View photos If you are a shareholder in Shopify Inc’s ( NYSE:SHOP), or are thinking about investing in the company, knowing how it contributes to the risk and reward profile of your portfolio is important. The beta measures SHOP’s exposure to the wider market risk, which reflects changes in economic and political factors. Different characteristics of a stock expose it to various levels of market risk, and the broad market index represents a beta value of one. Any stock with a beta of greater than one is considered more volatile than the market, and those with a beta less than one is generally less volatile.
What is SHOP’s market risk? Shopify’s five-year beta of 1.2 means that the company’s value will swing up by more than the market during prosperous times, but also drop down by more in times of downturns. This level of volatility indicates bigger risk for investors who passively invest in the stock market index. According to this value of beta, SHOP may be a stock for investors with a portfolio mainly made up of low-beta stocks. This is because during times of bullish sentiment, you can reap more of the upside with high-beta stocks compared to muted movements of low-beta holdings.
Could SHOP's size and industry cause it to be more volatile? With a market capitalisation of CAD $11.54B, SHOP is considered an established entity, which has generally experienced less relative risk in comparison to smaller sized companies. However, SHOP operates in the internet software and services industry, which has commonly demonstrated strong reactions to market-wide shocks. Therefore, investors can expect a low beta associated with the size of SHOP, but a higher beta given the nature of the industry it operates in. It seems as though there is an inconsistency in risks from SHOP’s size and industry. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.
NYSE:SHOP Income Statement Oct 3rd 17
Can SHOP's asset-composition point to a higher beta? During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I examine SHOP’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Considering fixed assets account for less than a third of the company's overall assets, SHOP seems to have a smaller dependency on fixed costs to generate revenue. Thus, we can expect SHOP to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. However, this is the opposite to what SHOP’s actual beta value suggests, which is higher stock volatility relative to the market.
What this means for you:
Are you a shareholder? You may reap the gains of SHOP's returns during times of economic growth by holding the stock. Its low fixed cost also implies that it has the flexibility to adjust its cost to preserve margins during times of a downturn. I recommend analysing the stock in terms of your current portfolio composition before deciding to invest more into SHOP.
Are you a potential investor? Before you buy SHOP, you should take into account how their portfolio currently moves with the market, in addition to the current economic environment. SHOP may be a valuable addition to portfolios during times of economic growth, and it may be work looking further into fundamental factors such as current valuation and financial health.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
Shopify shares fall 11% as short seller calls firm a 'get rich quick scheme' ... Citron Research says most of the businesses Shopify works with aren't legitimate
CBC News Posted: Oct 04, 2017 12:28 PM ET Last Updated: Oct 04, 2017 4:17 PM ET
Shares in Shopify were down by as much as 11 per cent on Wednesday after a high-profile American short seller said most of the 500,000 businesses the company works with aren't legitimate.
Citron Research's Andrew Left released a video Wednesday morning alleging that Ottawa-based Shopify's hype is unsustainable, and argues the stock should be worth half what it is.
Shopify makes money by helping small and medium-sized businesses sell their products and services online, by handling all of the back end logistics of payments, inventory and web design via a cloud-based service.
But in his video and accompanying website, Left alleges that most of the company's customers aren't legitimate businesses, but rather simply people who have been sold dubious "business opportunities" built around reselling, which goes against Federal Trade Commission rules.
"They are not selling them to business owners," Left said of the websites. "They are selling them to people as opportunities to get rich quick."
Shopify is "a company that has mastered the good old get rich quick scheme," Left said, saying he can't account for as much as 90 per cent of the company's customer base.
"This is not an $11-billion company," Left said. "This needs to get completely looked at by the FTC and completely looked at by Wall Street."
He also accuses the company of paying bloggers and other online influencers to produce content favourable to Shopify without disclosing that relationship.
Shopify did not reply to a request for comment by CBC News. Trading volume in the company's shares was about twice as much as normal on the stock market in Toronto.
Left is what's known as a short seller, which means he makes money by betting against the performance of stocks that he thinks are overvalued. According to data compiled by Bloomberg, just over four million shares in Shopify are currently held by short sellers, about three per cent of the total. But that ratio has doubled since the middle of August.
Left rose to prominence in 2015 when he went public with allegations that drug company Valeant was fudging its numbers.
Not sure why the company management is not our defending the company? I am a user of this company for the past year and I have been very happy with their product and service. They have extremely knowledgeable and friendly reps and every day their are trying to make their product better. I bought more shares yesterday but I am disappointed that the company is not out in media defending themselves. Unless I missed it.
SEAN SILCOFF OTTAWA 15 MINUTES AGO OCTOBER 5, 2017
Shopify Inc. has fired back a day after an American short-seller attacked the Ottawa e-commerce software company's business model and marketing practices and said the stock was vastly overvalued, causing the stock to plunge.
"We vigorously defend our business model and stand resolutely behind our mission and the success of our merchants," the company said in a brief statement on its website that did not directly address the accusations in a note and video posted Wednesday by Beverly Hills, Calif.-based Citron Research.
Shopify stock was trading down about 4 per cent on the New York Stock Exchange just before noon. The shares fell 11 per cent the day before.
Citron's managing editor Andrew Left, who is shorting Shopify stock, alleged Shopify's business was "dirtier than Herbalife" and said the Ottawa-based company had "mastered the good ol' get-rich-quick scheme." Herbalife is a multilevel marketing company that sells nutritional and weight-loss products, and which agreed to pay $200-million (U.S.) in a settlement with the U.S. Federal Trade Commission (FTC) after being accused of pyramid-scheme practices.
Mr. Left – who has been called the "the shock jock of short -sellers" because of his incendiary attacks on publicly traded companies whose stocks he has shorted – commended Shopify's technology, which enables merchants to set up and run online stores over the Internet. But he said Shopify's "dirty little secret" is an affiliate marketing program that allows third-party promoters to earn commissions for persuading new merchant customers to sign up.
Affiliate marketing is a common online selling practice, giving individuals and businesses a cut of money made from online purchases if they've helped direct the buyer to that product, typically through reviews or blogs. Some affiliate marketers are mainstream celebrities or social-media personalities and established companies including Amazon also use the practice
However, affiliate marketing has drawn recent scrutiny from the FTC, which warned in a blog post last month that many such marketers put out "exaggerated claims or misleading information to get people to click. They may say anything to get you to click on their ad because they have an incentive – getting paid."
Shopify offers its 13,000 affiliate partners the equivalent of the first two months of a new customer's monthly fee once new merchants they refer sign on to its platform. Customers pay monthly subscription fees starting at $29 to use Shopify's cloud-based software .
Mr. Left, whose note was long on accusations but short on detail, also alleged that Shopify improperly promotes the notion that its merchants can become millionaires, that third-party affiliates do not disclose they are compensated by Shopify and that most of Shopify's customers are not true merchants but "people who are buying a system" to make money online. He argued those and other practices would face FTC scrutiny.
Mr. Left also claimed Shopify stock was worth just over half of its value as of Tuesday. Shopify has been a top performer on both the Toronto Stock Exchange and the New York Stock Exchange, nearly tripling in value in the past year and trades at a substantial premium to other subscription software providers.
In its statement, Shopify said it is helping to enable the growth of entrepreneurship by making it as easy as possible "to enable anyone, anywhere, to build, grow and scale a business." It noted more than 131 million consumers have made purchases from a Shopify store in the past year. But Shopify did not otherwise address the allegations raised by Citron and Mr. Left.
National Bank of Canada analyst Richard Tse said in a research note "we can't unequivocally rule out that this negative report will not surface some regulatory scrutiny even if we think it's remote." He said any issues would stem from a group of "transient subscribers who do not represent a meaningful portion of value for Shopify."
However, he said "in the short-term, there's little doubt it will weigh on the stock despite what we believe to be an unchanged fundamental outlook," noting Shopify's annualized revenue per merchant customer has been rising and that the business appears to be on track to meet its target of becoming profitable by the fourth quarter. The weakness in the stock "opens up a window for long term investors" to buy, he said.
Mr. Left has made a name for himself targeting publicly traded firms he accused of engaging in fraudulent tactics, being overvalued or both. His best-known target was Valeant Pharmaceuticals International Inc., which he compared to Enron Corp. in 2015 before its rapid descent.
Entrepreneurship is on the decline, and Shopify is committed to fighting this trend.
Shopify’s growing community of entrepreneurs includes makers, creators and innovators, from students trying to pay for school to merchants who have successfully scaled their businesses.
Shopify has always strived to take the path that leads to more entrepreneurs by designing its platform to remove the technical, operational, and financial barriers to enable anyone, anywhere, to build, grow, and scale a business.
Some numbers on Shopify helping businesses start, succeed and scale:
Every 90 seconds a store using Shopify makes their first sale
A LOT of people buy from stores that use Shopify: over 131 million consumers have bought from a store using Shopify in the last 12 months
Stores using Shopify generated $10.7 billion USD in gross merchandise volume in the first half of 2017
We vigorously defend our business model and stand resolutely behind our mission and the success of our merchants.
Chief Executive Tobi Lutke said on Twitter on Tuesday that he would respond to Left's claims on the company's next earnings call, which is expected the week of Oct. 30. "Lots of people want me to address the short-selling troll thats targeting $SHOP. Looking forward to next earnings calls to do so"
Tobi Lütke @tobi CEO by day, Dad in the evening, hacker at night. - Rails Core alumni; Author of ActiveMerchant, Liquid. Comprehensivist
Shopify and DHL Express Partner to Empower Small Businesses to Go Global
October 18, 2017 PDF () New partnership brings two- to five-day international express shipping to hundreds of thousands of merchants
OTTAWA, Ontario & PLANTATION, Fla.--(BUSINESS WIRE)-- Shopify Inc. (NYSE: SHOP) (TSX: SHOP), the leading multi-channel commerce platform, and DHL, the world’s leading international express services provider, today announced a new partnership to help small businesses access global markets. Shopify will be adding DHL Express as a new international carrier to Shopify Shipping, helping hundreds of thousands of U.S. small businesses increase sales around the globe through lower shipping rates. These rates enable small businesses to more easily compete with large companies and marketplaces, and were previously available only to enterprise customers.
This press release features multimedia. View the full release here: businesswire.com
“For smaller businesses and startups today, the potential field of customers is not just local – it’s global,” said Cristian Vera, VP of Sales for DHL Express Americas. “Those on the Shopify Shipping platform can now access the growing global marketplace and take their business to new heights by shipping their products to any of the 220 countries and territories we serve.”
Shopify Shipping simplifies commerce by enabling businesses to easily manage all aspects of their shipping and fulfillment directly within Shopify. DHL Express will now be natively integrated into the Shopify platform, joining existing partnerships with USPS and Canada Post, to minimize costs and simplify fulfillment workflows for busy entrepreneurs. Shopify businesses currently ship millions of packages a month, and more than 10% of those are sent internationally.
“This partnership with DHL Express lets small businesses ship like enterprise companies: with fast, premium delivery, lower rates and a global brand consumers trust and choose at checkout,” said Maia Benson, Global Head of Shipping for Shopify. “With Shopify’s massive scale, powering more than 500,000 businesses, we’re able to work with global shipping powerhouses to offer this premium solution to the small business owner.”
Shopify Shipping and DHL Express will offer a wide variety of features to help businesses more easily ship their products around the world, including:
Fast shipping: customers receive packages within two to five business days, and can track them anywhere in the world Competitive international rates: special, negotiated shipping rates with no minimum shipping volumes or subscription required Free DHL Express pickups: can be scheduled through Shopify, for any number of packages Expansive global coverage: delivery to more than 220 countries and territories worldwide One-stop shop: Shopify Shipping enables merchants to manage all their shipping needs in one place
DHL Express for Shopify Shipping is available today for businesses in the United States. For more information, visit: cts.businesswire.com
About Shopify Shopify is the leading cloud-based, multi-channel commerce platform designed for small and medium-sized businesses. Merchants can use the software to design, set up, and manage their stores across multiple sales channels, including web, mobile, social media, marketplaces, brick-and-mortar locations, and pop-up shops. The platform also provides merchants with a powerful back-office and a single view of their business. The Shopify platform was engineered for reliability and scale, making enterprise-level technology available to businesses of all sizes. Shopify currently powers over 500,000 businesses in approximately 175 countries and is trusted by brands such as Red Bull, Nestle, GE, Kylie Cosmetics, and many more.
About DHL – The logistics company for the world DHL is the leading global brand in the logistics industry. Our DHL family of divisions offer an unrivalled portfolio of logistics services ranging from national and international parcel delivery, e-commerce shipping and fulfillment solutions, international express, road, air and ocean transport to industrial supply chain management. With about 350,000 employees in more than 220 countries and territories worldwide, DHL connects people and businesses securely and reliably, enabling global trade flows. With specialized solutions for growth markets and industries including technology, life sciences and healthcare, energy, automotive and retail, a proven commitment to corporate responsibility and an unrivalled presence in developing markets, DHL is decisively positioned as “The logistics company for the world”.
DHL is part of Deutsche Post DHL Group. The Group generated revenues of more than 57 billion euros in 2016.
Shopify Inc. ( SHOP)( SHOP.TO), the leading cloud-based commerce platform, plans to announce financial results for its third quarter ended September 30, 2017 before markets open on Tuesday, October 31, 2017.
Shopify’s management team will host a conference call to discuss third-quarter results at 8:30 a.m. ET on Tuesday, October 31, 2017. The conference call will be available via webcast on the investor relations section of Shopify’s website at cts.businesswire.com.
An archived replay of the webcast will be available following the conclusion of the call.
Shopify is the leading cloud-based, multi-channel commerce platform designed for small and medium-sized businesses. Merchants can use the software to design, set up, and manage their stores across multiple sales channels, including web, mobile, social media, marketplaces, brick-and-mortar locations, and pop-up shops. The platform also provides merchants with a powerful back-office and a single view of their business. The Shopify platform was engineered for reliability and scale, making enterprise-level technology available to businesses of all sizes. Shopify currently powers over 500,000 businesses in approximately 175 countries and is trusted by brands such as Red Bull, Nestle, Rebecca Minkoff, Kylie Cosmetics, and many more.
It all started with an Instagram ad for a coat, the West Louis (TM) Business-Man Windproof Long Coat to be specific. It looked like a decent camel coat, not fancy but fine. And I’d been looking for one just that color, so when the ad touting the coat popped up and the price was in the double-digits, I figured: hey, a deal!
The brand, West Louis, seemed like another one of the small clothing companies that has me tagged in the vast Facebook-advertising ecosystem as someone who likes buying clothes: Faherty, Birdwell Beach Britches, Life After Denim, some wool underwear brand that claims I only need two pairs per week, sundry bootmakers.
Perhaps the copy on the West Louis site was a little much, claiming “West Louis is the perfection of modern gentlemen clothing,” but in a world where an oil company can claim to “fuel connections,” who was I to fault a small entrepreneur for some purple prose?
Several weeks later, the coat showed up in a black plastic bag emblazoned with the markings of China Post, that nation’s postal service. I tore it open and pulled out the coat. The material has the softness of a Las Vegas carpet and the rich sheen of a velour jumpsuit. The fabric is so synthetic, it could probably be refined into bunker fuel for a ship. It was, technically, the item I ordered, only shabbier than I expected in every aspect.
I went to the West Louis Instagram account and found 20 total posts, all made between June and October of 2017. Most are just pictures of clothes. Doing a reverse image search, it’s clear that the Business-Man Windproof Long Coat is sold throughout the world on a variety of retail websites. Another sweatshirt I purchased through Instagram—I tracked down no less than 15 shops selling the identical item. I bought mine from Thecuttedge.life, but I could have gotten it from Gonthwid, Hzijue, Romwe, HypeClothing, Manvestment, Ladae Picassa, or Kovfee. Each very lightly brands the sweatshirt as its own, but features identical pictures of a mustachioed, tattooed model. That a decent percentage of the brands are unpronounceable in English just adds to the covfefe of it all.
All these sites use a platform called Shopify, which is like the Wordpress or Blogger of e-commerce, enabling completely turnkey online stores. Now, it has over 500,000 merchants, a number that’s grown 74 percent per year over the last five years. On the big shopping days around Thanksgiving, they were doing $1 million in transactions per minute. And the “vast majority” of the stores on the service are small to medium-sized businesses, the company told me.
Shopify serves as the base layer for an emerging ecosystem that solders digital advertising through Facebook onto the world of Asian manufacturers and wholesalers who rep their companies on Alibaba and its foreigner-friendly counterpart, AliExpress.
It’s a fascinating new retail world, a mutation of globalized capitalism that’s been growing in the cracks of mainstream commerce.
Here’s how it works.
Rory Ganon from his Shopify video (youtube/ Rory Ganon) ----------------------------------------------
“What is up everybody?!” a fresh-faced man with messy brown hair shouts into the camera. Behind him, two computers sit open on a white desk in a white room. By the looks of him, he might not be an adult, but he has already learned to look directly into the camera when delivering the ever-appealing gospel of Easy Money on the Internet.
“In this challenge, I’m going to take a brand new Shopify store to over one thousand dollars,” he says. “So I invite you to follow along with me as I take this brand new store from 0, literally 0, to over one thousand dollars in the next seven days.”
In the corner of YouTube dedicated to e-commerce, these videos are a bit of a phenomenon, racking up hundreds of thousands of views for highly detailed explanations of how to set up an e-commerce shop on the Internet.
Their star is Rory Ganon. Though his accent is Irish (“tousand”), his diction is pure LA YouTuber. He’s repetitive, makes quick cuts, and delivers every line with the conviction of youth. He appears to live in Ratoath, a small Irish commuter town about half an hour outside Dublin. His Facebook page describes him as a 17-year-old entrepreneur.
His success finding an audience seems predicated on the fact that when he says he’s going to show you everything, he really is going to show you everything. Like, you will watch his screen as he goes about setting up a store, so anyone can follow along at home. He’s a Bob Ross of e-commerce.
These techniques work the same for him as for Gucci. Some Instagram retailers are legit brands with employees and products. Others are simply middlemen for Chinese goods, built in bedrooms, and launched with no capital or inventory. All of them have been pulled into existence by the power of Instagram and Facebook ads combined with a suite of e-commerce tools based around Shopify.
The products don’t matter to the system, nor do they matter to Ganon. The whole idea of retail gets inverted in his videos. What he actually sells in his stores is secondary to how he does it. It’s as if he squirts hot dogs on his ketchup and mustard.
What Ganon does is pick suppliers he’ll never know to ship products he’ll never touch. All his effort goes into creating ads to capture prospective customers, and then optimizing a digital environment that encourages them to buy whatever piece of crap he’s put in front of them.
And he is not alone.
The touchstone investigation into this world—“ There’s No Such Thing as a Free Watch”— was conducted by an artist, Jenny Odell. After a visitor to Oakland’s Museum of Capitalism brought a watch that was “sold” “free” online, Odell endeavored to seek out its origins. The watch was sold by Folsom & Co, one of a constellation of nearly identical companies selling nearly identical watches. These companies are distinguished primarily by their loose relationship with the truth about themselves. The information they provide about the brands is almost certainly fictional. While Folsom & Co claimed to be from San Francisco’s Soma district, SoFi coastal claimed to be from Miami. Both were probably from somewhere else. Another site creates the barest sketch of a supposed founder named “Bradley” who “had a constant desire to present himself well but didn’t believe fashion and style should come with such a high price.” Bradley probably doesn’t exist.
Of course, this is merely a hackneyed version of what all branding does, Odell points out. It creates stories that pump up the value of products. What you can charge depends on the story you tell, which on Instagram means well-lit photos in coffee shops lead directly to higher prices, especially if they feature an “influencer” with a lot of followers.
These new retail sites are also creatures that could only exist in our current economy. They are a reshuffling of the same fast-fashion infrastructure that powers H&M and Zara. West Louis and Folsom & Co are a new a front-end for the Asian factories that make stuff. Stumble onto one—or more likely—find yourself targeted by such a brand’s ads, and you open up one of many highly disposable faces of the globalized economy. It’s just that with companies like West Louis, the seams show, literally and figuratively.
* * *
Ganon’s videos are particularly fascinating in describing the mechanics of digital advertising through Instagram and Facebook.
In the tutorial, he briefly discusses finding a niche for the products in your store, and he uses some business school powerpoint terms. But when he actually selects a niche, it is Lions. That’s right: Lions, the animals.
A screenshot from Rory Ganon’s video (Rory Ganon) ----------------------------------------------------------------------------
His reasoning, laid out in video two, is twofold. One, there are plenty of “Instagram influencers”—which is to say popular accounts—who he can pay to run an ad for his store because there are a bunch of “naturey” sites. And two, when he looks at Facebook’s Audience Insights tool, he (and anyone else) can see how large Facebook estimates the audience for certain interests might be. When he types in “lions,” “[Facebook] says I have 5 to 6 million monthly active people I can target,” he says. “But if I add in wildlife, you can see I have 10-15 million monthly active people I can show my ads to. So, if my store is successful, I can scale my store to thousands of dollars per day.”
So, he has his audience, now he needs his store. He calls it Lions Jewel, pulls in some lion pictures, copy and pastes Shopify’s default privacy and return policy boilerplate, and he’s up and running with the empty store.
For products, he turns to, AliExpress, the Alibaba company. The key to the whole scheme is that he doesn’t have to hold any inventory, so he can start up the business with no capital. And AliExpress has many companies that are willing to do what’s called “dropshipping” direct from wherever the item was manufactured or warehoused. That’s why my coat showed up in a China Post package.
There is an app that plugs directly into Shopify called Oberlo, which allows anyone to pull products directly from Aliexpress. Click a button and something that was manufactured in the Chinese hinterlands and marketed in a suburb of Shanghai becomes an item for sale on an Irish kid’s website. Oberlo’s marketing claims that 85 million items have been processed through the system.
Ganon searches out some lion-themed objects, including the one that he anticipates making the most money from, a gold-plated lion bracelet that he puts on sale for $0. He gives some tips for finding popular dropshippable items, too. He sorts Shopify-hosted sites by traffic with myip.ms, and then digs below the most popular stores, which generally sell products they make themselves. Deeper into the top 1000 stores, there are dropshippers reselling Aliexpress goods, just like Ganon is, so if he can ferret out what products are selling at high-performing stores, he can siphon off some of those dollars. All he’d need to do was do reverse image searches to find the listings in Aliexpress, suck those products in with Oberlo, and he could effectively clone the store in a few minutes.
But for the video series, he was focused on just the lion stuff. With his shop loaded with a handful of products, his next step is to get people to see the merchandise. First, he creates a Lions Jewel Instagram account, posting a smattering of pictures with a link to his store. Then, he taps an Instagram account that posts pictures of nature, and brokers a sub-$20 deal that pushes some hundreds of people to his site through Lions Jewel’s Instagram account.
When they hit the site, there is a countdown clock telling them they are running out of time to grab the free bracelet deal. This is, of course not true. But it creates that “sense of scarcity,” as Ganon says, that leads to purchases. That clock is just another app for Shopify, Hurrify. It is supposed to increase conversions 2 to 3 percent, Ganon claims.
As one is shopping this kind of site, occasionally a screen will pop up saying, “Alexis in Oakland just purchased the West Louis (TM) Business-Man Windproof Long Coat.” This effect comes courtesy of yet another app, Sales Pop. Ganon and the appmakers say these pop-ups provide “social proof,” which is, again, designed to increase conversions. One would expect that such an app would show actual purchases, and it can do that. But it can also show “ custom notifications” so that you can create fake customers who are supposedly buying things. Pick some cool-sounding names, pick some cool locations (“London,” “Paris,” “Mexico City,” “Oakland”) and it does the work of combining them into robo-social proof.
Given the array of behavioral tricks arrayed against your average Internet user, some of them take the free lion bracelet deal. But for those that don’t, merely by visiting his site, they’ve been tagged in Facebook’s system because Ganon has installed a standard Facebook tracking pixel. That means Ganon can now re-target those people who visited but left without purchasing anything through Facebook. And he spends a lot of time designing and testing ads that will bring them back for the purchase.
There’s nothing unusual about this in digital marketing. In fact, it’s a completely common practice. But employed so baldly, it shows the strangeness of our current commerce model. I like lions, so I follow an Instagram account that posts pictures of them, they post an ad, so I go to a webpage, and now I get ads chasing me all over the Internet advertising a lion bracelet. It’s enough to make you long for the days of going to the mall or buying stuff out of a catalog.
Ganon says he creates blogs for his sites, too. So maybe for his lion store, he’d cobble together “fun facts about lions” by looking up the most popular lion content on the site, Buzzsumo. Once you hit that page, he could retarget you.
This is one major purpose of “content marketing.” For example, a company could have someone ghostwrite its CTO some blog posts about cloud storage topics that only people deep in the industry could be interested in. Because of that hyperspecificity, anyone who lands on those pages is likely to be a prospective customer. So, even if the prose is unreadable, it doesn’t really matter beause by the time you’re staring at the words, the content has served its purpose already. Just by arriving on the page while logged into Facebook, you’ve placed yourself in a custom audience that can be targeted on the Facebook back end. This is a basic capability of the system: it works for any demographic, from Chief Executive Officers to white supremacists to lion lovers.
The last step in a Ganonite store process, then, is to do the actual fulfillment of the orders. This means entering names and addresses into AliExpress, so the Chinese companies can send out the stuff. But Ganon doesn’t like to waste time on things that don’t generate revenue for his stores. “There’s only 24 hours in a day,” he writes in a slide, underlining this text, “Why waste money on things that don’t make you money?”
So Ganon “automates” the order fulfillment by hiring digital workers on the platform, UpWork, for 3, 4, 5 dollars per hour. When I searched through the platform last week, there were 275 openjobs listed for dropshipping, 200 for AliExpress specifically, and 132 for Oberlo—though there was considerable overlap among all those ads.
Ganon’s video series opens by promising that he’ll get his store’s revenue to $1,000 in the first week. Spoiler alert: that does not happen. That’s probably because it’s harder than he made it sound. But there was something else going on, too. Ganon posted the videos in real time. So, as the first video began to circulate, other people—following his instructions exactly—began to create shops also selling lion bracelets. Oops!
In general, it’s hard to know how much actual profit anyone could make from a store that does even substantial transactions. AliExpress products are cheap, but not free. Facebook and Instagram ads are effective, but cost money. That “Make a thousand dollars in a week!” promise is very easy to whittle down.
But as hypermodern economic entities, they are fascinating. Even the idea of a “supply chain”—the system for using cheaper labor and global logistics networks to increase profit margins for companies with the wherewithal to do global business—breaks down. There are just suppliers and retail-front ends connected loosely by e-commerce sites and apps.
“Amidst the shifting winds of Alibaba sites, dropshipping networks, Shopify templates, Instagram accounts and someone somewhere concocting the details of ‘Our Story,’ a watch was formed, like a sudden precipitate in an unstable cloud,” the artist Odell writes.
Which suggests a name for this phenomenon of jumbled up global capitalism that uses Silicon Valley ad tools to arbitrage cheap goods from Asia: the Supply Cloud.
As for my coat, in the end, there was no real mystery to it. It was too cheap to be true, and no matter how much technology changes, you get what you pay for.