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Episode 77 - The Software Stack for a Shopify Store

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Hey, Scott Austin here. 

In this episode, I’m going to talk about the other software tools beyond Shopify that you can use to grow your Shopify business.

The uber lesson that I want you to take away is that automation through software is a key component of growing a business.  But don’t rush the process too much.  Every business is different.  Therefore, the tools that different businesses will use will also differ.  As a business owner, you need to know your business well enough to decide what the right tools for your business are.

As any business grows, it gets more complex.  And a common way to handle the increasing complexity is to automate more tasks by adding specific software systems.  There are many different types of systems for e-commerce businesses.  And there are plenty of confusing acronyms out there.  So let’s get started with a glossary of terms.

Here are some of the commonly used tools and services beyond Shopify for an e-commerce business.  This list is presented alphabetically and is not meant to indicate importance.

  1. 3PL. 3PL stands for Third-Party Logistics.  Third-party logistics is when a company outsources their warehousing, inventory management, and fulfillment process to a dedicated third-party provider. 3PL is a concept that’s been around for decades but is gaining popularity as the e-commerce industry continues to rise.
    Examples include GoBolt, Deliverr and ShipMonk.
  2. Accounting Software.Accounting software assists bookkeepers and accountants in recording and reporting a store’s financial transactions. The functionality of accounting software differs from product to product. Larger companies may choose to implement a customized solution that integrates a vast amount of data from many different departments. Small companies often choose an off-the-shelf product.
    Examples include QuickBooks, FreshBooks and ZipBooks.
  3. Affiliate Marketing Software. Affiliate marketing software allows stores to grow, track, and manage affiliate marketing campaigns. Affiliate marketing is a type of performance-based marketing in which affiliates promote a company’s products on their own site or social presence. The affiliates then receive a commission based on the amount of traffic, conversions, or sales generated by the promotion.
    Examples include Refersion, LeadDyno and Affiliatly.
  4. CRM. CRM stands for Customer Relationship Management.  CRM is technology for managing all your company’s relationships and interactions with customers and potential customers. The goal is simple: improve business relationships to grow your business. A CRM system helps companies stay connected to customers, streamline processes, and improve profitability.  When people talk about CRM, they are usually referring to a CRM system, a tool that helps with contact management, sales management, agent productivity, and more.
    Examples include Klaviyo, Hubspot and SalesForce.
  5. Customer Support. Customer support software is a tool that helps businesses in the management, organization and tracking of customer queries and concerns. It also stores all information relevant to customer service, which can be used to come up with valuable business insights.
    Examples include Zendesk, Gorgias and Reamaze.
  6. ERP. ERP stands for Enterprise Resource Planning.  ERP is a system used by companies to manage and integrate the important parts of their businesses. Many ERP software applications are important to companies because they help them implement resource planning by integrating all of the processes needed to run their companies within a single system. An ERP system can also integrate planning, purchasing inventory, sales, marketing, finance, human resources, and more.
    Examples include NetSuite, Microsoft Dynamics and Sage.
  7. IMS. IMS stands for Inventory Management System. An IMS is software aimed at automating the core processes related to tracking of goods in stock from the moment they appear in a warehouse or other business premises to the moment they leave it.  An inventory management system may be built either as a standalone solution or as a part of another more comprehensive system.
    Examples include Brightpearl, Katana and Zoho.
  8. OMS. OMS stands for Order Management System.  OMS platforms provide a single, centralized system for managing orders from multiple sales channels, include brick-and-mortar locations, websites, call centers, mobile orders, kiosks and more. It makes it easier to manage orders, inventory, fulfillment and returns for your business.
    Examples include Shipstation, ShippingEasy and Shippo.
  9. Paid Marketing and Retargeting Tools. As an e-commerce store owner who wants an influx of quality traffic, running paid ads targeted at your ideal customers is a way to increase your online store’s sales and profit. 
    Examples include Facebook Ads, Google Ads and Pinterest Ads.
    With paid marketing tools, you can run ads to: 
    1. Increase your brand awareness
    2. Market your product
    3. Get your target customers into your sales funnel by signing them up to your email list
  10. PIM. PIM stands for Product Information Management.  A PIM handles all the data, content, and other material that you need to market and sell products. A PIM also ensures that quality data is created for internal use and multichannel distribution.  There's a lot of data that supports a single product throughout its lifecycle.
    Examples include Jasper, Plytix and Fabric.
    A good PIM is able to deal with incoming, outgoing, and cross-department product content including the following:
    1. Essential product data - SKUs, UPCs, names, titles, descriptions, etc.
    2. Taxonomy & relationships - Categories, labels, variations, etc.
    3. Technical specifications - Measurements, materials, ingredients, warranties, etc.
    4. Digital assets - Images, videos, documents and 3D models.
    5. Marketing data - Keywords, personas, SEO elements, etc.
    6. Sales information - Prices, testimonials, customer reviews, etc.
    7. Design specifications - Style sheets, designer notes, assembly instructions, etc.
    8. Channel-specific information - Google categories, Amazon titles, mobile descriptions, etc.
    9. Localized information - Multilingual copy, translations, etc.
    10. Supplier & manufacturer data - Spreadsheets, certifications, etc.
  11. Referral Marketing Software. Referral marketing is a customer acquisition tool for e-commerce stores.  With referral marketing, when a customer refers someone to your e-commerce store, they get a reward (similar to affiliate marketing).
    Examples include Referral Candy, and Growave.
  12. Social Proof Apps. Social proof apps are powerful for every business, but especially e-commerce stores.  Since consumers tend to be persuaded by the words and actions of other people, using a social proof app can improve your shopping experience and conversion.  Social proof apps show customer reviews and ratings, real-time customer activity, and sales notifications in your store in the form of banners, floating bars, and popups.
    Examples include, FOMO and Yotpo.
  13. SCM. SCM stands for Supply Chain Management.  SCM is the active management of supply chain activities to achieve efficient operations. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.
    Examples include Skubana, Xentral and Fishbowl.
  14. The original definition of a software stack was very technical and was the collection of technologies (most of them unseen by the user) used to deliver an application.  But today in e-commerce, stack has a broader definition.  It’s the aggregate collection of technologies used by the business.  The software systems don’t need to directly interact with each other but together, they help to automate a store’s processes.
  15. Web Analytics. Web analytics is the measurement, collection, analysis, and reporting of web data to understand and optimize web usage. Web analytics is not just a process for measuring web traffic but can be used as a tool for business and market research and assess and improve website effectiveness.
    Examples include Google Analytics, KISSmetrics and Lucky Orange.
  16. WMS. WMS stands for Warehouse Management System.  A WMS consists of software and processes that allow organizations to control and administer warehouse operations from the time goods or materials enter a warehouse until they move out.
    Examples include Acumatica, ShipBob and Veeqo.

Now this is a pretty long list, but it is also not comprehensive.   There are more types of systems out there, this just covers the big ones.  And some of these systems can be stand-alone or included in a larger system.  For example, you can get a stand-alone Inventory Management System or it could be included in an Enterprise Resource System.

Next, I want to come up with a number.  And that is the average revenue made by a Shopify store.  I haven’t seen this number published, but I have seen a total merchant revenue number of 200 billion dollars and a total number of 1.7 million Shopify stores.  Using those numbers, we can come up with an average revenue per store of 118 thousand dollars.  And the 80/20 rule tells us that there are far more stores under that revenue number than above it.  So for the rest of this conversation, I’m going to assume that my listener’s store, that is your store, is making a little over 100k per year in total revenue.  And lets assume a profit margin of 20%, so a little over 20k. 

Now, let’s shift into some best practices or pearls of wisdom when it comes to adding a system to your stack.

  1. In general, the big companies should not be your role models when it comes to systems. I’ve had many Shopify store owners talk to me about implementing NetSuite for ERP or SalesForce for CRM.  The typical cost range to implement Netsuite is between 25 thousand and 100 thousand dollars.  That’s just the setup cost and not the recurring cost.  For SalesForce, the range is from 10 thousand to 100 thousand dollars.  In other words, many of the solutions that are designed for large enterprises are cost prohibitive to the average Shopify store to implement.  Here’s another way to think about.  What if your big competitor owns their own fleet of trucks to get their materials to assemble their product and to distribute their products to warehouses.  Well, as an average Shopify store, you are not going to own even one big truck.  But you may have a hatch-back to run down to the local Home Depot as needed.  So when looking for software systems, don’t look to what the big companies are using.
  2. Integration is key. In my many years of Shopify experience, I’ve integrated all sorts of systems with Shopify.  Some are easy.  Many are complex.  And a few are downright impossible.  So as you look for a system, also evaluate how easy is it to integrate with Shopify.  I prefer it if the system provider has their own app in the Shopify app store that integrates with Shopify.  That way, issues can be brought to the system provider’s customer support team as they are responsible for both the system and the integration app.  But not every system has their own app and that’s fine.  There are many middle-ware integration applications that work well.  That said, be sure that your system provider can tell you what middleware to use and can point to several successful integrations of their system with Shopify.  Trust me on this.  No matter how sexy the system is, you do not want to be first business to integrate it with Shopify.
  3. As a small business, agility is your competitive advantage over the bigger players. You can respond to market forces more nimbly because you aren’t encumbered by the legacy systems, processes and bureaucracy of the big companies.  Every system that you add to your stack will decrease your agility.  That’s not to say that you shouldn’t integrate systems – you absolutely should.  Just do it very judicially.  For example, let’s say your business has grown to the point where you need a ticketing system for customer support.  Once you pick and implement a ticketing system you are pretty much going to be locked into it.  Your processes will be driven by what is capable within the system or the work required to implement changes into the system.
  4. I believe in solving a business’ actual problems today and not trying to solve for anticipated problems down the road. My thinking behind that is that most of us are pretty bad at predicting the future as change is so rapid.  So don’t get a system you can grow into.  Get a system that solves the problems that you have today.  Worry about tomorrow when tomorrow comes.
  5. Swiss army knifes sound great, but. One system that does everything that you need and which is all integrated sounds great.  But systems like that require much more effort and therefore costs.  As an average Shopify business, you may be better off getting different systems for different tasks.  For example, for CRM, I highly recommend Klaviyo.  And I’ve had clients that also want a CRM for their outbound marketing efforts to potential wholesale customers.  Klaviyo is not optimal for that.  In this situation, a CRM like Hubspot is a better, although not the only, option.  The client will argue that one system that does both would be more efficient.  And they are right.  But the flaw in that argument is that one system that could do both, say SalesForce, could take 3 or more years of profit just to implement.  Sometimes it’s better to go with two separate solutions as they are much easier to get up and running.  And because you are less invested in them, they can be more easily changed out if needed, keeping your business more agile.
  6. You may need some help. Just like Shopify has a learning curve and takes a lot of time to get setup properly, most other systems are the same way.  So you may need to hire some external experts to get things set up, get the new system fully integrated into the rest of your stack, or train store staff on how to get the most from the platform.
  7. You need to know what you are automating. There’s a best practice in campus design.  And that is to build the campus without sidewalks and let it be used for a year.  Then after a year of use, you place walkways where the people ended up walking.  The logic being that actual users may travel differently from what was anticipated by the campus designers.  In a Shopify store, you should be implementing new systems to automate existing tasks.  I see too many stores implement a system and just follow the process guidelines of the system without thinking about how their business actually works.  So before you even research a system, you should know what your requirements are.  For example, affiliate marketing software comes in a wide variety of features and scenarios that they are designed for.  So my recommendation is that if you want to expand into affiliate marketing, that you first do it by hand to learn what works well for your business.  Then find software that automates your affiliate scenarios.  For example, your starting assumption could be that Instagram influencers will drive sales for your store.  So you find a system that focusses on Instagram and purchase and implement it.  And then you find out that Instagram traffic doesn’t work for you, but its bloggers instead.  All that time and cost to implement the Instagram system will have been a waste.  Instead, I recommend that you try to get a small number of Instagram influencers driving sales in your store first through manual processes.  If Instagram is working for you, then you’ll be smarter about the features you want from the affiliate system.  And if Instagram doesn’t work, then you gain that learning without the cost of implementing the wasted system.
  8. A salesperson’s job is to sell. I would much rather hear from a system’s customers about the benefits of the system instead of having a salesperson tell me how their system can solve every problem I have.  In other words, when evaluating systems, ask the sales team for referrals from other Shopify stores that are about the same size as yours.  And call those people to get more of the unvarnished truth.  And if the system doesn’t have Shopify stores that are the same size as yours, that should be a sign.

At the beginning of this episode, I said the uber lesson that I want you to take away from this episode is that automation through software is a key component of growing your Shopify business.  But don’t rush the process too much.  Every business is different.  Therefore, the tools that different businesses will use will also differ.  As a business owner, you need to know your business well enough to decide what the right tools for your business are.

I hope that advise now makes more sense to you.  Best of luck in finding the right software and systems to help your business grow and scale.

Thanks for listening.

JadePuma is a certified Shopify Expert. If you need any help with your Shopify store, we can help.