SKU’d Thoughts 26: Is Shopify vs. Amazon really a thing?
I have written in the past about Walmart and Amazon’s battles for the same customer base but when it comes to direct-to-consumer brands, Amazon also has a formidable competitor in Shopify. The e-commerce platform for online stores provides small businesses with key services, including payments, marketing, shipping and customer engagement tools, to make the process of running an online business simple. Shopify powers over 600,000 businesses which have sold over $82 billion through its platform.
But can Shopify compete with Amazon?
Amazon is responsible for 38% of online retail in the US. Its large reach and scale have earned the company a controversial reputation among some merchants who see the platform as a necessary evil. For more than a decade, Amazon has leveraged data from third-party sellers on its site to develop products that are close enough to the originals at lower price points. This type of practice, among other reasons, has given DTC brands pause when considering whether to sell their products on Amazon. DTC brands are inherently customer-centric and to deliver a great customer experience they need to tap into key customer data which Amazon has been unwilling to share with third-party merchants.
On the other hand, Shopify has treated DTC brands as partners. It helps that unlike Amazon, Shopify is strictly a facilitator and not a merchant. Shopify has been building tools and resources that are in lockstep with the DTC brand revolution. Initially, all of Shopify’s offerings were focused on the online store. As DTC brands mature into physical locations, Shopify is still providing support ranging from its own point-of-sale hardware to offering space for brands to run their own pop-ups.
A few of Amazon’s advantages over Shopify have been its inventory and fulfillment management capabilities. However, last month Shopify announced Shopify Fulfillment Network, which will warehouse Shopify merchants’ inventory and handle shipping and delivery to customers within two days. This offering is a direct counter to Amazon’s Fulfilled By Amazon, which allows Prime merchants to complete shipping orders within two days.
Both Shopify and Amazon are working on solving pain points for online merchants. While Amazon views the end consumer, not merchants, as its customers, Shopify sees the merchants it supports as its ultimate customer. This distinction in target customer will be a key factor in how both platforms are able to attract brands. If Shopify continues to facilitate the growth of brands both online and offline, I believe Amazon will need to rethink how it engages third-party merchants, specifically DTC brands.
Cross posted on Medium