Shopify: The Conquest for Chinese E-Commerce

In mid-2020, Tobias Lütke, CEO of Shopify, faced a critical decision on how to time potential expansion into the China market. Over the prior 15 years, his Canadian software-as-a-service company had grown from a small e-commerce solutions provider to a full service e-commerce platform. Shopify could help an online merchant set up a website, register for a URL, process payments, manage inventory, e-mail customers, purchase digital advertising, and more. Since its founding, Shopify had primarily served Western retailers and consumers. In late 2019, it had established a small team in China as a beachhead for growth. However, recent events in 2020 had cast the move in a new light. The global coronavirus pandemic, U.S. and China trade tensions, and potential U.S. regulation of social media platforms with Chinese ties (e.g., TikTok and WeChat) potentially called into question Shopify’s initial judgment on timing. Lütke wondered whether his firm should double down on the opportunity in China, or pull back. China was the largest e-commerce market in the world, with $2.3 trillion in revenues in 2019 versus $795 billion in the U.S. If this was the time to expand operations in China, Lütke needed to determine whether it was better to focus Shopify's strategy on pursuing cross-border services (China merchants selling into the U.S. and/or U.S. merchants selling into China), or continue to plan for in-country operations (serving China merchants selling to Mainland consumers).