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Wednesday, September 19, 2018

For the benefit of those who haven't yet taken the plunge and invested in Shopify I'll outline in this article why you should and why this stock will continue to grow.

Shopify is “cloud based” e-commerce software which means that you don't need your own server to run it on. It is built and operated across a cloud network of servers that have inherent redundancy and utilise the latest in hosting techniques. If you haven't heard of CDN's yet then you will soon.

A content delivery network (CDN) is a network of distributed servers that deliver content based on the geographical location of the user. They use a proxy server which is an IT speak way of saying that everything is cached and therefore lightning fast.

Up until this point in time e-commerce websites have been made using “Open Source” software which is freely available. However the maintenance of this software is expensive requiring several developers on larger installations and as it is server based it does not have the benefit of CDN without extra investment.

In addition to the maintenance overhead probably the most attractive feature of e-commerce website builder platforms like Shopify is the security aspect. With hundreds of thousands of websites all running on a common platform it is much harder to exploit the defences of a well organised and drilled IT team than it is to find individual sites that have not kept up with patching or source code releases.

Building your e-commerce store using open source software means that you are accountable for the security. However with the majority of installations on shared hosting servers this software can be easy to attack via well known exploits.

The other benefit of using Shopify is that developers can connect to the software via a well organised common API instruction set which makes integrating with third party “best of breed” components like email software or accounting software a very easy thing to do.

Shopify has so far been the most successful company because it understands how to use the internet to market its product properly and the competition has been left trailing in its wake. BigCommerce is its nearest competitor but they don't have their templating system as well developed and their API is not as good.

The nearest competitor to Shopify that is likely to surge over the next few years is Lemonstand who recently raised $1.25 million in seed funding. Their use of open source tools to develop in and the adoption of a standard API system will make them a formidable player in this fledgling market.

Today Shopify sits at $28.90 and it is good value for a long term prospect.