Shopify (SHOP 0.08%) really came into its own during the entrepreneurial explosion that occurred during the lockdown phase of the pandemic. People forced into their homes and looking to create a web presence turned to the cloud-based e-commerce platform provider for the tools to achieve it.

However, the momentum faded by the time 2022 rolled around and with less than a month to go in the year, Shopify's stock has lost three-quarters of its value from the all-time highs it hit a year ago. And it still trades at some premium valuations.

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Image source: Getty Images.

Concern of a possible recession next year weighs on the business, even as it bounces sharply off its lows. Bear markets, though, are typically measured in months, while bull markets are measured in years. Since 1928, the average bear market lasted 15 months while the average bull market rally lasted three years.

So can Shopify regain its former heights? Let's dive in and see where this online platform provider will be in three years. 

A vertically integrated business

The first thing investors should note is Shopify today is not the same one that went public back in 2015. It evolved into much more of a full-service platform, offering users a suite of apps that can be plugged into their website for greater functionality.

It's one of the reasons why I think Shopify has a lot of growth potential, regardless of whether a recession hits next year or not. By building out its offerings, the company gives small and medium-sized businesses (SMBs) a much more level playing field when they go up against bigger rivals, and at the same time makes itself a much more potent business.

For one, app developers are attracted to Shopify because it allows them to keep all the sales of their apps up to the first $1 million before paying a fee. Those are terms many of Shopify's competitors can't offer, giving Shopify a real edge in drawing talent. 

It also creates a critical mass of customers the developers can target that the competition doesn't have; thus the two can grow by feeding off one another through the flywheel model: More customers attract more developers drawn by the better sales economics, which brings in more customers attracted by the diversity of offerings.

Giving Amazon a run for its money

For another, Shopify allows SMBs to better compete against the 800-pound gorilla in the room, Amazon (AMZN -0.34%)

Its Shopify Fulfillment Network gives customers the ability to offer two-day and next-day delivery, as well as expanded options for storage, freight, inventory handling, and returns, all of which would be impossible for most on their own. And Shopify acquired fulfillment technology leader Deliverr this past July, which enhances Shopify's spoke-and-hub logistics network by giving customers full ownership of brand and data.

Shopify also introduced numerous other benefits for its customers, including point-of-sale capabilities, payments options, small business loans, and multichannel opportunities for businesses to sell on TikTok, Facebook, Instagram, Snapchat, Pinterest, Twitter, YouTube, and even Amazon.

These help customers avoid having to solely rely upon Amazon for growth opportunities.

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Image source: Getty Images.

The destination location for business

Though Shopify naturally draws entrepreneurs and SMBs to it, the e-commerce platform provider is also increasingly attracting enterprise-class businesses such as General Mills, Heineken, Kraft Heinz, Logitech, and Molson Coors

It's why Shopify actually has the second-biggest share of U.S. e-commerce retail sales, yet it's also why Amazon has taken a much greater interest in its business and has expanded its own reach into Shopify's turf. 

The Buy with Prime button Amazon is allowing retailers to add to non-Amazon-affiliated sites is a concerted effort to stop Shopify's encroachment. Investors can expect the rivalry to only grow sharper in the years ahead.

Shop till you drop

What this speaks to is an amazing growth opportunity for Shopify. Nearly 600 million shoppers purchased from retailers operating Shopify websites last year, a 40% compound annual growth rate from 2015.

Shopify generated $4.7 billion in revenue last year, produced nearly $3.9 billion already in 2022 over the first nine months, and just reported record-breaking Black Friday sales.

Obviously no one knows how a recession might play out, but Shopify certainly seems to have established a business that can make it through the storm on its way to even greater growth.