Author: Zhao Manman
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In the e-commerce ecosystem, the e-commerce SaaS service as a "water seller" has exploded. China Youzan, the leader, has emerged in China, and the well-known Shopify has emerged in North America.
On June 15, retail giant Wal-Mart announced a partnership with Shopify , intending to attract 1,200 merchants from Shopify in 2020. Shopify sellers who meet the requirements can directly add their product lists to Wal-Mart’s e-commerce platform to complete seamless docking.
Canadian e-commerce company Shopify, as an e-commerce SaaS service provider, has won a 5.9% share of the US e-commerce market, surpassing eBay and becoming the second largest e-commerce company in North America after Amazon. Shopify stock has been climbing, growing faster than Amazon. More than 1 million merchants in more than 175 countries around the world have chosen Shopify.
As one of the largest e-commerce SaaS service providers in China, Youzan also has a series of dazzling and wonderful legends. The latest annual financial report shows that Youzan’s total revenue in 2019 increased by 99.7% year-on-year to 1.171 billion yuan. The revenue generated by merchants through the SaaS products provided by Youzan, that is, GMV, reached 64.5 billion yuan, a year-on-year increase of 95%.
It is also an e-commerce SaaS. Industry experts believe that the benchmarking company of Youzan should be Shopify . However, the development trajectories of the two e-commerce cloud service companies in China and Canada are quite different, from which new business opportunities may be discovered.
1. Industry status
Founded in 2006, Shopify is headquartered in Ottawa, Canada. It focuses on e-commerce SaaS and value-added services. Merchants can use various themes, templates, and tools provided by Shopify to build their own online stores after paying a certain fee. Spend too much energy on software programming implementation, just focus on selling.
Source of figures: Official website and annual report China Software Network
On May 21, 2015, Shopify was listed on Nasdaq in the United States. By 2020, its market value has grown substantially in just five years, from $1.714 billion to $130 billion. Its gross merchant volume (GMV) grew from $700 million in fiscal 2012 to $61.1 billion in fiscal 2019.
Source of figures: Organized by eMarketer China Software Network
In 2019, Shopify's operating income reached US$1.578 billion, making it the second largest e-commerce company in North America after Amazon.
Youzan is the largest e-commerce SaaS in China. Total revenue in 2019 increased by 99.7% year-on-year to 1.171 billion yuan. The GMV generated by merchants through the SaaS products provided by Youzan reached 64.5 billion yuan, a year-on-year increase of 95%. In 2020, the total market value of Youzan will reach RMB 289.46. In 2019, the number of paying users reached 82,343.
Source of figures: Official website and annual report China Software Network
Compared with major domestic e-commerce SaaS service providers Weimob, Guangyun Technology, Aurora Big Data, Meideng Technology and other companies, in terms of revenue, Youzan and Weimob are the two companies with the largest revenue, and in terms of growth Judging from the rate, Youzan is higher. In terms of market share, Weimob and Youzan are also relatively high. Therefore, Youzan is a leader among Chinese e-commerce SaaS service providers.
In comparison, both Shopify and Youzan are the leaders in e-commerce SaaS in China and Canada. Of course, Shopify is in the field in terms of market value, operating income, growth rate, number of users, GMV and other aspects. Youzan regards Shopify as a benchmarking enterprise and the direction of its efforts, and believes that in the future development, the two will drive the development of e-commerce SaaS.
2. Business model
The two e-commerce SaaS business models in China and Canada are both based on the SaaS model in cloud computing, but each has its own characteristics , which is closely related to the development status of e-commerce in China and North America.
2.1 The biggest difference between Shopify and Youzan’s business model is that they are based on different e-commerce platforms
The biggest difference between Shopify and Youzan's business model is that Shopify has its own e-commerce platform, while Youzan does not have its own e-commerce trading platform, but sells its own SaaS services based on e-commerce platforms in China.
So you may have such a question, what is the difference between Shopify and Amazon? Amazon Amazon is an e-commerce trading platform, while Shopify is an e-commerce SaaS software.
For users, if they choose to use the software and services provided by Shopify to build their own online store, they can rely on their own online store for sales. As for where the user wants to place the store, it is the user's own choice . Users can put their stores on the platform provided by Shopify, on the platforms of other e-commerce companies, or even on their own websites.
Youzan is in the business scope of SaaS applications, extended services, value-added services, consumer services, etc., relying on platforms such as WeChat, with SaaS service booking service as the core, to help small businesses carry out decentralized transformation. But Youzan does not have an e-commerce platform.
Youzan entered this field by providing merchants with the SaaS services they need to operate on an e-commerce platform. From online store opening, operation, payment, CRM to offline stores and online Unicom, Youzan forms a closed business loop, and helps merchants make better use of the traffic resources under the decentralized platform by providing corresponding tools and services.
Youzan can help merchants open and operate stores directly on WeChat, opening up the road to provide full-link SaaS services for small and medium-sized merchants.
2.2 Both Shopify and Youzan’s revenue include subscription service and value-added service revenue
The revenue of Shopify and Youzan e-commerce SaaS includes two parts:
One is the subscription service income of e-commerce SaaS. like
Shopify's 2020Q2 achieved subscription revenue of US$200 million, a year-on-year increase of 28%. As of June 2020, the company's MRR reached US$57 million, a year-on-year increase of 21%. Apps and theme revenue contributed to other growth in subscription revenue.
In terms of main business performance, due to the increase in the number of paying merchants and the average revenue brought by each merchant, Youzan’s SaaS revenue in 2019 reached 594 million yuan, a year-on-year increase of 145.0%.
The second is the income from providing value-added services to merchants.
In addition to Shopify's e-commerce SaaS subscription service revenue, value-added service revenue is also an important component. In 2020Q2, Shopify's merchant value-added service business achieved revenue of US$520 million, a year-on-year increase of 148%, and accelerated growth for three consecutive quarters.
In 2019, in addition to SaaS revenue, Youzan’s extended service revenue was 150 million yuan, a year-on-year increase of 112.2%, mainly due to the increase in GMV and the use of extended services by more merchants. Transaction fee income was 334 million yuan, a year-on-year increase of 41.5%.
Youzan’s 2020 Q1 financial report shows that in the first quarter of 2020, the number of existing paying merchants reached 91,209, a year-on-year increase of 48%, and the number of new paying merchants reached 13,987, a substantial increase of 84% year-on-year.
2.3 Shopify owns the revenue of e-commerce platform
Because merchants can use the Shopify e-commerce platform, Shopify will take part of the profits from the total turnover of e-commerce merchants as its income.
According to experts, if an offline physical store is used as a metaphor, Amazon is more like a large department store. Different stores can sell their own products in the department store, and the department store directly attracts customers to these stores.
In Shopify, it is more like a builder who builds and maintains a store. If you want to open a store, you can choose the services provided by Shopify.
Compared with Amazon, Shopify has established its own advantages, including that customers of the e-commerce platform can establish their own independent brands; the website is maintained by the merchant itself, and there is no danger of being closed; the requirements for inventory are relatively low.
The disadvantage is that merchants need to advertise themselves, conduct market operations, and of course attract traffic, which is not allowed on Amazon; the delivery service is not as convenient as Amazon.
The net name "Xue ****" believes that the advantage of Shopify is the decentralized platform, merchants can have their own personalized online stores, earn fans, and maintain customer relationships. Weaknesses are weak margin, high merchant homogeneity, and low survival rate.
And "****2019" believes that the Shopify store is actually "invisible" relative to competitors, and it can be embedded anywhere on the Internet.
Shopify sellers can either concentrate on spending money on researching advertising routines, or concentrate on developing products to attract fans, and do both well. Shopify can provide all services that are convenient for sellers, and the degree of freedom is higher than that of e-commerce platforms.
3. Products and services
Comparing the SaaS products and services and value-added services of the two e-commerce companies, you will find the same places in their development and the highlights of their respective products and services.
3.1 Shopify Products and Services
Shopify stated in its investor report for the first quarter of 2020 that Shopify has a clear and clear value chain positioning, that is, "one platform, all channels, any device", with a "single integrated background" to "support merchants' payment, capital, market , analysis, APP, inventory, delivery, order, delivery, etc., support all terminal devices.
The portrait of Shopify's full line of products and services is very clear:
One is to provide the basic services required by merchants to open stores in the form of SaaS services. Shopify divides its service into three versions: Shopify Basic, which provides all the basic functions needed to create an online store, priced at $29 per month; Shopify Advanced, which provides all the functions needed to expand the online store, priced at $29 per month $79; Shopify Premium, the advanced features needed to scale your online store, is priced at $299 per month. The functions and employee accounts provided by each version will be different.
The second is Shopify's solution for medium and large merchants - Shopify Plus, which is an upgraded version of Shopify, provides users with an upgraded version of e-commerce SaaS services, and supports cross-border e-commerce. Compared to Shopify, Shopify Plus (Shopify Upgraded Package) provides better branded customized international storefronts, optimized product management, automated activities and processes, VIP support, and CRM (customer relationship management) channels and 3PL (third party) Tool integration.
At present, more than 3,600 top sellers have joined the Shopify Plus program. The average annual growth rate of Shopify Plus sellers is as high as 126%. The high-volume Shopify Plus brand has entered the Fortune 500 (Fortune 500s)
Third, in addition to platform subscriptions, Shopify also provides value-added services such as Shopify Shipping (logistics services), Shopify Capital (financial services), and Shopify Payments (payment services). Revenue from value-added services exceeded its subscription service revenue in 2020Q2.
3.2 Youzan Products and Services
According to the information in Youzan’s annual report and official website, Youzan’s products and services mainly include four major business segments: e-commerce SaaS, Youzan Cloud PaaS platform, value-added services and consumer services, covering the entire link needs of merchants.
The core product of e-commerce SaaS is the SaaS micro-mall, which helps merchants to open stores and operate e-commerce businesses on mobile platforms such as WeChat and Weibo, covering the basic functions required by merchants, such as store opening and decoration, order management, marketing, membership, data analysis, etc.
Youzan has also developed customized versions according to the characteristics of different industries, such as Youzan Retail, Youzan Industry, Youzan Education, etc., to meet the needs of merchants in different industries.
Youzan Cloud PaaS platform opens relevant capabilities to third-party software developers and merchants with self-development capabilities to help merchants realize their individual needs, and establish their own service ecology through Youzan Cloud application market.
In terms of consumer services, Youzan microstores provide supply chain capabilities for individual sellers. Sellers only need to be responsible for selling goods, and the platform provides services such as source of goods and delivery; A sales platform for popular products in Moments that sells data, etc.
Youzan continues to enrich value-added services, expand the business scope of enterprises, improve business growth, and enhance merchant stickiness. If you like the service market, merchants who have needs in store decoration, product shooting, agent operation, customer service, short video shooting, etc., can connect and cooperate with professional service providers in the service market.
4. SaaS competitiveness
The core competitiveness of the two e-commerce SaaS is reflected in the following indicators.
4.1 GMV
GMV is a common term in the e-commerce industry. In the field of e-commerce, GMV (Gross Merchandise Volume) specifically refers to the total transaction amount of the website. In fact, there is no uniform standard for GMV in the industry, and each company can define its own statistical caliber. But through GMV, we can see the marketing effect of an e-commerce platform or e-commerce SaaS.
Shopify GMV is singing all the way and keeps rising.
Source of figures: Organized by eMarketer China Software Network
Shopify has released its Q2 GMV data for 2020. In 2020Q2, the Shopify platform achieved a GMV of US$30.1 billion, a year-on-year increase of 119%. Affected by the epidemic, GMV mainly accelerated its growth in April-May, and the growth rate in June-July dropped. From a structural point of view, affected by the epidemic, offline POS GMV fell by 29% month-on-month. With the gradual resumption of business of offline stores, POS GMV in June has returned to the level of February and showed a continuous upward trend. In addition, under the influence of the epidemic, the online GMV of retail merchants in Q2 2020 increased by 73% month-on-month. In terms of categories, the value-added of consumer goods such as food, beverages and tobacco is relatively rapid.
In terms of payment, the 2020Q2 Shopify Payment GPV reached US$13.4 billion, a year-on-year increase of 131%, and the penetration rate reached 45%, a year-on-year increase of 3%. In terms of logistics, the penetration rate of Shopify Shipping merchants in North America reached 49%, a year-on-year increase of 7%. In terms of financial business, in 2020Q2, the company newly issued MCA and loans of US$150 million, a year-on-year increase of 65%.
In fiscal year 2019, China Youzan’s GMV has reached 64.5 billion yuan, a year-on-year increase of 95%, and the three-year CAGR is as high as 82%, showing rapid growth.
Data source: Official website and financial report China Software Network
Although there is still a gap between China Youzan’s GMV of 64.5 billion yuan and Shopify’s 61.1 billion US dollars, China’s Youzan’s GMV has grown at an astonishing rate, and its development curve is similar to that of Shopify.
4.2 Structure of Operating Income
As an e-commerce SaaS company, the proportion of SaaS subscription revenue and value-added service revenue in its revenue can show the direction of enterprise development.
At present, among Shopify’s approximately US$1.6 billion in revenue, SaaS revenue is approximately US$700 million, while the proportion of transaction fee and value-added service revenue continues to rise. In fiscal year 2019, its transaction fee and value-added service revenue accounted for 60%.
Look at China's praise. In fiscal year 2019, among the company’s operating income of 1.171 billion yuan, transaction fee income reached 334 million yuan, a year-on-year increase of 41.5%, accounting for nearly 30% of the revenue. With the further expansion of the company's ecological effect, the company's transaction and value-added business has great potential for growth.
Experts believe that only when GMV reaches a certain level can the company's financial services and transaction business generate income . In turn, financial and transaction services will enhance user stickiness and promote the growth of the company's GMV.
4.3 Financial services and value-added services
Shopify also provides logistics service Shopify Shipping, financial service Shopify Capital, and payment service Shopify Payments services, and the financial and value-added services have grown rapidly and accounted for a relatively high proportion.
China Youzan is the only platform in the SaaS e-commerce service market that has its own payment license . It has integrated popular domestic payment methods such as WeChat payment, ApplePay, Alipay, UnionPay payment, etc. into Internet payment-related services. It is precisely because of the payment license and the comprehensive business layout of Youzan Guarantee and Youzan Installment that the company can so smoothly promote the development of financial transactions and value-added services.
5. Development strategy
Because in the US retail e-commerce, Amazon and Shopify occupy the top two market shares, but Amazon's 37.3% market share is significantly higher than Shopify's 5.9% market share.
In terms of GMV, the difference between Shopify and Amazon is not that big.
Therefore, Shopify faces two development paths: one is to do a good job in subscription services in the field of e-commerce SaaS and expand value-added services; the other is to expand its own e-commerce platform, which must face the competition of Amazon.
The advantage of Amazon lies in its aggregation. It has various types of stores, and more merchants will enter Amazon because of similar aggregation benefits, making users more inclined to go directly to Amazon to search for the products they want to buy, allowing Amazon to build Develop a logistics system that satisfies same-day delivery.
Shopify is building a platform similar to Amazon, using Shopify as the entrance, users can search and shop from Shopify, or continue to invest in the development of their own platform to provide better software services for different merchants.
In another direction, Shopify’s self-developed shopping platform is parallel to building an e-commerce platform with other platforms , such as cooperating with Facebook to build a shopping platform on IG, allowing users to visit different stores, and acquiring 6 River Systems to build its own Warehouse distribution network.
The development direction of Youzan is its core business e-commerce SaaS and value-added and extended services.
Youzan mentioned in the financial report that the future business strategy is to help merchants succeed, and to help merchants grow their businesses by providing better solutions that meet their business needs. Through the SaaS system provided by Youzan, merchants can build stores on multiple traffic platforms, and only need to use the background provided by Youzan to manage all aspects including products, orders, funds, inventory, members, etc. Continue to help merchants open stores in multiple channels and obtain more traffic; Youzan will provide merchants with live broadcast e-commerce solutions.
In the future, Youzan will expand its advantages in the field of live broadcast e-commerce, continue to cooperate with more platforms capable of live broadcasting, and expand the sales channels of merchants in live broadcasting scenarios.
By comparing the two major e-commerce SaaS service providers in China and Canada, we found that e-commerce SaaS and its value-added services have broad development space, and can completely recreate multiple unicorn companies.
The development ideas of the two e-commerce SaaS to help users establish decentralized retail are basically the same. But in terms of whether to participate in the construction of e-commerce platforms, Shopify and Youzan have different choices. In the future, e-commerce SaaS has no moat, and its development is doomed to innovation.
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