Shopify vs. Herbalife | Shorting Public Companies

Shopify vs. Herbalife | Shorting Public Companies

October 05, 2017

Yesterday, Citron Financial came out with a video and a detailed paper outlining how Shopify is similar to Herbalife, that they are running a get-quick-rich scheme, and that their stock should be half the value that it is.

They also compared it to one of the largest MLM disasters in US history, Herbalife. All of this, while shorting the stock for Shopify. Below are a few facts that were left out of the conversation, as well as a clear rebuttal to why Shopify isn't Herbalife:

Context

First, some context. Shorting a stock means that you have a vested interest in seeing it fail. You believe it is going to fail, so you bet that it will. When you carry the weight of Citron, short a stock, and then come out saying it is a bad stock, then you are making yourself money.

Shopify stock fell 11% yesterday, meaning they are already in the black on their investment. The name you might remember is Bill Ackman. He did the same thing with Herbalife. Short the stock, tell the world and wait. It worked out well for him, but it won't for Citron.

Shopify Isn't MLM

Shopify is not a multi-level marketing system. It sells software as a service, and over 500,000 customers use it to manage their website, sell products online, and control their inventory. Sure, there are likely a ton of those that aren't making money, but I would expect the same thing from any other e-commerce solutions. Things that differ here is that a Shopify user doesn't have to sell Shopify to make money, and signing others up to Shopify doesn't make the average user any money.

Additionally, you don't have to buy product to meet a quota, then resell it to friends and family. The goal is not to sign up as many people under you as possible. It's to set up a business online and sell your products to the world.

Shopify Is For SMBs

Shopify is a great tool for many small and medium businesses, particularly those who have a storefront and want to start to embrace online sales. It's not easy though, and Shopify has built an ecosystem to help.

With Partners and Experts, they help with small things like changing graphics and colours, up to running your marketing campaigns or handling your drop-shipping. It has created a lot of businesses that simply support those who are looking to build their business. Not all businesses succeed, and Shopify likely has a higher rate of failure in terms of people getting started, but that isn't due to the platform, it's due to effort.

Shopify Is A Platform

I am frank with most people who start to use Shopify. It's 10% setup and 90% marketing. It's not that you have to pay someone to market your business, but you need to pound the pavement just like any other business. You need to engage in social media, you need to run Facebook ads, you need to have stellar photography, good product descriptions, continue to learn new ways to market online, and reduce overhead to remain competitive. Just like any other business, not everyone makes the grade. The platform supports those who want to try, and some succeed, and some don't.

Shopify Is Priced Reasonably

At $29 USD a month, Shopify is a fair price for what they offer. We have looked at many competitors, as well as the services they offer, and you get what you pay for. Any small business will tell you that $29 is a small amount to pay for just about anything related to business.

With a full website, the ability to handle online sales, connections to tons of payment gateways, shipping calculators, point of sale apps, a full-featured inventory system; I could go on. The point is that it's well priced. You can also shut down your store at any time - it's month to month. If you don't want to sell online anymore, you can also drop the store component and just keep your site at $14 a month.

Shopify Vs. Herbalife

Herbalife spent countless dollars selling their people on the product. They also spent countless dollars making sure people understood that signing people up under them was where the money was made. Essentially saying, don't worry about selling the shakes, worry about signing people up, that's where the money is. There are 1000's of stories online about the debt, the alienation of friends and family, and how people felt they were misled by Herbalife. They even made a movie about it.

Find me a story where someone says Shopify ruined their lives. Find me one where Shopify is to blame for crippling debt. It's just not there. That isn't because Shopify has perfected the ability to remain a third party. It's because Shopify isn't a get-rich-quick scheme, it isn't an MLM, and it isn't Herbalife.




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