There’s a behind-the-scenes battle going on between the two biggest ecommerce platforms in the U.S. that could have big implications for merchants. After much media speculation at the end of 2020 about whether Amazon would launch a service to go head-to-head with Shopify—or perhaps acquire Shopify outright—Amazon bought an Australian company that could help it compete directly.
Here’s why the rivalry matters to online merchants, and how understanding it can help retailers select the right ecommerce channels for their goals.
How Could Amazon and Shopify Compete?
Amazon’s strength for retailers, of course, is the vast reach of its marketplace. Shopify, on the other hand, helps merchants quickly build independent ecommerce sites without making a big investment in IT and platform development. By design, Shopify isn’t a household name among consumers — the company’s focus is on helping its retail customers cultivate their brands. Since 2006, Shopify has quietly built a customer base of more than a million merchants around the world, from small startups to major food and apparel brands, according to Quartz.
Because of these differences, it’s appealing to think of Amazon and Shopify as competitors in a zero-sum game: Either merchants are selling on the Amazon marketplace or running their own stores on the Shopify platform. But the ecommerce ecosystem is more complex than that.
They Meet Different Needs, For Now
Right now, Amazon and Shopify occupy different roles in the ecosystem. For example, merchants that want to build a base of repeat customers need to tell an engaging story about their value and quality, establish trust, and communicate clearly with their audience. This is especially true for direct-to-consumer brands that market heavily through social media. Merchants also need control over their customer data and flexibility in creating and adjusting return and refund policies to reflect customer preferences, seasonal conditions or unexpected events like shutdowns or weather events.
Having a freestanding online store on a platform like Shopify helps to meet those needs because merchants can create and share in-depth content in the format their visitors prefer, make site adjustments based on site data, communicate directly with customers and leverage customer data for marketing and site improvements. The potential downsides, depending on the size of the brand and its website checkout, are a smaller market reach and fewer conversions, if customers have to set up or enter payment options. However, Shopify has recently added a Shop app and Shop Pay to help customers search its merchants and check out easily across its stores and on social media—moves that inch it into Amazon’s turf.
Brands need a steady stream of new shoppers to grow their customer base. They also need customers to be able to find them easily. Because of Amazon’s vast reach and the fact that it’s the first stop for so many product searches, it can help merchants get their products in front of customers who might not otherwise see them. Its saved payment and “buy now” options make it easier for customers to quickly make purchases. The tradeoffs are Amazon’s fees, product page formats and refund and return rules – plus the fact that many Amazon shoppers are focused on finding the lowest possible price rather than building relationships with brands.
As it stands, many brands take a both/and approach with Amazon and Shopify. For example, accessory designer Rebecca Minkoff has a Shopify Plus webstore that includes 3D and augmented reality product displays to offer customers an immersive experience that’s not possible on Amazon. However, the label also has a store on Amazon, with free Prime shipping on many of its popular bags. It appears that many merchants feel there’s room for both models in the ecommerce universe.
What an Amazon Move Could Mean for Sellers
However, Amazon has tried to offer independent webstore services to merchants before, but shut it down in 2015. Now, it may be ready to try again. In January, Australian webstore platform Selz announced that Amazon was acquiring the company. So far, Amazon hasn’t said what it plans to do with Selz, but industry analysts are considering the possibility of Amazon using it to try again with webstore services.
If that happens, it could set up a David vs. Goliath battle for merchants’ business. Because of the pandemic, Shopify revenue grew by 82% during the first nine months of 2020, but even as the second-largest ecommerce platform, it’s still much, much smaller than Amazon. Amazon’s 2020 revenue topped $386 billion, while Shopify’s was $2.9 billion. It’s unclear whether Amazon reentering the ecommerce platform space would result in more choices for merchants or eliminate Shopify as a competitor.
The potential stakes for merchants are high. On one hand, a move by Amazon into the webstore space could give merchants more freedom to present content and product information the way they want and also benefit from Amazon’s market reach and technology. On the other, it’s possible that if Amazon eliminates competition in the space, merchants might not be able to retain control of their content format options, customer data, store policies and fraud protection options.
The Takeaway: Watch This Space
Because competition from Amazon could have such a large impact on Shopify and other webstore services—and by extension, those services’ clients—ecommerce sellers should keep an eye on this story. In the meantime, it’s also worth considering whether your brand should have both a standalone website and a marketplace presence, to make the most of the opportunities available in each ecommerce area.
Rafael Lourenco is EVP and Partner, ClearSale