Shopify is Under Scrutiny by Citron Research
Shopify, a popular e-commerce platform for small and medium-sized businesses, is under fire for its “get rich quick” scheme.
Founded in 2004, Shopify provides an easy tool for people to set up an online store without any elaborate tech knowledge. The Canada-based company has been one of the best-performing stocks on the NYSE in the past year. The team also recently announced its partnership with Instagram to enable all-in-one mobile shopping for its merchants.
Just as everything seems to be going well for the Canada tech favorite, Shopify found itself in an allegedly fraudulent claim about its customer counts. The company boasts to have over 500,000 merchants on its platform. Of those 500,000 accounts, 2,500 are Shopify Plus merchants. If we assume Shopify to have at least 20,000 Shopify Advanced accounts, then where are the rest of the 450,000 merchants?
Citron Research’s Claims of Shopify’s Referral Scheme
This question was raised by Citron Research’s founder Andrew Left, who previously exposed frauds of companies like Valeant Pharmaceuticals. Last week, Citron published an extensive research calling Shopify “a completely illegal get-rich-quick scheme (with a good software platform)”.
Ironically, Shopify’s CEO Tobias Lukte was the first to mention his company’s questionable claim. In an interview with Bloomberg, Lukte said that some venture capitalists had expressed their disbelief in Shopify’s claim of having 500,000 merchants.
“I have lots of stories about being laughed out of VC offices because they told me the entire addressable market for my company was 40,000 stores,” Lukte said.
According to Citron Research, there are over 10,000 Shopify “partners” who teach people how to become a Shopify millionaire. One of these Shopify promoters, Keder Cormier, used to be a promoter for Herbalife, another company that was caught in a similar scheme. The Federal Trade Commission (FTC) had fined Herbalife $200 million for its multi-level marketing operations in 2016.
Yet, Shopify seems to have completely ignored the lesson from Herbalife. Not only does Shopify recognize the promoters as its partners, it also claims that “2,700 people become millionaires each day” on its Facebook page. The company even goes as far to provide a sample resignation letter for Shopify users who are ready to quit their jobs.
FTC demands influencers and marketers to disclose their relationships when promoting any products or services. In Shopify’s case, the company’s affiliate program states a monetary reward of up to $2,000 for each merchant referral. However, none of the Shopify promoters, or “partners,” has disclosed any compensation from the company in their marketing materials.
Here comes the catch – some Shopify merchants don’t even need a product to sell. The company’s service called Oberlo can find products for you to sell and take care of packaging and shipping. In other words, Shopify users can just buy the platform but not really have an original product to offer.
At the end of Citron Research’s report, Left estimated that Shopify stock is inflated by 45%. He also stated that Citron will forward all of its findings to FTC and advised “cautious investing for all.” Shopify’s share fell more than 8% to $106.95 after the report was released, although it’s important to note that the company had seen a 150% growth in stock price since the beginning of 2017.
So, how reliable is Left’s information?
Left is quite an infamous short-seller who profits from betting against companies by persuading shareholders to expect a drop in share prices. In defense of Shopify, Canada Business wrote that Left’s questioning is “a common tactic for short-sellers.”
While Left’s claims about Shopify’s inappropriate marketing strategy are valid, Shopify is still one of the most user-friendly e-commerce platforms on the market. Analysts acknowledge that Shopify’s marketing language is very aggressive and can potentially violate FTC regulations. The company perhaps needs to better regulate its promoters who might be taking advantage of the referral program. Nonetheless, we can’t simply ignore the Shopify merchants that run legitimate businesses via the platform. Notable brands like Budweiser, Tesla Motors, and Red Bulls undoubtedly use Shopify as their e-commerce platform.
What’s Shopify’s Response?
Without directly responding to the allegations, Shopify released a statement on the following day. “We vigorously defend our business model and stand resolutely behind our mission and the success of our merchants,” Shopify posted on its website.
The company also pointed out that Shopify stores have “generated $10.7 billion in gross merchandise revenue in the first half of 2017.” That’s an undeniable proof that Shopify is a platform with businesses that are selling real products.
It’s a little far-fetched to call Shopify a complete fraud. However, the company can certainly improve on its affiliate regulations and modify its marketing approach.
Bounce rate is the percentage of visitors who left your website after viewing the page they landed on. The average bounce rate for a regular website is 40.5%, according to Kissmetrics. For eCommerce sites, the average bounce rate can vary from 20% to 40%.
If you see a higher-than-average bounce rate in your Google Analytics, your website might need some improvements. A high bounce rate usually implies that people aren’t finding what they need on your website or they don’t seem interested enough to click on anything else. In other words, you’re either targeting the wrong audience or you’re failing to provide a good user experience. Many other factors can increase your bounce rate, such as annoying pop-up ads, slow page speed, and poor landing page design.
Are you getting high traffic to your website but no conversions? Here are 5 things you can do to improve your bounce rate so you can retain those visitors.
Avoid Popups and Music
Think about how you feel when an advertisement pops up when you had just entered the web page. You probably want to exit immediately, right? Irrelevant popups and unnecessary background music are the fastest ways to drive your visitors away. Try to stay away from popups unless you have a very attractive offer for people to click or sign up for your email list.
Make Your Copy Readable
No one loves to read essays. Your landing page copy should be engaging and eye-catching. If you already have good content, don’t neglect formatting. People tend to shy away from long paragraphs and hard-to-read fonts. Try to break down your content with subheadings and bullet points. Choose your typography carefully – don’t sacrifice readability over an abstract cursive font.
Add Internal Links
If you have blog content, add relevant internal links throughout the articles to guide your audience to other useful pages. Fashion retailers also do this very well by linking related items below a product, showing what other people also love or what you should pair the item with. When you create internal links, think about what else your audience would love to know after reading your piece of content.
Set External Links to Open in a New Tab
Back button fatigue is a symptom we’ve all experienced while browsing the web. If your website has external links to other resources that are not part of your site, make sure to set them to open in a new tab. It’s easy for web visitors to get lost in mindless clicking and never bother backtracking to your website again.
Link to Your Social Media
Make your social media profiles visible and easily accessible on your website. Encourage visitors to sign up for newsletter. Even if your web visitors don’t have desire to click on other pages, they can be curious to check out your social media profiles. They might end up liking what you have on Instagram and follow you — that’s another way of retaining your visitors and connecting with them so they can visit your website again.