Size Matters: Why Market Cap is Critical when Picking an eCommerce Platform

When selecting an eCommerce platform to build your business on, there are certain critical aspects that always need to be factored in: platform functionality, how the platform aligns with your specific business needs, overall cost, and the list goes on…

These are all important considerations. However, there is another, commonly overlooked metric, which I would argue, is more important than all of those things combined: market capitalisation. 

Here’s why. 

Market cap, above all else

At its simplest, market capitalisation is the metric that most clearly paints a picture of a company’s health, its growth potential, and the money and resources it has available. 

When it comes to eCommerce platforms, those things matter, a lot.  

There are plenty of platforms out there and they're all competing for a slice of the same market. They all say similar things: “You should pick us as the platform to grow your business on. We are going to help you achieve what you want to achieve. You can trust us.”

But we need to compare apples with apples. As of this writing, Shopify has a market cap of around US$106 billion. That’s a significant chunk of change by any standard, and it all goes to support the platform’s research and development, its operating costs, capital expenditure, marketing, and everything else in between. 

BigCommerce on the other hand, has a healthy, but far more modest, US$635 million to spend on all those same things. 

You don’t need to be an economist to realise that Shopify is in a much better position than the latter to provide merchants with real bang for their buck. Healthy investment coffers provide confidence that ‘business as usual’ will prevail, that their websites are going to stay up and running, and that the platform will be sound, fast, and that all the very necessary behind-the-scenes work is being done. 

There's a genuine business advantage in knowing that the ‘boring’ stuff is sorted. Very few online businesses are technically capable - or at all interested - in managing servers or hosting providers, and thinking about downtime and uptime, and why should they? But it’s all critical, and it’s nice to know that someone is always thinking about it.

Expecting the unexpected

What if, tomorrow, Meta suddenly made a change that critically impacted your store’s Facebook product feed? 

Someone would need to fix the issue, and who should it be? You, personally? Your agency at their urgent hourly rate? Or would you prefer your platform provider anticipated the change and addressed it ahead of time and behind the scenes, within the costs you already pay, before you even became aware of it as a potential issue? 

A platform with a healthy market cap has the required budget to make sure that those sorts of issues will never impact the merchant or their customers, let alone that business’s bottom line.

The platform you work with should have an amazing team of people thinking about everything that you don't want to deal with, can't do, don't know about, or don't have time to think about. You want fantastic people who are really pushing the platform and driving it forward - not someone who might occasionally think of those things. This, alongside your own internal team, and your agency partner, gives you an amazing team focused on every aspect of your business, from macro-level industry insights and trends, down to the day-to-day thinking required for your business to succeed.

This is where most smaller platforms, including local solutions developed within and specifically for the New Zealand and Australian market really struggle. Facebook is still changing, laws are still being written, customers still expect a world-class experience and your internal team still want a platform that makes their life easier, not harder. A platform run by a team of fifty people, or twenty, or even just ten, can’t possibly allocate the same resources to forward-focused thinking that’s going to drive your business forward, or at the very least, allow you to keep up with the Shopifys of the world.

Size is undeniably good 

The extension of that is: larger companies with the bigger market cap - the likes of Shopify, Adobe Commerce and BigCommerce - have the money to spend on innovation, new products, and anticipating where the industry is going. 

How will AI be incorporated into the platform? How do customers use social within their research and buying cycles? How will different payment technologies be integrated into the platform? 

When you're deciding who you should give your money to, generally speaking, it's good to give it to someone who's going to be doing as much for you as possible, so you don’t have to spend your own money (and time) doing it.

Competition Matters

Shopify, being a $106 billion company, has the largest market share of any eCommerce platform. This translates to an extremely large and active ecosystem of development partners and providers (like Pocket Square), as well as a slew of marketing agencies, integration providers and app developers.

This ecosystem sharpens the offerings available and the level of service you get. Those providers know - as we do - that if they don't do a good job and offer a competitive service, the ecosystem is so large that clients will just go somewhere else. 

Once again, market cap is a useful figure to gauge this. A larger market cap invariably translates into a bigger ecosystem, meaning better technical support, better design support, and better development work. It equals confidence. 

Change, investment and 2024

Last year was, for most businesses, tumultuous, and as a result, few decision-makers were particularly excited at the prospect of making big capital expenditure into their infrastructure, including into digital which has seen continual growth year on year.

But that was then. Now, we’re seeing serious platform reassessments taking place. 

Shopify’s Q3 and Q4 of 2023 was the strongest they’ve ever had with record numbers of new businesses shifting to the platform. 2024 will be the year of increased investment - focusing into channels that can drive growth, digital being the most obvious, most measurable and most in need.

People know that digital is the way forward and they’re ready to make the move. 

But platform selection is just the beginning. Next time, I’ll be discussing what you need to consider when selecting an agency - another hugely important piece of the puzzle. 

Stay tuned.