With almost 12,000 apps and integrations from almost 3,000 ISV partners, Shopify App Store is one of the largest app marketplaces in existence today. It's also one of a growing number of transactional app marketplaces, paying out $561m to app developers in 2022 alone.
It's not just an ecosystem - it's a storefront into a new software economy.
And, just like traditional economies, there are winners and losers in Shopify's economy. Failures are a feature, not a bug.
Small businesses fail - a lot
In the United States, approximately 595,000 small businesses close each year. According to 2024 data from the U.S. Bureau of Labor Statistics, 20% of them fail within their first year, and 50% fail within their first five years.
That might sound like a lot, but it's a symptom of a healthy, vibrant economy.
Small businesses in the U.S. fail for a variety of reasons:
- 42% of fail because there is no market need for their products or services - there's not enough customers with enough problems to sustain them
- 18% fail due to pricing and cost issues - they're charging too little, or too much
- 17% fail because of a poor product offering - they're solving a problem, just not very well
- 17% fail because of poor marketing - they created solutions nobody knows about
Which goes some way towards explaining why Shopify removed 419 apps from their App Store at the end of last year. These apps failed for broadly the same reasons businesses fail.
419 Shopify apps "closed" in Q4 2024
419 is a lot of apps to remove in a single quarter. It's more apps than Canva, Clover, Crowdstrike, Klaviyo, Square, Stripe, and Workday currently list in their app marketplaces.
And it's more apps than Shopify added in the entire month of November.
Yet, relative to the overall growth of new apps listed in Shopify App Store in the same period, it's a pretty healthy balance. 989 apps were added in Q4 2024 and 419 were removed - meaning every app removed created breathing room for 2.4 new apps.
I say "breathing room" because, based on AppMarketplace.com data, most of the removed apps had already failed.
No customer reviews, no market need
41% of apps removed from Shopify App Store in Q4 2024 had received 0 product reviews. No customers had any opinions to share - good or bad - about these apps.
Bearing in mind Shopify serves over 4 million merchants across 175 countries, that's a clear signal that something wasn't right about them. Another 13% of removed apps had earned just 1 review.
That 41% figure is suspiciously close to the one I mentioned earlier: 42% small businesses fail because there is no market need. Apps with 0 product reviews likely failed for exactly the same reason.
No customer reviews suggests no installs. No installs suggests a lack of market need.
Poor product offering
Of the removed Shopify apps that had received any ratings at all, the story doesn't get any better. 19% of rated apps removed in November 2024 had a 3 star rating or less. Again, a suspiciously close percentage compared to the 17% of small businesses in the United States that fail because of a "poor product offering."
Apps rated 3 stars or less can generally be defined as a "poor product offering." Customers tried them, didn't like them, and told other customers about their not-so-great experience - the same thing happens in the "real" world.
In November and December 2024, over 35% of removed (and rated) apps had an average rating of 3 stars or less.
Quite a jump, and possibly a sign that the quality bar in Shopify's economy is rising all the time - the emergence of the "Built for Shopify" cohort of apps is likely a contributing factor, and dragging up the quality expectations of customers.
Another contributing factor might be the obvious trend du jour: the rise of AI apps.
AI apps are eating the world (just not yet)
It might be tempting to assume the failed and removed apps were a series of "spray and pray" experiments from eager developers to test the AI appetite of Shopify merchants.
That assumption, for the most part, would be wrong.
Throughout the quarter, an average of 16.45% of removed apps were "AI-enabled" in some way. Bearing in mind 14.66% of new listings added to Shopify App Store in the past 30 days were for AI agents, apps, and integrations, it's almost a "one in, one out" story on the AI front.
Time will tell, but it might be that "AI apps and agents" cause more app retention than churn. Contrary to what you might hear, Satya Nadella is bullish on AI agents helping us extract more utility value from the applications we use - which should make an AI app enabled Shopify experience even better over time.
Removing Apps is Better for Everyone
The Shopify Economy acts just like the real world economy. Apps "fail" for broadly the same reasons small businesses fail in the United States. Usually because there's no market need, or because they're considered to be "poor quality" by customers.
In the same way a "failed" store in a shopping mall creates new opportunities for fresh new businesses to startup and succeed, the removal of apps from Shopify App Store creates a different type of real estate for new app developers.
Better for customers
Whether in an App Marketplace or a physical shopping mall, customers expect to be able to discover, try and buy the products they need quickly and easily. As Shopify App Store grows past 12,000 apps, searching for and discovering the products they need gets much more difficult.
Removing low quality, under-performing apps from Shopify App Store is the equivalent of a shopping mall removing an under-performing tenant. Not only does the removal of one tenant make room for others to grow and prosper, it can also lift the quality of the shopping mall experience overall.
Better for partners
Removing apps also focuses more attention on partners that continue to invest in high quality products. Often, the "loudest" partners are the ones that invest the least into product quality. They then under-perform relative to their peers.
Instead of investing energy in less-fruitful partner conversations, Shopify's Partnerships team can - by removing under-performing apps - redirect their energy towards high performing partners that continue to innovate and serve their mutual customers well. Which, in turn, translates into more revenue for partners.
Better for Shopify
Obviously the end game for Shopify - like any successful business - is merchant and revenue growth. A higher quality inventory of apps and integrations in Shopify App Store helps them attract new customers (who can future-proof their decision to invest in Shopify) and retain those customers for longer. More apps means more ways for merchants to grow with Shopify as their business grows.
A well managed platform economy isn't one that just focuses on "winning" new partners - it's one that focuses on tending to, managing, and pruning that same economy in service of a better customer experience.
Easy to say, much harder to achieve - but Shopify is doing an exceptional job.
