Shopify vs. Wix - The network effect.
Updated: Dec 21, 2021
In this article we will be comparing the two e-commerce rivals. Which one makes a better investment?
Overview
Shopify is the e-commerce behemoth that allows costumers to create their own online stores to sell their products with no coding skills. Wix takes a broader approach - besides setting up an online store, they also allow their costumers to make money through many different ways, such as Wix events management platform, Wix online bookings platform, Wix blogs platform that you can grow and monetize through ads, Wix restaurant bookings platform and so on.
Shopify has a $190 billion dollar valuation while Wix sells for $11 billion. Right from the go we see that Shopify is nearly 20x times more expensive, let's find out why.
Growth
Shopify's average 5 year revenue growth rate is 70.9% while Wix's is 37.4%.
| 2016 | 2017 | 2018 | 2019 | 2020 |
Shopify | 389.33M (+89.7%) | 673.3M (+72.9%) | 1.07B (+59.4%) | 1.58B (+47.05%) | 2.93B (+85.63%) |
Wix | 290.1M (+42.54%) | 425.64M (+46.72%) | 603.7M (+41.84%) | 761.09M (+26.07%) | 988M (+29.91%) |
The network effect
There is a war for developers going on between tech companies. They compete for the talent all the time - whoever has more developers building apps on their platform will attract more users. Apps make the platform more powerful and more flexible. Shopify recently eliminated fees for developers making under $1 Million in revenue to attract more developers to its platform.
Shopify's App Store already has a library of 3000+ apps vs. Wix's App Market 300+ apps. That's a huge difference. Shopify also takes the lead in the quality of the apps. Take a look below on the screenshots of the first page from each app store. Costumers seem to be using the apps a lot more on Shopify and they also seem to be enjoying the quality of those apps more.
Wix's marketing apps
Shopify's marketing apps
This is one of the areas where Shopify is building out its moat - the network effect. They don't care about saving money for the developers. They are making a long term investment with this move. The more developers build apps for Shopify, the more costumers will choose their platform to run their online commerce business. The more costumers stay on Shopify the more money the developers make on their apps. If there is more money to be made on the platform, more developers will build apps for the platform. And this flywheel goes on non stop!
Wix is a great web development platform but their app market is simply not good enough. There isn't enough apps and the few apps that are on it are often bad quality. When it comes to e-commerce, Shopify just allows you to do more and it has become a go-to for a beginner online merchant. The stock performance has followed.
Shopify vs. Wix 5 year chart
