Shopify Cuts App Store Commissions to 0% for Developers

Shopify Reduces App and Theme Developer Revenue Share

Mirroring recent decisions by major tech companies like Apple, Google, and Amazon, Shopify has announced a reduction in its commission fees for developers within both the Shopify App Store and the newly launched Shopify Theme Store. This announcement was made during the company’s Unite 2021 Conference, alongside a range of other updates concerning the Shopify platform, including enhancements to Checkout, APIs, and developer tools.

Growth in the Shopify Ecosystem

Shopify reports that its app developer partners generated $233 million in revenue during 2020. This figure represents a substantial increase compared to the combined earnings of 2018 and 2019. This growth is likely connected to the surge in e-commerce activity spurred by the COVID-19 pandemic.

Currently, over 6,000 apps are publicly available in the Shopify App Store. On average, merchants utilize approximately six apps to manage their businesses effectively.

New Revenue Share Model

Shopify will now eliminate commissions on app developer revenue for those earning less than $1 million annually on the platform, a threshold that will be reassessed each year. This provides developers, especially those nearing the $1 million mark, with increased earning potential.

For developers exceeding the $1 million revenue threshold, Shopify will implement a 15% commission on only the revenue earned *above* that amount – referred to as “marginal” revenue.

Theme Store Alignment

The same revenue-sharing model will be applied to the Shopify Theme Store, which is accepting developer submissions starting July 15th.

It’s important to note that the $1 million revenue benchmark applies independently to each store – the App Store and the Theme Store.

These changes will take effect on August 1, 2021, and are available to developers who register their account details within their partner dashboard.

Impact on Shopify’s Revenue

Shopify anticipates a decrease in company revenue as a result of this more developer-friendly model. However, the company believes this impact will not be significant, as it expects the changes to foster greater innovation and development within the platform.

Broader Industry Trends

This adjustment to Shopify’s App Store aligns with a wider trend in app store commission structures.

Apple previously announced a reduction in App Store commissions for smaller businesses, lowering the fee to 15% for developers earning up to $1 million annually. Google and Amazon have followed suit, each implementing their own variations of this model. Google offers a 15% fee on the first million dollars earned, while Amazon provides AWS credits alongside a 20% commission.

These changes are, in part, intended to mitigate antitrust concerns regarding alleged app store monopolies and to incentivize developer participation.

Competition in the App Store Market

Microsoft has also adjusted its commission structure, matching Epic Games’ 12% cut on game sales within the Windows Store. The updated Windows 11 Store will allow developers to utilize their own payment platforms, while maintaining a 15% commission on apps.

Shopify’s Unique Position

While much of the recent focus has been on lowering commissions for app and game sales, Shopify’s app platform differs. It centers on applications designed to enhance e-commerce businesses, supporting functions like shipping, marketing, store design, and customer service. These are not directly consumer-facing applications, but are distributed through an app store environment.

Additional Updates from Unite 2021

Beyond the changes to developer revenue sharing, Shopify unveiled several updates to its platform during Unite 2021.

Key Updates Include:

• Online Store 2.0: A more flexible and customizable update to Shopify’s Liquid templating language.
• Custom Storefronts: Investments in faster response times for custom storefronts.
• Hydrogen: A new React framework for building custom storefronts.
• Oxygen: A platform for hosting Hydrogen storefronts on Shopify.
• Metafields Support: Expanded support for Metafields for products and custom content.
• Checkout Improvements: A faster Shopify Checkout experience.
• Checkout Extensions: Customizable extensions built by developers.
• Shopify Scripts: Easier and more powerful scripting capabilities.
• Payments Platform: Integration of third-party payment gateways into Checkout.
• Storefront API Updates: Enhancements to the Storefront API.

Shopify’s Growth Metrics

Shopify reported that over 450 million customers completed checkouts on the platform last year, resulting in $120 billion in gross merchandise volume. The company’s partners – including app developers, theme builders, and agencies – generated $12.5 billion in revenue in 2020, representing an 84% year-over-year increase and a fourfold increase compared to Shopify’s own platform revenue.