Is the Shopify App Store overcrowded in 2024?

App Store Growth in 2024

In this issue I want to talk about Shopify’s app store and give you my analysis from tracking every app on the app store over the last year.

For many apps it has been a pillar of their growth since it’s start. It is no wonder, because it is this built in experience for merchants that minimise friction.

They do this by showing merchants relevant apps for example in their store’s admin area. The competition on the app store also is fierce as the number of apps continue to grow. Let’s have a look a this:

What I did was scraping the entire results for almost 2000 popular keywords and this is what these numbers are based on:

In January 2023 the number of apps on the app store was just shy of 8000 apps. Now in January 2024 we found a little bit over 9500 apps. So growth was by about 1500 apps over the year of 2023, or by about 19% year over year.

So, how can we put that into comparison?

Until 2021 Shopify stated their number of merchants in their annual report.  this means, the latest official number approximately 2 million merchants by end of 2021. This was an increase of 18% year over year from 2020. If this rate held up in 2023 it would be in line with the app store growth, but there is something worrying:

I the latest annual report at the time of making this video, they stopped publishing this figure. They now only state that there are “millions” of merchants using Shopify. When it comes to annual reports things like these don’t happen by accident.

So the only possible explanation is that the merchant growth didn’t keep up at this rate.

vague figures on merchant growth from Shopify annual report.

The  annual is a gold mine of relevant information, so there is one more thing I want to show you. In this figure Shopify does this cohort analysis of revenue by merchants by time of signup.  And to me it looks like there is a pattern that you should would look into when identifying app opportunities:
When merchants go from year 1 to year 2 of store operation Shopify’s revenue from these merchant almost doubles but it stays more or less the same afterwards.
This could mean that new and growing merchants would also be the best group to target with Shopify apps and if you talk to merchant’s you might actually want to talk to this group first.

Revenue by Cohort from Shopify annual report

So Shopify’s growth so much depends on new merchant’s starting out and less on existing merchants doing more business. I checked this in multiple annual reports and it seems to be consistent. It also explains Shopify’s $1B marketing budget figure also in the annual report since new merchant are so important to their growth.
Let me know if you found this kind of information helpful