Post-cookie strategies   //   July 1, 2024

Shopify is betting on its Shop Cash rewards to grow app sales

Add Shopify to the growing list of platforms looking to host big sales events to compete with Amazon’s Prime Day, with its Shop Cash rewards proving to be a unique new acquisition tool.

This June, Shopify hosted its first-ever Shop Week on its Shop app. It was the largest sales event on the app to date, generating over $1 million spent in Shop Cash, the rewards program it rolled out one year ago. The rewards program gives people 1% back on every purchase they make in a Shopify store, which can be spent on other Shopify brands via the Shop app. But during Shop Week from June 3 to June 9, all shoppers received an extra $5 in Shop Cash, plus an extra 5% to 20% to Shop Cash on purchases from about 100 featured brands. By the end of the week, just over 10,000 brands that sell in the Shop app broke their daily sales records for the platform due to extra deals and attention.

“We gifted shop Cash out to drive that engagement, and it worked,” Anna Decilveo, head of merchandising and brand partnerships for the Shop app, told Modern Retail. “I know a lot of friends who were like ‘This is so generous,’ so the gift worked.”

Such sales events hosted by platforms are increasingly becoming a part of the retail calendar. On Thursday, TikTok Shop announced its “Deals for You” day, while Walmart is pledging its “biggest ever sales event” more than a week ahead of Amazon’s Prime Day. The two-day sales event starts July 16 and is already being advertised weeks in advance.

Decilveo couldn’t say if another Shop Week is officially going to be held, but it’s on the table. “It was hugely, hugely successful from a shopping perspective,” she said.

For Shopify, Shop Week capped off a year of experimenting with new ways to entice shoppers to spend within its app. Shopify first launched its Shop app in 2020, as a rebrand of an app called Arrive. Initially, the Shop app offered simple package tracking features. But Shopify has since added more sections to encourage discovery, like “shops we think you’ll love,” and in-app purchases.

Shop Cash rolled out in June 2023. Customers can use the cash back for discounts on the Shop app, with additional bonuses for brands that have signed up for Shop Campaigns. That service allows brands to set their customer acquisition costs and budgets for ads with Shop Cash deals attached. This model, which only charges brands for converted customers, has attracted companies like Blueland, Glossier and Caraway.

Shop Cash is one of many products that Shopify aims to use to fuel its growth. Its merchant solutions revenue was $1.4 billion last quarter, a 20% increase year over year. The performance was attributed to the growth of GMV, continued penetration of Shopify Payments and growing adoption of emerging products like Shop Cash.

President Harley Finkelstein said during a May earnings call that Shop Campaigns is one example of how Shopify can use data and insights to fuel merchant marketing. “We’re already seeing merchants and incredible brands use it and find increased revenue through much higher visibility, much better conversions,” he said, according to a transcript.

On average, brands see a 2.2X increase in sales via the Shop app when they use Shop Campaigns, according to Shopify data. For some brands, it’s become a useful acquisition tool that beats the costs of other digital advertising methods. Margot James, a performance marketer for a suite of 40+ Shopify brands called OpenStore, said the Shop Campaigns have been a valuable tool to bring new customers in. It’s been a place to experiment, she said, at a time when other channels are getting more expensive or underperforming. “It’s a unique way of getting your brand out there,” she said. “It’s such an easy campaign, so it’s like why not use it?”

And there’s some evidence to suggest a Shop app customer is of a slightly higher caliber — customers who’ve been acquired Shop campaigns return at 31%, compared to the industry average of 28%.

James said Shop Campaigns tends to work best if the brand keeps the customer acquisition cost down. But going too far beyond the suggested ranges won’t generate much volume. “It’s best to start within the middle range and assess performance, then test from there,” she said.

Shopify wouldn’t share how many brands it’s added in the past year but Decilveo said it’s grown significantly. One of the biggest appeals is that the brands only pay a customer acquisition cost when the person makes a purchase — as opposed to paying up front for a campaign.

“If they are browsing your brand, and maybe they favorite a product and they come back three weeks later, you’re not paying for them to view your brand or peruse your products,” Decilveo said. “You’re only paying if they ended up actually converting and becoming a customer.”

Once enabled, the brand can choose whether to advertise a Shop Cash offer only on the Shop app. One of the latest beta updates allows Shop Campaign ads to be displayed on marketing platforms like Google and Meta. From there, Shopify takes over and pulls together the creative from uploaded product imagery as well as the placements. It also controls the Shop Cash multiplier offer that’s given to the customer — which Decilveo said can vary by brand and by shoppers. “The multiplier is actually something that is more personalized and dynamic to each user,” she said.

From the consumer perspective, Shopify has toyed with the design and display of Shop Cash in its first year. Offers are displayed in more places, like on a product page as well as the dedicated Shop Cash search pages.

For all the improvements, though, it’s still a push to get people to shop on a third-party app. Noel Reinhold, director of technology and consumer digital marketing at e-commerce agency Front Row, said for most clients, the Shop app is a very small piece of their DTC strategy – perhaps less than a tenth of sales. “In terms of consumer orders, we aren’t seeing a ton yet,” he said. Still, it’s something clients are starting to ask about, and it typically isn’t a larger lift to get set up. 

“If you’re already on Shopify and you don’t want to do anything out of the box, your product catalog is already on Shopify so it is easy to set up,” he said. 

As a consumer, Reinhold decided to browse through the Shop App during Shop Week after seeing the extra $5 added to this account. Prior to that, he’d interacted with the app mostly as a way to check on deliveries. But he said he could see the platform growing with more marketing. “It’s one way they can build their customer base,” he said.