Other customers such as Allbirds have moved beyond SMB status, but they have a much more limited product range than enterprises that are running highly complex e-commerce sites with hundreds of millions of SKUs.

Shopify's out-of-the-box functionality makes it possible for companies to get less complex sites up and running quickly, so the ERP integration may help in these cases, Jewell said. But additional ERP implementations will contain more complicated business rules, business logic, processes and finance requirements.

"These integrations may help a little bit with reducing complexity, but once you're getting into the true enterprise space, you often need a systems integrator or a value-added reseller to build those deep integrations," he said. "There aren't a lot of cases where large enterprises are putting their whole e-commerce on Shopify, but there are instances where they're putting one store on Shopify. So this program may help those companies in the lower mid-market that may have graduated beyond QuickBooks but are not using an SAP or Oracle."

Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.