The future is analog, p.12
The Future Is Analog, page 12
If it worked for books, could it work in other areas? In Miami, a Haitian American aerospace engineer named Nirva Boursiquot thought so. After years working in supply chain management with the Department of Defense, Boeing, and Airbus, Boursiquot grew tired of the judgment she faced as a young, Black woman in an overwhelmingly white, male industry. As she shopped for everyday goods and looked to support Black entrepreneurs with her dollars (especially after the rise of Black Lives Matter protests in the summer of 2020), she saw an opportunity to help these Black businesses with her expertise in logistics. “When we say ‘Black-owned business,’ what does that really mean?” Boursiquot asked rhetorically, noting that the expectations for these businesses were mixed. On the one hand you felt good buying from them, but on the other you assumed that because they were small and independent, prices would be high, shipping would be slow, and the shopping experience would require a sacrifice. Customers either accepted that, as a price of buying Black, or went off to Amazon or Walmart. “Why should we do that?” she asked. “Let’s make sure our orders ship within twenty-four hours. Let’s have intelligent procurement plans.” She launched a marketplace, called Kinfolk, and built a warehouse to receive and dispatch goods from independent Black businesses within twenty-four hours. She upgraded the software and fixed supply chain problems. She focused on Black-designed and -owned household staples. She made Black commerce as modern and efficient and competitive as it could be. “You’re buying Black without compromise, from industries you couldn’t think of! Detergent, fabric softener, dryer balls. We are competing with Procter and Gamble.” Boursiquot believed the future of Black commerce was just as connected to its community as it had always been, based around manufacturers and shops that put down roots locally and wove together the fabric of their neighborhoods by serving them. Digital technology’s role was to strengthen those roots, not rip them up.
Competing with Amazon once seemed impossible, especially for small retail stores, but over the past few years one company had begun chipping away at Amazon’s sense of invincibility, demonstrating that an alternative future for online commerce was within reach. Shopify is a Canadian e-commerce software platform that powers more than a million web-based stores around the world. The company began in Ottawa in 2006, when a computer programmer named Tobias Lütke tried to open an online snowboard store and was so frustrated with the available e-commerce software out there that he created his own. Fast-forward to today, and Shopify is Canada’s most valuable company, worth around a tenth of Amazon. More importantly, it has created and scaled an alternative future for digital commerce, where brick-and-mortar retail businesses retain control of their customers and merchandise, while delivering service that rivals, if not outstrips, that offered by Amazon.
Shopify does not sell merchandise. It sells software that allows anyone to open an online store in a few easy steps and sell goods or services using a variety of integrated features that Shopify or its developers have created, from mobile and social media–based shops to physical point-of-sale systems inside retail stores. Like other digital technology companies serving retail customers, such as the payment firms Stripe and Square or the website platforms GoDaddy and Squarespace, Shopify makes money by selling their vendors subscriptions or taking a percentage of sales on certain services. Prior to the pandemic Shopify was growing steadily, driven mostly by entrepreneurs who were starting online-only businesses. One of their earliest customers was my friend Jaimie Harris, who started making custom headbands at bar mitzvahs around the Toronto suburbs and turned that into This Is J, a bamboo pajama and leisurewear company, with sales all over North America. Harris had tried her hand at building her own online store around 2005, after her headbands were spotted on celebrities like Natalie Portman and Britney Spears. When Shopify launched, Harris got a trial account. “I put it right up there with my first MacBook as one of the two biggest things that let me grow this business,” Harris said. “Shopify changed how easily I could control what I was presenting to the world for my business.” When the pandemic led to a sudden explosion in pajama orders, Harris had no trouble scaling her business.
Shopify dramatically changed during the pandemic, as global demand for online retail followed the closure of physical stores and lockdowns. Whereas its growth previously came from largely online merchants, like This Is J, the company was now deluged with new accounts from existing brick-and-mortar retailers that needed to get online yesterday in order to stay in business today. “We just dropped all our plans and immediately began putting out things to really help this moment,” said Dan Debow, vice president of product at Shopify, who is based here in Toronto. As the company brought on bookstores, restaurants, breweries, car parts suppliers, karate schools, and surf shops, it rapidly expanded its team and rolled out products and features to serve an analog-facing customer base: click and collect, delivery and logistics solutions, drop-off coordination, store location data and customer service chat portals for retailers, credit financing for entrepreneurs, and so on. In 2021, Shopify announced that new customers wouldn’t pay any commissions on sales until they made their first $1 million in revenue.
“Sometimes the absence of something makes people realize the value of it,” Debow said. “When you walk down the street you realize the city and neighborhood are made better by the value of humans connecting with you. A store is not just a distribution point to pick something up. The story of humans and commerce is one of the neighborhood—all that good Sesame Street and Jane Jacobs stuff—and when the absence happened, we felt like we lost something.” Debow lives less than two miles from my house, and as we talked about those dark days, we reminisced about the local stores that didn’t make it, the restaurants that remained on the endangered list, and, most importantly, what it felt like to walk down our city’s deserted streets and stare down a dystopian future filled with empty windows and boarded-up shops. That wasn’t the future Shopify was building, Debow claimed. Its future was one where anyone could sell online but also in person. Shopify was focused on creating a win-win model, and the company only made money if the brick-and-mortar entrepreneurs who were its customers made money. Shopify was not adversarial; it was cooperative, and it used digital technology to make analog commerce stronger. Whenever I bought something from a local store using Shopify software—my wetsuit from Surf Ontario, sneakers from the menswear store Lost and Found (owned by someone I went to high school with), a copy of the IRA history Say Nothing from the scrappy local bookshop Flying Books, KN95 children’s masks from a local cosmetics supply shop—I was helping those businesses in my backyard and the people behind them to build a future, online and off.
Nicole Reyhle, a writer and business consultant in Colorado who chronicles the business of independent retail on her blog Retail Minded, told me that Shopify’s ethos has always been different than Amazon’s in that it explicitly built the company to support small business. Reyhle had been following the company for years, but at the start of the pandemic she got a firsthand taste of what it did when she opened a Shopify store to sell a book her young daughter wrote. “Shopify wanted to give the small business an avenue in the world,” Reyhle said. “Amazon wanted to be the only avenue in the world.”
Shopify was far from perfect, and like any large technology company, it faced its fair share of criticism: from retailers about certain features and pricing and its integration with other software they used, from developers around its changing rules and control of the platform, or from customers about its service. But compared to Amazon, these critiques were relatively benign. Perhaps that would change over time, as investor pressure and competition influenced Shopify’s behavior. But for now, at least, no one was dying because Shopify helped to sell you a pair of shoes.
“Our secret is that we are aligned with our entrepreneurs,” Debow told me. “We are not adversarial to them or our ecosystem, or our developers. We are a platform company. A platform that other people build their businesses on. That’s our success, and it’s working! It’s working to be aligned with entrepreneurs. They’re making more money than we are. That’s working!” This was Shopify’s long-term strategy: build a platform by building up a community of entrepreneurs. Put their interests first, before the demands of investors to increase Shopify’s quarterly profits, and in the long term, everyone would benefit. The software didn’t dictate this. The industry didn’t either. This was a philosophical decision about the future of commerce that Shopify had baked into its operating system from day one. “If our focus is ‘How can we squeeze entrepreneurs the most we can so we can sell the cheapest box of detergent?’ then we’ll make different decisions,” Debow said. “It’s just a different set of goals, a different objective function.”
Shopify executives don’t mention Amazon by name often, but Bezos’s empire is clearly their target. In interviews, Lütke and Shopify president Harley Finkelstein frequently refer to themselves as “arming the resistance,” and comparisons between the two (for retailers, customers, developers, and stock analysts) abound. I asked Debow about the expectations established by Amazon in the e-commerce world and the challenges of trying to change them for consumers. “Amazon was a model of one store and one place to buy things and an obsession with the lowest price and quality,” he said. “That’s OK and true for many, many parts of the market. But that’s not a very nice world where people would want to live in when that’s the only place. There’s certain patterns that get adopted when technology gets put to use. If your choice was I can get any book I want quickly or I can go to a bookstore that doesn’t have that much selection, the choice would be straightforward.”
But great things in the world do not happen because of either/or decisions. Not everyone buys everything at Amazon, or Walmart, or Costco because they are the biggest and cheapest. People buy and sell and identify with all sorts of stores for all sorts of different reasons. They want to discover new things and learn. They want to visit new places and be entertained. They want to speak with people and imagine themselves as a different person. They want to feel part of a place and support its growth. They want this, and they want to pick up a thicker pair of wetsuit mittens because the forecast is calling for five-foot waves, and the water temperature is barely above freezing, and waiting two days for shipping isn’t an option because the waves are breaking right now! They want to know the price and when the product will arrive if they order it for delivery, and have all that information available at their beck and call.
“The truth,” Debow said, “was and.” Shopify did not see itself as a “category killer,” disrupting a market into submission. Shopify could compete with Amazon and stay loyal to shop owners and retailers. Customers could have a seamless, fantastic online shopping experience and support brick-and-mortar entrepreneurs. They could create the analog and digital future of commerce, without the tremendous costs to people, economies, and communities we were told to accept as the inevitable consequence of convenience. Already more than 10 percent of the population in North America bought something online from a Shopify-powered store. Debow called this E-commerce 2.0, an evolution in the way we saw digital commerce, from a top-down, superstore model to a decentralized marketplace where the small shop had access to the same sophisticated tools as national chains.
As Debow and I were talking about the future, he brought up Marshall McLuhan, the mid-twentieth-century writer and philosopher, whose old house was just down the street from Debow’s in Toronto. McLuhan had spoken about two futures: one where technology reduced things down to their most basic and efficient, and one where it allowed for experiences to be even richer. There was certainly one vision of the future of commerce—the one Amazon had set forth to build—where reductionism continued exponentially, until your toilet paper arrived by drone before you even flushed, quicker and cheaper than you thought possible. But Debow said Shopify wasn’t really concerned about that future, or Amazon for that matter. “To the extent that we think about them, well, that is a narrative of one version of the future,” he said. “But that is a narrative that we don’t want to come to life.”
I can vividly remember the last meal I ate in a restaurant, on the Tuesday night before the pandemic brought fun to a screeching halt. My friends Brian and Steve met me at Parallel, an Israeli restaurant that made its own tahini on a gigantic stone wheel it had imported from overseas, a ten-minute walk from Debow’s house. The vibe was loud and bustling, as couples and friends sat tightly packed in the converted auto garage, eating parsley-flecked golden falafel and creamy baked ground lamb to a soundtrack of indie rock and full-throated laughter. Though I was nursing the beginning of what felt like a cold, we ate and drank like we knew it would be a long time until we could do this again.
If retail stores faced a nuclear winter from shopping restrictions and Amazon competition, restaurants took the asteroid hit head-on. For places like Parallel, there was nowhere to hide. Dining in wasn’t just impractical; it was illegal. A restaurant could have the best chefs and managers, a stellar reputation, loyal customers, and plenty of cash in the bank, but without a way to serve food, it was as good as dead. The only path to survival was shifting everything to takeout and delivery, and for most restaurants that meant one thing: surrendering to third-party delivery (3PD) apps.
Restaurant delivery is nothing new. It’s been around as long as restaurants have, but until recently takeout and delivery were based on a direct relationship between customers and local restaurants, whose paper menus clogged kitchen drawers. Starting about a decade ago, a growing number of new companies modernized and streamlined restaurant delivery with digital technology. They uploaded and standardized menus on a central web interface, saved customer payment data to make transactions easier, and used GPS technology in smartphones to automatically dispatch, track, and pay a fleet of freelance delivery drivers, who strapped on insulated backpacks, grabbed anything with wheels for transport, and took to city streets across the world with steaming plastic containers of pho or cheeseburgers or French tasting menus. Global apps like Grubhub, DoorDash, Deliveroo, and Uber Eats may have pioneered this market, but every country and city spawned its own pool of 3PD operators, who essentially did the same thing.
The digital future that third-party delivery promised was straightforward: customers got to eat whatever delicious thing they wanted, whenever they wanted it, and could order it without much trouble at all. Restaurants got a boost in revenue from a whole new customer base, without having to own or operate a delivery service. Delivery drivers got flexible income when they wanted to work. And the app developers and their investors got a rapidly growing percentage of each sandwich, pasta, and sushi platter that showed up at your door. Tech and restaurant industry analysts regularly talked about the growing importance of 3PD for the industry’s future, as more and more diners opted to order in rather than go out. In the future, not only could food consumers have their cake and eat it on their sofa, but everyone would be better off doing so.
The pandemic supercharged third-party delivery. Online restaurant orders on apps doubled or tripled in weeks, as shut-in residents, sick of their newfound cooking hobby and failed attempts at sourdough, opened the apps, scrolled through a world of options, and ordered in night after night after night. The delivery companies urged consumers to support local restaurants by ordering in with a blitz of marketing, offering irresistible discounts and deals ($10 off your next meal! Free delivery!). They rolled out Superbowl ads and blanketed cities in billboards featuring every flavor of celebrity you could want (Dana Carvey! Simone Biles! Jon Hamm!). But as black plastic takeout containers piled up on our kitchen counters and struggling restaurants pivoted to churn out burgers and fried chicken for a waiting army of delivery drivers, the cracks in this blissful digital future split wide open.
Everyone, it turned out, was not better off with more third-party delivery. In fact, most restaurants fared far worse. App companies charged restaurants increasingly steep commissions, as much as 40 percent of an order in some cases, which meant that for every meal the restaurants painstakingly prepared and sent out the door, they were either making just a few measly bucks or actually losing money. “The apps don’t make the process of making food cheaper,” wrote Corey Mintz in The Next Supper, his fabulous book about the future of the restaurant industry. “They don’t make the process of delivering food cheaper, either. They just enable an ease of sales.”
If that weren’t bad enough, restaurants soon noticed all sorts of fishy things happening with delivery app companies. Some apps featured menus on their platforms for restaurants that had never actually signed up for their service, then charged that restaurant a commission for each order that came in. Others apps sent restaurants bills for phone calls made via listings on their apps, or they bought Google AdWords with a restaurant’s name, then set up fake websites so that when you searched for David’s Deli and clicked through on the first link, it took you to the app rather than the deli’s own website (then charged the restaurant for that click). With each order that went out, complaints increased: the food was cold, potatoes were missing, the driver arrived an hour later than the app promised. Any refunds or discounts were automatically charged to the restaurant, not the 3PD company, which stipulated in its dense contract that it was essentially blameless and all costs were the restaurant’s responsibility. I heard firsthand how employees at one 3PD company would have staff place numerous orders for one restaurant on a rival app, then cancel them twenty minutes later, in the hopes of driving that restaurant to abandon the rival app. The fact that this prank caused a restaurant to cook a dozen meals, then throw them out and eat the cost of that wasted food didn’t seem to concern anyone at the 3PD company. They were at war with their competitors; restaurants just suffered the collateral damage.
