Will Shopify (SHOP) Be The Next Amazon?

Saturday, May 16, 2020
Image Source: shopify.com/blog/introducing-shop

In the world of eCommerce, there are a small handful of the big players. At the very top of that list is Amazon. Recently, Shopify have released an app called Shop, which has had some within the industry speculating if they could ever topple Amazon from its number 1 spot in western markets.

Shopify originally came onto the market to provide website and store assistance for people looking to launch eCommerce businesses. This is still what it’s best known for, with them supporting over 1 million businesses with their online stores. The launch of Shop looks to be a branching out from their original offering to test out new waters and move into related markets.

Shopify’s offering is one that provides the technology behind a lot of businesses that sell online. The result is a huge network of companies around the world that are not centralised within one location such as ebay and etsy, but instead are linked by the software they run on, Shopify. The business has positioned itself as the go-to solution for digital native brands that want to scale fast.

Shopify was launched 14 years ago in 2006. Three friends had hoped to sell online but couldn’t find a viable solution, so they decided to make their own. In the last 14 years, the business has grown to support 1.4 million jobs around the world through companies that use Shopify.

One of the defining features of its success is that it’s all encompassing and will provide all that’s needed for a business to get up and running online. A seller can create a simple store, customise it, market it, organise social media and monitor sales, shipping and inventory. But if that’s been the key to its success in the past, what will be the secret to future success?

One of the paths Shopify is hoping to continue growing their organisation through is fulfillment. This can be seen by the beginnings of an investment plan last year of $1 billion, over five years. This investment will go towards warehouse space, as well as robotics to enhance fulfilment. The aim of this is for Shopify to also deliver the packages they sell.

The announcement of its fulfilment plans inevitably brings up comparisons to Amazon. There are key differences between the two though, the Shopify approach is merchant-first. This means the software and product are designed to support independent retailers selling on their own, without the need of a centralised marketplace.

A lot of the technology that Shopify invests in is to empower small merchants. In a world where the internet giants can easily out manoeuvre and bully smaller sellers, their offering slightly levels the playing field. Independent shops would not be able to provide a logistics plan that works as efficiently as larger eCommerce providers, such as Amazon. Shopify’s strategy is to utilise the combined power of all these retailers.

That being said, Shopify is a long way off being on the level Amazon is at. For example, the $1 billion investment in logistics over the next 5 years is dwarfed by the $64 billion Amazon planned to spend on shipping and logistics in 2019. Secondly, this area is a departure from what has brought Shopify’s past success, there will be a lot to learn when implementing this new arm of their business.

Couple this with the latest release of Shop and there is a lot changing at Shopify. Shop allows buyers and sellers to track packages, but also allows buyers to shop through a feed of recommended products. They can also learn more about the brands that are selling and buy with a one-click process. One of the reasons for launching the app is because there is a trend for people to not only be shopping on mobile, but on mobile-native apps. Creating a bespoke app takes a lot of time and resources, which a lot of vendors do not have. By utilising Shop, Shopify hopes to close this gap.

Shopify has a lot of exciting projects in the pipeline that could see the company continue its positive trajectory. However, the world of eCommerce moves fast and can change quickly. For them to take Amazon’s spot at the top of the food chain would require a monumental shift which although possible, doesn’t look to be on the cards anytime soon.