Making money building Shopify micro-SaaS apps
preetamnath.com
preetamnath.com
Personally I believe the days of a solo engineer being able to build a viable Shopify app business are nearly over.
Shopify has instituted new process for assessment and approval of new apps in the app store, similar to Apple. We are finding the approvals can take weeks and sometimes require big rewrites to meet as-yet-undocumented business requirements.
Also Shopify stores can explode in bursts of traffic at a moments notice. And these apps sometimes are mission critical to the merchant's business. It is very challenging and expensive to scale an app rapidly when the folks who have installed it get large bursts of success without any forewarning. If a DTC brand launches their store with some cheap / free apps and their product goes viral, that means the indie solo app developer has to scale to meet the demand. These new DTC merchants often don't understand very much of the business of maintaining SaaS and aren't very forgiving when an app fails to keep up with the demand put on it.
The challenge is if an inexperienced developer offers the app for free or a nominal fee like $50/mo that means they have to scale up infrastructure and support and often re-write the app for a small number of merchants who are still only paying $50/mo. This happens to more Shopify app developers than I want to admit, and many many bootstrapped folks are operating at a substantial loss, looking for a way out without irking customers who depend on their app.
With that in mind, be very careful if you enter any type of SaaS marketplace. It seems tempting and low barrier to entry but you may be biting off much more than you can chew.
1) The value of the app to merchants in the app store is taken into account. They look at whether the app fits into the ecosystem and adds value for merchants.
2) Your monetization strategy should involve revenue share with Shopify from the get-go, in a way that scales with the success of your app.
3) The user should not leave Shopify for account registration or authentication.
4) As much functionality should be embedded in Shopify as possible.
5) Do not ever attempt to build something that side steps Shopify's checkout or order data in any way. Shopify payments and transaction fees is how they make money.
Ok, yes, I hear your gate-keeping, but counterpoint: bite anyway.
It leads to growth. Maybe in more ways than one.
I think that is generally a gate-keeping attitude.
Possibly you misread.
https://shopify.dev/docs/admin-api/rest/reference/billing/us...
Two Quibbles.
First, the API is very good but Shopify support will not answer developer questions about it and will push you to their developer forums. There if you are lucky you might get a useful answer within a day or two, if unlucky you won’t.
It’s shocking that a company whose entire business revolves around these APIs (its not just used by app developers but by merchants themselves) refuses to offer technical support.
Secondly, it’s a tiny market. The best data have found indicates about $50M a year total to App developers, so if you want to build that $1M MRR app, look elsewhere. Author, please correct me if this is wrong, as I’m working on a Shopify app as my side project and it would really help my motivation if my estimate is way low.
The author suggested $2k/month gross revenues ~ $20k/year net, was a reasonable expectation for a niche app. So this presumes you have maybe 5 apps, developing a new one or redeveloping an existing one on a pretty regular basis. Or it presumes a side-gig. It doesn't really presume a startup company.
The Shopify Developers homepage https://developers.shopify.com/ (scroll down one screen) claims $90M in 2018, unless you have some reason to doubt their claim?
Biggest thing is that the ramp up time is very slow. You're not going to get a bombastic number of installs starting off, no matter how much marketing you purchase. It's a slow climb up and the best time to launch your app is yesterday. Plan on one to two years to see decent revenue, and then hopefully continue to grow it for the next few years after that.
Shopify Plus customers and traffic spikes are definitely a big concern, especially when it comes to your pricing model. Everytime I've come up with a "worst case" scenario it has happened so you need to always have built-in contingencies around that. Whether that means reaching out to the store to create a unique plan/pricing for them and possibly adding more value services. For example, one of our apps gets between 25k to 100k webhooks per hour and the spikes are unpredictable. Our app also has a queue system to process jobs in the background which can mean there are anywhere from a thousand tasks in queue, or 500k. (Shopify API is slow and limiting for big, heavy tasks).
If you are also an actual Shopify developer (theme or private app developer) there is a lot of opportunities for upsells depending on what your app does. It seems a lot of app developers in the App Store simply have apps out there to get leads for development (service) work.
Overall, developing on Shopify has been really good. There are some annoyances with their REST API vs. GraphQL API, their documentation, their support, etc... But generally it's been smooth sailing for the past few years. But we've had very, very slow growth and only in the past couple years have paid more attention on trying to maximize our business around Shopify apps.
Our goal is always to be improving the apps and adding features that the copy cats just can't do. We invest a significant amount of time in improving the apps.
No doubt we have lost some market share to the competition but it only motivates us more to keep on improving.
Generally it comes down to building things better and easier to use than the competition. It would definitely be very hard to compete against an app that's Free or $5/mo and has 500 5-star reviews and isn't a dumpster fire.
I tend to look at creating apps that are more complicated than what the average joe could build. One of our apps is an automation app (like Shopify Flow but 10x more useful). It's so stupidly complicated that nobody in their right mind would compete with it in a short time period. To match our features would take at least a year.
Generally we have found that all of the low-hanging fruit and quick ideas have been taken. But the more specific and complicated problems are still worth solving, even if there's one or two other apps out there that are similar.
Definitely looking for ideas with the least amount of competition is good, and really trying to figure out what kind of differentiator you can bring to the table. Usually there's at least one angle to compete on, whether it's price, simplicity (ease-of-use HUGE), hands-on support, features, beautiful UI, responsiveness, integrations...
Sometimes its hard to find the right thing to build if you don't know enough about store owner problems. There are _entire verticals_ that have unique problems that are hard to "know" about unless they tell you. Lots of different types of stores exist on Shopify. People sell classes, events, digital goods, bookings, AirBnB style stuff, equipment rentals, services (hourly based).. There are probably some available ideas that are geared more to those specific verticals.
The tough thing about this is that the ease of building into the platform also attracts a lot of competition (which the author mentions in the post too). Getting in on a fast growing platform early is really beneficial because you can arbitrage the opportunity before others get into the platform. My startup was probably one of the first 50 apps in the Slack app store when it launched in December 2015.
Since then, there's been about 5 dozen startups who are in the space now, but that early Slack platform momentum gave us enough of a lead to build a real business closing in on $1M ARR with 5 people.
This depends on good timing. As a small team or single developer you don't want to invest months into building a plugin or service for a platform that won't take off. And at the time the platform has great traction, chances are that someone already took the higher risk and implemented something close to your idea.
I would be interested in knowing more about the decision process that made you confident enough in 2015 to pour resources into a Slack plugin, if you would like to share that.
At the time, the "company" was just my co-founder and me. We were essentially going to fail/give up by taking on consulting work. The decision to integrate with Slack was a bit of a bet-the-company move. We were building an internal wiki to compete with Confluence. Our early beta users told us they'd use our MVP, and when we gave it to them, no one actually did. When we asked, they just said, "We just keep forgetting. Still interested." We then asked about hooking up our wiki to Slack so you could search from Slack and get notifications for new content, and they wanted that desperately. Some teams even pre-paid us to build it for them. So we scrapped our whole MVP and three months of work, and rebuilt the entire product on top the Slack platform in two weeks over the holidays.
When I say, "on top of Slack", I mean we literally used Slack's APIs as our backend and just rebuilt a "wiki" front end serving up Slack files from the APIs. We even deep linked to their Post as the editor in our wiki. The goal was to validate demand so we did it as leanly as possible. Once we launched, we got about 200 sign ups in 48 hours. From there, we built a real product, which is now tettra.com.
I wrote an article about the pros and cons of building on another company's platform about a year after that which goes into more details if you're interested: https://thinkgrowth.org/building-on-slack-saved-our-startup-...
> We were essentially going to fail/give up by taking on consulting work. The decision to integrate with Slack was a bit of a bet-the-company move
> they wanted that desperately. Some teams even pre-paid us to build it for them
Congrats to the successful pivot. At this point giving demand validation another try instead of shutting down makes a lot of sense, given you already invested heavily and had a list of potential users. Happy to hear it worked.
For example, this recommendation engine is "100% free", https://apps.shopify.com/orcinus-product-recommendation
Company page: https://autocommerce.io , and there isn't a pricing plan in sight.
How exactly do you pay for the servers and dev costs? ML experts aren't cheap. They seemed to be backed by an app studio, https://www.innonic.com/en/ . Is this a loss leader? Are they harvesting datasets and selling them to PE? Is it part of some master plan? Or, is it simply an influx of cheap capital in the wrong hands?
What's going on here?
This example is one of several I've found that seem to be data harvesting operations. Could someone trick non-technical folks into introducing severe vulnerabilities for all their customers via this? Tracking them across the internet for fraud or scummy marketing?
Edit: More examples,
https://apps.shopify.com/zoorix
https://apps.shopify.com/upsell-funnel-engine-upsells
Further cursory research shows that this isn't the only category with an impossible value : price ratio. What in the name of Baphomet is going on?
Yeah that's a game that personally I could never bother playing. It sounds to me like trying to be the alpha fish in a tiny aquarium... that is closely observed and experimented with.
Going indie is no small effort, so if I did it I'd try to play a bigger game, with more freedom, where I can give my best without fear of being outmarketed because someone beat my price by a couple dollars.
I reckon the same applies to most 'app store' ecosystems.
Hard not to compare this against Apple, where the total revenue generated by the Shopify App Store is perhaps around $50 million versus the Apple App Store which is more than $50 billion in digital goods & services ($500 billion including physical goods & services).
I have nothing against Shopify (I've even built an app for a customer once like 8 years ago), but the only reason they charge 2.9% + $0.30 and not 20% for transactions is because Stripe, Square and PayPal all charge 2.9% + $0.30. What's really interesting is I wonder how much price collusion is involved with the 2.9% + 30c price for payment merchants. If there were no price fixing surely one of them would drop to 2.8% + 30c to gain an edge in market share but they don't.
Most likely none.
To be collusion they have to be actively working together to do it. Pricing to match or at least be competitive with your peers, isn't collusion. If you are competing with the other players and you look at their prices (in this case, entirely public prices), then match, it's not collusion. It's extremely unlikely they're secretly conspiring to hold that line. At this point the business margins are doing the work to provide resistance to compete on undercutting the 2.9% + $0.30.
It's nothing more than a: you move and we'll move stalemate; you don't move, we won't move. It's unspoken and very common in business. The cloud companies such as DigitalOcean, Vultr, Linode do it as well. Their plans have been quite similar for many years now.
The processors are not aggressively undercutting to advantage for the same reason those cloud companies have stopped doing that frequently, the margin has gotten a lot tighter and nobody is eager to go further. Each notch they go lower becomes increasingly painful.
That sounds very much like the definition of collusion. An unspoken agreement that says "you don't move, we won't move".
Churn is incredibly high, unfortunately. And merchant reviews are ruthless. There's some consensus amongst Shopify devs (at least in a particular Facebook group) that Shopify isn't doing enough in weeding out unreasonable reviews and fake reviews. So it's quite possible you launch your app and get killed in your first week. I've experienced it (as well as others) where merchants take you (the dev) hostage by threatening to write a poor review (which will affect your ranking) if you don't create a feature just for them.
I no longer need to develop for their app store anymore, but it's still a good start if you're just breaking into side projects and want to monetize them.
I’m a solo dev that’s built a desktop label printing app. I’d love to integrate it with Shopify. Read more at https://label.live
Anyone want to help me better understand the need for product labels, shelf tags, or fulfillment labels? Also thinking a FSBA integration would be important, too.
Shipping is real, and the more carriers you can support seamlessly the better.
I personally would suggest to start a business creating WooCommerce websites. At least you'll be owning the whole profit and would not depend from the whishes and decisions of a wannabe BigCorp. As an additional plus you help spreading open source software.
The benefit of App Stores is getting a access to a mass number of qualified customers anxious to add compelling features to the platform they bought, be it a web store front or iPhone. The negative is the platform has to always keep moving ahead, and sometimes your app is right in its path.
We used to call it picking up nickles in front of the SteamRoller back in my Photoshop Plug-ins days. Was very frustrating, but still very lucrative. I have often talked about giving a demo of my next brilliant plugin to the Photoshop team lead and product manager just before the release of Photoshop 3. Three weeks later Photoshop3 was released with their version of my plugin in it.
Can't have multiple discounts in the cart? Splution: create custom discount codes on the fly for absolutely everyone in real-time.
Stealing the good ideas and adding them to the core platform would generate more money short term but would destroy the app store
Shopify Merchants are selling roughly $80B a year, at least 5x WooCommerce merchants. Paying Shopify 20% means you net at least three times higher monthly revenues over paying WooCommerce zero commission.
Apple charges devs 30%, but in return you get access to the worlds highest volume App Store paying developers $35B a year. You can also make iOS apps using an enterprise certificate, and distribute to tens of thousands with zero commission, but no one will ever find you on the store search, or give you public App Store ratings, you’ll never appear in a top category list or get featured by Apple, and any potential customers you reach will be leery of using your custom payments or subscription system, leading to lower paid conversions.
This seems a weird way to calculate potential eCommerce platform plugin profits because (unless you are a payment gateway), the quantity of stores is more important than the volume those stores sell, and WooCommerce is by far the most popular eCommerce platform.
For example, Kylie Jenner's Shopify store has approx. $330mm[1] in revenue a year as far as I can tell, but that's only going to translate into one potential plugin purchase.
[1] https://www.theedgemarkets.com/article/tech-how-shopify-turn...
Kylies a bad example, since her dev team can presumably afford to build the specific custom features they need.
Merchants in the $100K to a few million a month range aren’t likely to be able to afford much custom development, but won’t blink an eye at paying hundreds of dollars a month for useful apps. A $10k a month merchant might balk at spending a $100 a month on anything but mission critical apps, and a $1K a month merchant probably isn’t buying any apps.
But when Shopify sales volumes are at least 5x Woo Commerce (more likely over 10x because I don’t believe Woos numbers), odds are Shopify is much bigger in every customer segment.
Otherwise it’s possible for someone to integrate your stuff into their store even outside of the Shopify store (by integrating JS snippets for example).