Member Exclusive   //   May 9, 2023

Member Dossier: Shopify’s checkout strategy aims for customization, efficiency

This story is one section of Modern Retail’s Member Dossier. In this series, we drill down on one pertinent topic in the retail industry. More from the series →

This story is one section of Modern Retail’s Member Dossier. In this series, we drill down on one pertinent topic in the retail industry. In this first Dossier series, we talk about all things checkout. 

Shopify claims to power as much as 10% of all e-commerce transactions. Over the last few years, it has skyrocketed in growth — processing $197 billion in gross merchandise volume last year, more than triple what it processed in 2019.  And the company’s business has blossomed from serving not only independent and DTC retailers but also major global brands like Black and Decker, Mars and Mattel. 

But sustaining this growth amid increasing competition from web platforms and the likes of Amazon’s new Buy with Prime means creating products that continue to increase merchants’ conversions. And this year, that means creating a simple-as-possible checkout experience. 

The latest Shopify software updates rolled out in the first quarter of 2023 features a suite of updates allowing merchants to customize their checkout page — such as being able to use apps for add-on purchases, stackable discounts or loyalty programs on their checkout pages. In addition, it offers the ability to update how brands’ pages look in the Shop app. Critically, the update also includes a one-page checkout that spares users from clicking through multiple pages to enter their shipping and billing information.

The updates respond to the demand for more customizable strategies as merchants aim to make their checkouts easy to navigate and provide opportunities to upsell. 

“Where we see customization adding the most value falls into two kinds of buckets,” Shopify’s director of product Mani Fazeli said. “The first bucket is that there is some piece of information they either need to collect or convey. And then the second is the ways in which they can enhance the experience with that buyer, in order to either increase their average order value or to increase the likelihood of getting that conversion.”

Modern Retail spoke with Fazeli about how the latest updates respond to retailers’ needs, and the future of checkout. This conversation has been edited for length and clarity. 

Merchants have expressed the desire to be able to customize the checkout process for their brand. How has Shopify responded?
Merchants have told us that they want more control over their checkout. So we’re launching new levels of extensibility, which is the term we use for how to have an app-based upgrade, and a safe, higher converting way of making customizations. We’re releasing a new drag and drop checkout editor, which means the Shopify Plus merchants can install third-party apps.

We also have something called the branding API that allows them to make fairly sophisticated changes to the look and feel of the checkout. There are a lot of examples of the way that this can manifest, whether it’s to capture fulfill order, to maximize average order value, to further optimize for conversion. That can come from anything like simple form fields and banners that they might need to load, or sophisticated upsells, loyalty programs, ID verification tools, whatever it might be.  

Why is one-page checkout an important update for Shopify?
The relationship of a buyer’s journey is all about how streamlined it is for them to have to go from browsing the site, choosing the kinds of products that they’re interested in and then being able to turn that into an order without lots of repetitive tasks. So, the streamlining really comes down to how easily they can get clarity of cost for the purchase that they’re making, understanding the promise that’s made to them with delivery and when they can expect the product, what are their taxes or potential duties if they’re purchasing cross-border and being able to enter in their information really easily and pick their preferred payment method. 

What functions or tools do you anticipate are going to fuel the future of e-commerce?
My humble opinion is that the future of e-commerce will be powered by a buyer’s identity, and Shopify is at the forefront of that evolution. 

The key to creating it is automatically recognizing the buyer at checkout, even if it’s the first time that that buyer is purchasing from a particular merchant. So long as that buyer is in the Shop Pay network, we have a number of clever ways to detect them and streamline their ability to say, ‘Yes, this is me. And I want my identity to be used as part of this shopping flow.’

It’s where you’ve gone to a Shop Pay-enabled merchant, and you just type in your email address as you’re going through a guest checkout, and we pop up and say, ‘Hey, is this you? We just sent you an SMS, type in your code.’ And then we accelerate everything else after that.

That’s just one of a number of ways that we try to identify the buyer with very little effort on their part, including in a world that operates with, you know, Apple’s latest ITP restrictions that they have on the industry and still being able to be that streamlined system. 

What other elements do you think will be part of the next iteration of how we shop online?
If we care a lot about knowing the identity of a buyer, why just recognize them inside of the checkout? Why not try to know who they are from the very beginning of their shopping journey?

With the Winter edition, we’re announcing another really exciting thing called Login with Shop, which is the ability to have merchants offer something to the buyer in exchange for them identifying themselves. Then that identity is known through the entire journey, not just the checkout.

What that enables is personalization, what that enables is targeting. We think this is a pretty big unlock globally for a very large swath of the current merchant base, and the future merchant base.

Modern Retail+ members can download the entire Member Dossier here

Want to discuss this with our editors and members? Join here, or log in here if you're already a member.