Shopify goes after Amazon with new Walmart deal
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I think Shopify is in a much better bargaining position than Walmart.
It used to be a popular app called Arrive for automatically tracking packages by parsing tracking numbers from connected email accounts. Arrive was also the branding for shipping updates by check in Shopify Checkout on all Shopify based eCommerce sites.
A few months ago Shopify:
1. Rebranded the app as "Shop"
2. Rebranded every Shopify site's checkout to "Shop Pay."
3. Began forcing users on Shopify based sites to create a "Shop" account at checkout
4. Changed the Arrive SMS shipping updates feature to text you an app store link for the Shop App (which you already have an account for now)
5. Integrated every item from every Shopify based eCommerce site with the Shop App for direct purchase, using the universal Shop account you just created.
So they took an already popular app with high engagement, forced people to make accounts for it, used dark UX patterns to get millions to text themselves a download link.
In a matter of months they went from being one of the largest eCommerce platforms for independent retailers to being a one-stop "shop" for every eCommerce site that used them, with millions of daily active users.
It badly needs a prominent browse feature if it wants to take on Amazon. Or maybe I just missed something in my brief tour.
Shopify's customers are merchants, businesses and manufacturers, each advertising their very own store and sales channels. For them it's hard not to consider Shopify as their ecommerce platform of choice. Meanwhile I'd argue that end customers couldn't care less about which ecommerce platform their store of choice is using. Therefore I think the Shop app isn't all that important actually. Or do people really seek out Shopify stores in particular? That seems ridiculous to me.
Amazon could have done so, but they didn't. Shopify can do so building upon there Webshop and POS environment. And they seem to do.
That's how thousands of businesses have operated for decades or more.
I do though. I tried to place an order on an online service providers website to get some work done that I couldn't do on my own with my work laptop. They used shopify to process all payments and my order got denied. Not by the provider, not by my bank. But by shopify. I got a hold of one of the companies cs staff who looked into it and told me I was sol. Shopify had flagged my transaction as fraudulent and there's nothing he could do. Calling my bank didn't help, they didn't see the transaction as suspicious and would have authorized the transfer. Ultimately I gave up and will have a vile taste in the back of my mouth whenever I hear of shopify. The company I tried to patronize lost a customer, and shopify gets free bad press from me.
So, while shopify doesn't need discovery or awareness among customers, shopify can't afford to get bad press without decent consumer ad spend else their actual customers may jump ship to avoid being tainted by their brand.
If shopify fubars this deal with walmart that could start a snowball.
Walmart sounds just like Amazon.
I hope your experience(s) had neither of those?
I don't mind buying books from Amazon, but there's so much counterfeit stuff on Amazon these days that I actually try to buy from either the original vendor or a third-party with a regular supply chain like Target.
I was looking for hand-soap a month ago (when the supply was scarce both online and in B&M stores). Amazon had some from 3rd party sellers but they were listed with very high markups and their authenticity was questionable. So on a whim, I visited the vendor's site (JR Watkins), added some to cart (and they were cheaper than on Amazon!), and the checkout process with Apple Pay (on what was a Shopify backend I believe) was seamless (less than 10s).
I didn't have to create an account (!) or enter my credit card number or address -- Apple Pay handled everything after I scanned my face.
I'm seeing more and more specialty vendors with Shopify store fronts these days, and the experience is so seamless that I'm much more open to buying from Shopify storefronts rather than Amazon, especially it's something of value that could end up being a counterfeit listing on Amazon.
i built one.
I have to say I'm concerned about Shopify's growing dominance in the e-commerce market. They're selling a 'David vs Goliath' story about taking on Amazon, while at the same time becoming a Goliath themselves.
They are gradually building what seems to be an unassailable lead: preferential card processing rates with Stripe, hard-to-match discounts on shipping with the major logistics companies, warehousing to help retailers fulfil products, an anti-competitive app only for Shopify retailers, an exclusive arrangement with Facebook for Facebook Shops, and now a partnership with Walmart.
They are rapidly becoming the next FAANG.
Shopify isn't remotely close to joining the big tech club, outside of their comically inflated bubble valuation (trading for 56 times sales).
Let's compare, trailing four quarters.
Amazon, $296b sales, $14b operating income
Apple, $268b sales, $65b operating income
Alphabet, $166b sales, $35b operating income
Microsoft, $138b sales, $52b operating income
Facebook, $73b sales, $26b operating income
Netflix, $21b sales, $3b operating income
Shopify, $1.7b sales, negative $178m operating income
One of these is very much not like the others. Investors think they've found the next Amazon, it's not. It's a slightly better Etsy as a business, and if they're really lucky, in 10 years they might be an eBay. Amazon is only what it is today, thanks to the AWS margins and op profit (not because of its retail business, which has very low growth and terrible margins). There's no evidence of stellar margins hiding in Shopify's business. 14 years, zero profit, and a weak gross profit margin (eBay's gross profit margin is 2x that of Shopify, and was even better in years past; even Etsy has a far better gross profit margin).
Compare Square to Shopify to further amplify the obviousness of the context:
Square has $5.1b in sales (3x larger, trading for 8 times sales), an operating profit for 2019, still growing fast, and is worth about 2/5 what Shopify is.
SHOP's valuation is obviously lunacy, which is quite common in this market at the moment (the Dave Portnoy market). See: Nikola or most any cloud company. It'll end in tears or a decade-long stagnation in the stock, there are no other possibilities. How long will it take SHOP to generate a $3b annual profit? That's the future stagnation clue, their market cap represents a decade or more of returns pulled forward (if everything goes right for them). The only thing qualifying SHOP for consideration among big tech, is their market cap.
If we were going to spread the insanity around more evenly, ETSY, adjusting for its slower growth rate relative to SHOP, should have a $25-$30 billion market cap. Every investor generation thinks their bubble is the one that is different and is going to last.
Also, as for Facebook Shops, I don’t think that’s a good thing for Shopify. It’s a forced marriage, with a divorce planned for future.
what are your needs?
Seemingly 50% of every package sitting on anyone's doorstep has the familiar Amazon branded packing tape surrounding it as well.
They're definitely dominant.
Amazon is the only online retailer that’s figured out shipping and the CBSA here. Everyone else is awful. Walmart online ordering is awful. Home Depot is awful. What’s left of toys r us is awful. Canadian Tire online is so witheringly, eye-watering awful that it turned me off of even going to the store.
Besides amazon, what else is there here?
Walmart, Costco, The Bay all did more than a billion in revenue for 2019. Home Depot, Canadian Tire, Best Buy, Home Depot had more than 500 million and less than a billion.
They wouldn't be doing these numbers if the state of e-commerce was as "eye-watering awful" as you make it out to be.
These numbers are for the Canadian market which ended with about 40 billion in total "e-commerce" sales for 2019.
Home Depot advertises 2 day shipping but then waits a week before actually starting the clock on their shipping. At least here in Canada. Walmart is the same.
Let me tell you about ordering from Canadian tire online. I did this once. I chose in-store pickup. When I got to the service desk (which actually had an “online pickup” sign on it), and asked for my order, the staff looked at me like I was from Mars. And this was a showcase-store on Grandview here in Vancouver - not some backwater CDN tire off in Moose Jaw. Then they discovered that actually, they don’t have that item. The website said my order was ready to pick up, but they didn’t have it set aside and they didn’t even stock it and had no idea how this “online pickup” worked. So I asked for a refund. And they couldn’t do it! It’s a separate company and they didn’t even have my order in their system to be able to refund me! I asked them what I was supposed to do at that point, and the store manager (of the largest CDN tire store in vancouver) actually advised me to dispute the charge on my credit card and get the charge reversed!
That’s eye-wateringly bad.
These numbers are readily available in their financial statements (Wal Mart doesn't separate out Wal Mart Canada's numbers - I happen to be in the industry.
Your Canadian Tire anecdote sounds unbelievable unless it was many years ago.
Canadian Tire is one of the few Canadian stores in 2020 where can check store stock/inventory online down to the aisle of the store. They had already started implementing pickup lockers in their store before covid.
I've placed a few online orders with them and have never had any issues (including in store pickup). FYI, they did close to $600 million in e-commerce sales in 2019.
Walmart, Loblaws, etc process same day grocery pickup online (and they did this before the pandemic).
The Canadian e-commerce experience is not some backwater that you proclaim it to be.
That’s kind of my whole point - Canada is different. I read all sorts of accounts from Americans about how e-commerce and online retail in the US has matured and you can reliably order goods from lots of big retailers online and expect to get your goods on a predictable date. And that just hasn’t happened in Canada yet. Online retail here is still comprehensively awful. Amazon is the only online option that delivers predictably and on time.
Just within the last two years I’ve ordered from both Walmart and Home Depot and both of them have sat on my order for 2 weeks before actually shipping it. I’ve had Home Depots delivery courier actually throw a box of light bulbs across my yard onto my concrete steps. And yes, that CDN tire incident was about 2 years ago. IKEA wants $20 shipping to send me a box of screws. The only bright spot in any of this is grocery delivery as you point out. But even then, Save-on’s payment processor has glitched my orders on two occasions.
The Canadian e-commerce experience is not some backwater that you proclaim it to be.
It’s still about 10 years behind the US. I still see too many retailers who are basically charging what their US equivalents are + the shipping cost difference to traverse the CBSA moat. The big retailers here can’t get it together and the small retailers are still just arbitraging Canada’s weird retail import tariffs. Super high shipping costs, bungled and lost orders, and unpredictable and late delivery is still the norm outside Amazon, or at least it was in 2019. Hard to say now with c19.
I wish i had some stats for the raw # of total packages/shipments, because that's where I think Amazon's marketshare would match the picture of "50% of every package"
Link I found for 2018 e-commerce net sales in Canada [0] has amazon and amazon.ca combined for 4.7b, costco at 1b, walmart 0.9, apple 0.79, the bay 0.47 etc.
So amazon eclipses the other other 7 competitors all on its own.
[0] https://www.statista.com/forecasts/871090/canada-top-online-...
Most of my packages from Amazon will have just one item in it but when I go to a store, like walmart, I will more often than not have a cart of multiple items I am buying.
I am not saying I represent everyone, but rather, it is hard to compare the two without knowing more data.
IIRC, Amazon's total revenue is less than 300 billion while Walmarts is over 500 billion.
[1]: https://www.marketwatch.com/story/walmart-surpasses-ebay-in-...
During the height of the pandemic Amazon's performance suffered for us. Prior to the pandemic 100% of our online purchases came from Amazon mostly due to inertia. Find something, order it, it shows up.
Amazon faltered. Lots of things out of stock, delayed delivery, missing items in shipments. We then turned to ebay and shopify and experienced none of those things. The spending is probably now 50% ebay, 30% amazon and 20% shopify now.
The decentralization approach to ecommerce is really coming through now ... at least for us.
I was surprised what a great experience it was buying from ebay and shopify. I hope they don't work to centralize things in the future.
Now that the longs had their say, here is the short side.
Shopify has an API. Someone wrote a plugin to allow a shop keeper to publish inventory into the Walmart API. When sellers sell on Walmart's platform, Shopify sees zero transactional revenue.
That's the actual technical story.
The linked "article" which actually included a quote from the COO includes a page of bullet points about how Shopify is really knocking it out of the park. Including the "Facebook deal".
Actually the Facebook deal is FB pulling the cart & payments features into their FB & Instagram apps. So, effectively killing Shopify web store use. Apparently FB is doing something special for Shopify so that Shopify can charge 2% on top of FB's 5% fee. But sellers can also just make their shops directly on FB and skip the 2% Shopify surcharge.
I would have expected fellow programmers to understand a bit of math & show some constraint with bubble valuation stocks!
Or they can use Shopify and get all of those, and manage their inventory, and pricing, and shipping rules, etc all from one place and pay Shopify a few hundred dollars a year, when they would have paid thousands in software annually to replicate the same anyways.
Yeah, I can totally see why they would go the non Shopify route.
The idea behind it is "headless commerce" -- a shop owner can operate single backend while diversifying the front-end channels from which customers are able to transact (marketplace, webshop, third-party, mobile app). It's a value-add service that all ecommerce sites will eventually move toward to retain customers.
With higher transaction volumes, provided customer data is collected and passed through, the shopkeeper can now access analytics for multi-channel targeting, marketing etc. Shopify can then sell all kinds of value-added services based on this data.
https://xconomy.com/boston/2019/09/10/shopify-buys-6-river-s...
You don’t have to deal with complaints, vetting products, or supply chain issues. Just side with the buyer in a dispute, and outsource all the other tasks to the customers who spend their time browsing through all the garbage on Amazon to save an extra few dollars.
So no idea what is happening but makes me think there are lots of sellers shipping from different locations potentially for competing sites.
1. https://techcrunch.com/2020/05/19/walmart-says-it-will-disco...
Walmart sees this and decides: let's double down on the bad part!
What is a monthly user? What part of the facebook ecommerce platform did they use?
Facebook has the centralized marketplace, many local/regional sales groups and paid advertising.