Shopify just wrapped up it’s big annual convention and a lot of the financial media surrounding the event has focused on the idea of the company competing with Amazon. But what does that really mean, and is it actually happening? We’ll begin exploring those questions in today’s blog post.
Pinpointing Amazon competitors is hard because Amazon has tentacles in so many different industries. For instance, Amazon competes against both Microsoft (Amazon’s Amazon Web Services vs. Microsoft Azure in the cloud computing space) and Best Buy, yet Best Buy allies themselves with Amazon by renting space to Microsoft inside their network of retail stores. This isn’t just a case of the-enemy-of-my-enemy-is-my-friend; these are two utterly different industries with completely different audiences. As Amazon expands from their roots in retail and, later, web infrastructure, into delivery logistics, smart homes, and even grocery and healthcare, the first question that comes to mind is, are there any companies that aren’t competing with Amazon in some fashion?
It’s a poignant question as we shift our focus in this article to Shopify. Shopify, of course, doesn’t directly sell goods. But they enable thousands of stores across the Internet to do just that. These stores, in industries ranging from eyeglass-wear to coffee beans, from energy utilities to clothes, do just that. Amazon may sell goods from all those categories in one place, but Shopify enables a plethora more companies to offer their own products on their own branded stores, thereby cutting out the fee that Amazon would collect on a similar transaction on their own platform and competing directly with the behemoth.
Of course, there are trade-offs. One reason that Amazon has become so popular is because of its venerable Prime program, which, among other things, allows free one and two day shipping on millions of items sold on the Amazon platform. Shopify has no such feature to unite all of its stores. Shopify also doesn’t offer centralized customer service for consumers. In fact, “Shopify” is not a consumer-facing brand at all; instead, buyers deal with individual storefronts including their own policies and service. Companies tend to use the Amazon platform because it’s considered to be consumer-friendly and, with millions of potential buyers who are also Prime members, the advantaged market of free and fast shipping is enormous. Still, for all the reasons and differences we’ve illustrated, Shopify and Amazon are not exactly direct competitors? After all, a company (the target customer) can list their products on both platforms.
For a moment, let’s ignore that a consumer might be more likely to make a purchase on Amazon in order to take advantage of their Prime benefits, or more likely to avoid Amazon because they view the company as too large, immoral, or otherwise are not interested in supporting such an enterprise. Under this lens, Amazon and Shopify are, at best, indirect competitors. So why has the media been so hyper-focused on the contrary?
Well, we theorize there are two reasons. First, the prospect of a David company rising up to take on the Amazon Goliath makes for entertaining news articles. Second, Shopify is making a play for companies that might have previously chosen to use Amazon’s platform instead of or in addition to Shopify. They are introducing new features that make global e-commerce easier, such as support for multiple currencies, which Amazon has long offered natively. With these new features, Shopify may be hoping to eat into Amazon’s featureset, which could previously have been seen as one reason that those onerous fees were worth paying. What these features don’t solve for is the impact that exposure of a product coming up in Amazon Search can make in a startup’s bottom line. We predict that few companies already on Amazon will actually leave the company to focus exclusively on Shopify as a result of these new features. Rather than act as true competitors, we see Shopify as adapting and providing a solution to survive and thrive in an otherwise Amazon-centric world. Shopify provides a platform on which any company of any size can not only sell their services, but also build their brand, separate from their platform’s identity, and that is a feature that Amazon can’t even remotely match. For that reason, we don’t see Shopify and Amazon as competitors, even if they fuel growth for each other.