From Drop Shipping to Social Commerce: Opportunities For Entrepreneurs with Shopify's Vargab Bakshi, International Partnerships Lead

Vargab Bakshi International Partnerships Lead, Shopify chats with Amit Somani Managing Partner, Prime Venture Partners .

Listen to the podcast to learn about:

02:15 - Vargab's Letter to Shopify's COO

04:30 - An Entrepreneurship Company: Empowering the Rebels

08:00 - How D2C brands can Become Successful

11:20 - The Power of Shopify's Platform & Community

13:30 - From DIY to DIFM

17:40 - From Months to Minutes with Shopify App Store

19:50 - The Rise of Social Commerce

22:00 - Opportunites for Tech Entrepreneurs

25:50 - Drop Shipping and Cross-Border Commerce

28:15 - How Shopify Works: The Storied Culture

33:00 - The Roadmap for Phygital businesses

Read the complete transcript below

01:00 - Amit Somani

Welcome to the Prime Venture Partners podcast. Today we have with us Vargab Bakshi. He was the first employee in Shopify India and is now lead in the international partnerships team at Shopify. Welcome to the show. Vargab.

01:16 - Vargab Bakshi

Thank you. It’s great to be a part of this podcast.

01:20 - Amit Somani

So, Vargab. You know what a rocket ship you’re on. I remember this quote from Sheryl Sandberg, that when you’re offered a seat on a rocket ship, don’t ask what, just get on it. So can you talk us through how you got into Shopify a little bit and the first few years? I believe you started in 2014?

01:36 - Vargab Bakshi

That’s correct. I have always been passionate about e-commerce and the internet industry. I started my career at Google. I was looking for a gig where I was able to help small businesses succeed online. Because early 2010, there was Flipkart, Amazon who had already started to do well and it was quite evident that eCommerce was going to pick up and Shopify caught my attention. It was a Canadian company, and they had no footprint in India. Just around that time, a company called Singapore telecommunications singtel became the go to market partner for Shopify in a few countries of Asia. I reached out to Singtel and I started working for Singtel Shopify. In a few months, Singtel Shopify’s relationship dissolved. And I wrote to the COO of Shopify, Harley Finkelstein who’s now the president. I said that I really want to work with Shopify directly. I’m very passionate about the purpose that you guys are on, and how can I be a part of the rocket ship? That’s how conversations got started and here I am today.

01:46 - Amit Somani

Wonderful. So, it leads me to an interesting tagline that I’ve seen about Shopify, where you guys say that everybody in the world is an entrepreneur, and in particular, can run their own business and their own store. So can you talk a little bit about the purpose at Shopify? And how do you guys think about the world?

03:03 - Vargab Bakshi

Yeah, absolutely. Since Facebook is a social media company and Google is known for its search, Shopify would love to be known as an entrepreneurship company. Almost half of the people who are on Shopify have started their entrepreneurial journey with Shopify. We take a lot of pride in that because we have so many people become financially independent, find their freedom, and create jobs and make better economies. Shopify takes a lot of pride in helping small businesses come online, helping people start businesses and that really motivates everyone working at Shopify. We are here for a purpose to help the small guys and empower the rebels in many ways. We think retail is going to be in the hands of many more people than what it is right now, which is in the hands of a few behemoths. It’s super important for companies like Shopify to exist, because companies like ours enable the small guy to become big in the internet world.

04:11 - Amit Somani

Great. So can you talk about some examples in particular in India and South Asia where you worked in the last six years of stories that are very interesting or intriguing, or even hard to believe? People who went from not having any presence or doing e-commerce to really riding on Shopify platform and doing amazing things.

04:33 - Vargab Bakshi

Sure. So there are two kinds of entrepreneurs that we generally cater to. The first, most prime one would be a merchant. So Shopify is a platform, which allows someone to sell a product online, the person selling it, we call them merchants, often called as sellers in India. So that’s one type of entrepreneur that’s on the platform.

There’s another type of entrepreneur, which are Shopify partners. These are mostly agencies who are very strong in technology, the developer community who are building plugins and apps for the Shopify App Store. There are stories from both sides of the world. There are many merchants’ stories which I like personally. One of my favourite brands is headphonezone.in. They’re a Bombay based company, who sell headphones. The website is very beautiful. They’ve got a lot of community building activities that keep happening.

There’s a storytelling aspect to direct to consumer businesses and that’s super important and I think Headphone zone has done a great job of that. There’s also another company called Alicia Souza, who’s a popular social media influencer, Instagram influencer. So, she does create illustrations, sells products and her designs on calendars, mugs, diaries, and a lot of other gift items.

These are two of my favourite merchants from India. I’m also an avid shopper from Raymond and Raymond’s on Shopify and so I do shop from there as well. From the partner side of things, there are 1000s of stories there as well. We’ve seen so many of these small dev shops or software companies of 10 to 15 people, building million dollar businesses based out of India. Most of those companies are not just catering to merchants in India but also catering to merchants in the US, UK and Australia.

India has always been very popular as an export hub for software services and we see that same behaviour in the Shopify ecosystem as well. So techies even working in big software companies do side hustles and help merchants in the US start their online business or digital marketers, who probably are even high school dropouts but are great in what they do in terms of digital marketing and helping entrepreneurs scale their businesses in India and globally. So there are fascinating stories, and a couple of blogs as well that you will find on the Shopify blog, which talks about these stories, how they became million dollar businesses, and how they found purpose in helping entrepreneurs across the world.

07:22 - Amit Somani

Fascinating. One of the questions I have is for the little guy as we’re calling the people who are running the Shopify stores from zero to a million dollars and so forth as compared to the large Kahunas like the Amazons and the Flipkart. So getting traffic is as important a part as running your e-commerce store and doing Merchandising, discounting, logistics and everything. How does that work in your experience with respect to all these entrepreneurs that have come on and set up their Shopify stores? How are they able to attract customers and get the marketing channel going?

08:01 - Vargab Bakshi

That’s a great question and probably one of the biggest challenges that any new entrepreneur faces. How do they drive traffic onto their website? The ones who are successful actually go on to become big businesses and the ones who fail, they die eventually. So the big differentiator for D2C brands that are successful would be the idea of storytelling and the idea of content marketing and executing that really well.

Companies that are doing well on Shopify understand how to connect with their buyers well, and figure out channels where their buyers are hanging out and going hard on those channels whether it is Instagram, Facebook, or Tik-Tok, it’s very important for the merchant to understand where their customers are today and what their behaviour is and have that powerful storytelling to make sure that consumers start believing in them and making a purchase. I think the basics of e-commerce would be the same for Amazon or Flipkart, or even the small merchants. So the checkout experience, the cart experience, or the overall website speed, optimization and all of these basic things, obviously, will remain the same. But what really distinguishes small brands is the story and how they differentiate themselves against any other brand in their category.

09:24 - Amit Somani

How important is that classic triangle which is attributed to Jeff Bezos which is the value, convenience and selection as these are the three kinds of cornerstones for e-commerce. Is there something similar that you think for the smaller merchant or same thing applies plus storytelling? Does the assortment of the selection of products also very important of what you should go do on your own as opposed to a larger aggregator?

09:51 - Vargab Bakshi

We’ve seen various kinds of entrepreneurs. I’ve seen the cautious ones who first go through a proof of concept. There’s nothing wrong in selling on Amazon or Flipkart. I’ve seen people do a proof of concept on Amazon and see if their products are seeing traction, and then coming up with a story and selling it on their website directly. So the core concept of value convenience selection and all of this definitely does apply to any e commerce business.

But entrepreneurs on Shopify, probably first do a few experiments, try to sell on Facebook or WhatsApp. Social commerce is becoming so popular. They go through a certain proof of concepts whether it’s through social commerce, whether it’s through marketplaces, and then eventually lead to their own websites where they start selling directly.

10:38 - Amit Somani

Great. You were mentioning earlier about this flywheel. You start an experiment whether it’s on some other platform or Shopify itself. What gets the velocity and the momentum going for some of these folks?

10:56 - Vargab Bakshi

The Shopify flywheel is one of my personal reasons why I love the company so much. It’s a three sided platform. There are merchants, there are partners, and there are buyers. So merchants basically are the ones who are selling the platform. Buyers are the ones buying it and partners are the ones who are helping the merchant start their business, grow their business and scale it. So this flywheel where partners are helping a merchant and buyers are giving feedback back to the community. So this self sustaining flywheel is a big reason why Shopify is so successful.

You can find a few IIT guys and get them in a room and help them make a Shopify like software. It doesn’t take a lot of time. But what really differentiates us is this community of partners that we have built who are closely working with the platform and enabling these merchants time and again. This relationship is actually acting as a business moat for the company. So even if one starts a software today like Shopify and considering it’s better than Shopify, it will still take them years to build a partner ecosystem and community, which is one of the strongest pillars of the company today.

12:20 - Amit Somani

Let me ask a catch 22 question. How did you guys get your own partnership flywheel spinning? Because to get partners, you need to have enough merchants and to have merchants, they need to have enough buyers, and so forth. And often when we talk to startups and we work with some of them, we often say, look, solve the core problem first. In this case, I would imagine it could have been merchants for you guys. But was it there a tipping point where the partnership angle really helped further accelerate it?

12:51 - Vargab Bakshi

Absolutely, in the early days, we decided that we are going to build 80% of the product, which pretty much would apply to everyone and the rest of the 20%, we’re going to leave it to partners and developers to build plugins, apps customizations because commerce is very different business to business. So every business has its own tailor made kind of requirements. So that is why apps and plugins become very important.

Which is why right in the beginning, we understood that we are going to continue building 80% of the features which are going to be a core part of our platform and the rest 20% would have to be built by partners. Also, we realised that a lot of merchants need hand holding. Not everybody is very savvy with the ‘Do It Yourself’ way of doing things. That is why there is ‘Do It For Me’ or DIFM is what we call it a way of doing things where there are agencies, web developers, freelancers, website development experts who sign up as Shopify partners. And they provide all the hand holding to merchants who are not able to set up their own website and are not able to execute digital marketing strategies.

So this ecosystem plays a large role in the merchant enablement side of things. So instead of owning the services side of things in house, we decided to be a product focused company, which is going to make 80% of the features which everybody in the world wants and the rest of the 20% would be built by partners across the world.

14:31 - Amit Somani

Yeah, I think that’s pretty foresighted and clearly will be a big important element of your moat, as you’ve correctly pointed out. Is this DIFM? ‘Do It For Me’, kind of mentality? Is that sort of global in nature? Is it more small merchants or is it more geographies emerging like India, Africa or LatAm? Can you talk a little bit about this DIFM?

14:57 - Vargab Bakshi

Sure, India’s definitely a DIFM economy where we have a guy for everything. How many times in the US have you seen somebody having a chauffeur or somebody having two or three maids at home? Here, we have a guy for everything. So we are culturally very DIFM. But if you leave aside India, even in the US, UK and other developed countries, we see that merchants need to focus on things that are most important for their business, which will probably be selecting the right products, figuring out the pricing strategy, figuring the go to market strategy, the digital marketing strategies, the storytelling approach.

So those are more important things. The technical things like building a website, or doing some customizations can be outsourced to a partner very easily. So the idea is you don’t need a technical team to build a big eCommerce business. You need to be really good at the business, your products and your customer experience.

15:59 - Amit Somani

How’s the person running the store dealing with all these different partners and running a live business? Everything matters in terms of uptime, merchandising, promotions and logistics. All of these things are perhaps loosely coupled together. Where does the buck stop in terms of day to day operating one of these businesses?

16:24 - Vargab Bakshi

So, for someone who’s a one person company, it can become hard sometimes especially when the business starts getting 1000s of orders in a day. So, we see a lot of lean companies on Shopify. It could be solo entrepreneurs or less than 10 member teams. One person looking at logistics and the operation side of things. One to three people looking at customer support and a couple of people looking at digital marketing and some of the stuff which needs to be outsourced, especially the technology that can be seamlessly done. I’ll give you another example. So let’s say if one of these online companies wants to start a referral marketing programme tomorrow. If they were not on Shopify, they would probably have to hire a developer and spend 50,000 or one lakh rupees to get a small plugin made and it would also take them more than a month for that plugin to be built.

Whereas if you have a ready made plug and play model through the Shopify App Store, it will probably cost you a couple 100 rupees a month and you’re able to start using that product in less than one minute. So not only has it reduced your go-to-market time, it also allows you to experiment a lot instead of hiring and scaling your team and realising later that those are positions that don’t need to be there long term in the company.

18:02 - Amit Somani

Switching gears now; You also mentioned a little bit about social commerce? So can we double click on that a little bit and try to unpack some of the trends that you’re seeing with respect to social commerce? How do these things intersect with respect to a standalone sort of merchant store versus social commerce? I want to kind of pull that apart a little bit as well. So let’s start with what are you seeing in social commerce?

18:30 - Vargab Bakshi

Yeah. I think the whole world is on social media and it’s imperative for merchants to be where their customers are. And that’s why social commerce is a no brainer. So we’ve seen a lot of merchants who start selling through a Facebook page or an Instagram profile. In India, we’ve even seen people selling widely through WhatsApp, a reason why companies like Meesho have become so popular or GlowRoadfor that matter, as well. So we’ve seen a lot of these social commerce behaviours amongst Indians, especially because trust is something which isn’t easily built through websites in India, it’s built through people. And that’s why social connect becomes important.

So if I know you Amit, personally and I come and sell you a product, you’d probably have more trust in me than a website that you’ve probably never heard of and just found it through a Facebook ad. So that’s where I think the concept of social commerce comes in because there are people involved, there’s trust in that person and there’s a direct face-to-a name kind of a thing. I think this is going to be a bridge till the market matures enough to start selling on websites. But I do see that selling over WhatsApp or selling over a social media platform is going to be quite popular in the coming years as well.

20:03 - Amit Somani

I remember that you guys had announced a deeper partnership with Facebook globally, sometime in the middle of last year, on the Shopify stores on Facebook or something like that. Can you talk a little bit about that? Do you think that’s a direction that will happen over time you could do a Shopify store on Facebook, Instagram, Pinterest, Etsy or whatever. Do you think these platforms will become partners by themselves?

20:32 - Vargab Bakshi

Yeah. Shopify acts like a back end to all of these platforms. So a merchant would want to start selling across their Facebook shop, their Instagram shop, maintain their inventory, their orders and their customer information on the Shopify tool. So think of Shopify as like a multi channel platform that allows you to sell across all of these social media platforms.

So the Facebook shops integration was obviously a very pivotal one because the world is on Facebook and a large part of marketing for merchants is dependent on Facebook. So as Shopify and Facebook came together to launch this integration, it was super important for merchants to leverage it and grow their business further on Facebook. And the best part is that you’re able to manage everything, just through one platform, which is Shopify.

21:32 - Amit Somani

Understood. Let’s say you’re a tech entrepreneur in India or for that matter, globally. You want to serve a similar audience, which is to say merchants or ecommerce vendors, or e commerce SMB shops. You could obviously do that as a Shopify partner or you could even have some new and novel offerings to do these things. What are some thoughts that you have in terms of opportunities that are open and things that people should be more careful about as they go about building their business and serving a similar customer base?

22:04 - Vargab Bakshi

Are you talking about partners serving merchants and what are the opportunities for Shopify partners?

22:09 - Amit Somani

Yeah, that is one angle and then more broadly, entrepreneurs coming up with their own new products in general and have nothing to do with Shopify. But serving a similar kind of base. For example, what if I wanted to be a SaaS company giving analytics services or channel management services to merchants like the kind that you’re serving? But that could be across multiple platforms. It could be across Amazon, Flipkart and Shopify.

22:38 - Vargab Bakshi

So that is a big part of our platform and the reason why we are so successful is the Shopify App Store. Like I was mentioning how the plug and play model works. So, for partners who are for companies, product companies who are looking to, or already building softwares in analytics, marketing, customer support, sales. It’s a great way to integrate with Shopify and acquire businesses through Shopify. So Shopify has over a million merchants across 150 countries and all of these businesses are looking for great softwares. And these softwares could be vertical specific, function specific or even regional specific.

So by vertical specific, let’s say, fashion brands probably are looking for certain VR/AR kind of experiences, which leaves opportunities on the table for our tech entrepreneurs to pick up, make a product and then cater to that specific vertical problem and solve it through software. There are similar other categories like jewellery, home decor, or electronics. All of these different verticals there are, each of them have their own set of challenges, which can be solved by app developers. There are also functions specific softwares on the App Store which helps merchants market themselves better or provide better customer support or help them increase their sales or do better business analytics. So, I’ve seen hundreds of companies who have first built a product catering to businesses in India, US, etc. Then they slowly start understanding that if they integrate with platforms like Shopify, that’s where they really start scaling and they can easily move to a few 1000 instals in a few months and then they get much better feedback. Then they create a loop that allows their product to develop further because Shopify communities are very active and the feedback loops are very strong and positive. So it allows companies to grow much faster, not just from an acquisition standpoint, but even from a product development standpoint. And the region specific solutions.

Let’s say you build software that has a 100% product market fit for India but it needs a little tweaking. The same software needs a little tweaking if you go a little more east like Singapore and other Southeast Asian countries.It needs further more tweaking to achieve product market fit in markets like Japan, Australia or China. So solutions that localise Shopify in a certain country are also very valuable on the App Store. I would categorise all of these tech companies to focus either on a specific vertical or on a function or on a certain region, and go hard on the product market fit side of things.

25:38 - Amit Somani

Great. A quick tactical question on the Shopify App Store. How does the typical economics work there? Is it somewhat like the apple, iTunes App Store or Google Play Store or is it a little bit different?

25:53 - Vargab Bakshi

It’s very similar. It’s an 80-20 commercial model. So whatever revenue the partner earns through the App Store, 20% is taken by Shopify as Commission and the rest 80% is the partner’s money.

26:11 - Amit Somani

Just one more quick question along this thread. We talked about Singapore and you talked about other countries as well. How big is cross border commerce particularly? Since you’re based in South Asia and in particular, in India, from India’s outbound perspective, has that taken off? How is that looking with respect to the data that you’ve seen over the last five to six years.

26:35 - Vargab Bakshi

Cross border Commerce has been a very fascinating concept for Shopify over the last four or five years. One of our missions today is to connect every merchant in the world with every buyer in the world. But cross border commerce comes with its own complexities, especially in logistics. Since we are a technology company, we are first solving the problems at a technology level when it comes to cross border commerce. That’s part one. What has really already picked up is the concept of drop shipping, which is again, cross border, largely today.

We have seen a lot of merchants from India or Southeast Asia, pick up products from China and sell it directly into the US and European countries. So Shopify actually acquired a company called Oberlo some years back. It’s a Lithuanian company. Oberlohas tie ups with suppliers in China so anyone in Asia or Europe can pick up products from suppliers in China and sell it into the US and just put a profit margin and make money off it. They don’t even have to hold inventory, which makes it really simple for anyone to start a business and understand how eCommerce works just by testing waters through drop shipping. So, drop shipping as a cross border concept has really picked up.

Let’s take the example of some brands in India. We’ve seen so many brands in India, who are doing remarkably well domestically but are just not very confident when it comes to selling internationally. Those are the problems that we need to solve as an ecosystem and there’s a large part that logistics companies also need to play to make it simpler for merchants to understand compliance and rules around customs tax duties, etc. There’s more that can be done and we come up with content and playbooks to help merchants do cross border commerce. But there’s more to be done there from all of us.

28:56 - Amit Somani

Very interesting. To switch gears now as we come towards the end of this podcast and talk about the storied culture at Shopify. You guys were one of the first companies to allow employees to work from home forever. You even had a fancy office in Ottawa, Canada, and so forth. So maybe just talk to us a little bit more about just the overall culture, the value system and how you guys operate internally at Shopify?

29:24 - Vargab Bakshi

Yeah, So, when I worked at Google in the US, I thought that was the best office that I would ever see. But then I saw the Shopify office in Ottawa and I went nuts. It was amazing. While most of us are quite excited about this work from home forever thing, I personally also miss our rocket ship, the mothership office was absolutely stunning. The culture at Shopify is a lot about thriving on change and being absolutely okay with ambiguity because we strongly believe that if we took a decision yesterday and today, if we get more information, that means the decision we took yesterday needs to change, we’ll go ahead and do it. And if that means pivoting multiple times in a year, we’ll still do it.

I think people are so strongly connected with the purpose of why we are at Shopify, which is helping small businesses succeed, that operational challenges such as reorg or bosses changing frequently or business units going through a complete revamp. All of these operational things become very minute things for us. So, culturally, we are very dedicated to the cause of helping small businesses. Our president Harley Finkelstein often calls us the world’s biggest startup because we’ve got all the startup values acting like an owner or thriving on change and making great decisions quickly and being a constant learner. So these things really are like the pillars for us at Shopify.

31:17 - Amit Somani

It is very interesting that you also worked at Google and as did I. Are there tactical things that people can do? I’m asking this on behalf of the larger entrepreneurial community to drive culture. I’m pretty sure every entrepreneur believes that culture is really important. But you also got food and shelter issues and digital marketing and logistics and payments, and whatever. So how do you on a tactical basis, I remember the TGIFs in Mountain View in California that one of Eric, Larry or Sergey would always attend and so forth. Are there tactical things that are done to reinforce these behaviours of driving on ambiguity or being a learning machine or acting like an owner.

31:58 - Vargab Bakshi

The bottom up side of culture is as important as the top down side of things. So culture is not always driven top down. It’s not that the CEO sets an example and the entire company follows it. Yes, that’s true. But it’s equally important for somebody who is even a small individual contributor in a certain team also to equally exemplify the culture of the particular company. It largely starts with hiring and if the hiring is in place and if the talent teams are able to spot talent which believes in the mission and vision of the company, then half of the journey is done there.

For creating a great culture a) hiring needs to be great. b) we need to create an environment for people to express their opinions, openly and be confident in what they think and most importantly, care about the problems that they’re looking to solve and deeply invest their time and energy in it and solve those problems. I think those things go on to make great culture in the company.

Large companies can often have very process oriented structures and it can become difficult to move fast. But I think if small teams inside the company can act like pirate ships, it’s possible to move fast and it is possible to break things and learn and then build better things.

So these are some values but I think this largely starts with hiring and then creating an ambience for people to thrive.

33:48 - Amit Somani

Wonderful. So my last question. I was reading the five trends in your future of e-commerce study that you guys have started across your million merchants. One of those trends was how physical businesses are also going to evolve and in the VC parlance, we’re often calling them ‘phygital’; physical plus digital businesses. So, any predictions from you on just that sort of trend, either in India or or even more globally. What are some of the things you think will happen in the physical and digital worlds coming together?

34:18 - Vargab Bakshi

Yeah, Post COVID, the physical world of retail has completely changed and we don’t see it going back to what it was before COVID, not anytime soon, at least not for this decade. According to me, e-commerce is going to play a massive role in getting these brands to sell online. E-commerce, before COVID was one of the channels for a big retailer and probably not the highly prioritised one. The prioritised ones would always be their malls or their big showrooms. But post COVID we saw most those businesses focus completely entirely online and putting in all their marketing dollars to scale their online business. So I see this trend continuing.

Businesses which are not able to get online still are getting into a very dangerous spot. I would urge businesses who are doing well in physical retail to also immediately start online retail. One thing that I’ve seen enterprises often struggle with is that they want a picture perfect scenario immediately when they want to start online. And the truth of it is, that doesn’t matter and they shouldn’t be thinking of being perfect right on day one. This is a trial and error and an evolving process to transform digitally and become successful on the internet.

The Internet has disrupted how retail has worked. In the past, a lot of our big merchants today have legacy thoughts of selling through big distributors who have those customers already there. But you’re moving from that ideology to a direct-to-consumer kind of an outlook that takes time. The ones who are able to do it fast are the ones who are succeeding. The ones who are struggling to change are the ones who are going to face problems. So my request to those who are looking to go digital but haven’t been able to do it yet is to hire the right people. Don’t think of a picture perfect scenario, start and then evolve as you go.

35:52 - Amit Somani

Thank you so much, Vargab. This has been great. Lots of interesting insights from DIFM to your flywheel at Shopify to going digital right away. Thanks again, Vargab. I’m signing off. This is Amit Somani with Prime Venture Partners and was great to have you on the podcast.

36:11 - Vargab Bakshi

Thank you so much Amit. Great being here.


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