Small businesses strike back at Amazon with Shopify

For many small and mid-sized sellers, a third option has arisen, embodied by the rising star of ecommerce, Shopify..

This approach allows merchants to access cloud-based third-party services, such as payments and fulfillment, but allows them to maintain more control over their branding and customer relationships than larger marketplaces. . Buyers might not even know they’re buying something from a Shopify-powered retailer, and that’s the point.

In addition to making the products available on the sellers’ own sites, these software companies – which also include BigCommerce and Magento – can perform the laborious task of listing goods in the giant markets. By becoming hubs for managing sales through multiple channels, including social media platforms, they represent real competition for Amazon and its ilk, potentially giving marketers more leverage when dealing with these entrenched giants. .

This growing competition is forcing Amazon to acquire or create its own store building services outside of its market.

While traders have more options, it’s also more complex to navigate the platforms of this growing list of tech companies. Despite increasing competition for the businesses of sellers, they often remain at the mercy of the decisions of the giants.

Growing pie, more slices

In 2020, e-commerce spending grew 44% from 2019, about three times faster than their average annual growth rate over the past decade, according to Digital Commerce 360. The past year has been a particularly good one. good for Amazon, which went from capturing around 36% of all ecommerce spending in the United States in 2019, down from 38% in 2020.

While much of the growth in e-commerce outside of Amazon was due to other large retailers upping their game online, it is also due to small retailers finding their own ways of doing business. reach buyers directly.

At 14-year-old Shopify, by far the largest provider of software and services for merchants who start their own online stores, revenues grew 86% in 2020, to $ 2.9 billion. It now has more than 1.7 million sellers using its platform and offers services ranging from financing to payment services. In 2020, Shopify merchants sold $ 119.6 billion in merchandise, which is 40% of the total value of merchandise sold in Amazon’s third-party marketplace.

Shopify’s core offering is a cloud-based service that makes it easy to build and operate an online store. BigCommerce and Webflow do the same. Magento is open source software that allows merchants to build stores, but they need to find their own web host.

Shopify has expanded its offerings to include warehousing, fulfillment, and small business lending. During the last Black Friday shopping weekend, the total sales of Shopify merchants eclipsed the total sales of all third-party sellers in the Amazon Marketplace.

One seller using Shopify’s software is Eunice Byun, co-founder and CEO of Material, a New York-based seller of their own high-end yet affordable cookware. Material has never sold its products on Amazon and has no plans to do so, says Ms Byun, whose full-time staff consists of just three people besides herself.

For sellers, being on Amazon means giving up vital customer data like email addresses and ceding control of returns and complaints to Amazon, both of which are non-starters for the hardware. “The whole customer experience is so important to us as a company,” says Ms. Byun.

“In 2020 alone, Amazon invested more than $ 18 billion to help business partners grow their businesses and reach more customers,” an Amazon spokesperson said. “Amazon provides a wide range of tools to help business partners build customer loyalty.”

Shopify charges each of its customers a flat monthly fee of between $ 30 and $ 2,000, depending on features, and an additional 0.5% to 2% of each transaction if they use a non-Shopify payment processor. (It generates additional income through other products, including execution and loans.)

Neil Bruce is responsible for the online sales of Toolstop, the online storefront of a 56-year-old family-owned hardware store and wholesaler based in Glasgow, Scotland. For every sale his business makes on Amazon, he pays a fee that averages 14% of the price of an item, he says.

Mr. Bruce’s website is powered by BigCommerce, an Austin-based, publicly traded Shopify competitor. BigCommerce has a similar pricing structure to Shopify, but differs in that it doesn’t charge additional transaction fees on top of what merchants pay credit card transaction processors. When Toolstop adds items to its own BigCommerce powered site, it can choose to automatically list them on Amazon. Orders on Amazon are treated as if they had been made from Toolstop’s own site. When a box with Toolstop products arrives from Amazon, it includes a leaflet stating it was from Toolstop.

“The vast majority of businesses need to view markets, like Amazon, as an opportunity, not a competitor,” said Brent Bellm, CEO of BigCommerce.

This hybrid approach to listing products wherever consumers can find them is increasingly the norm, says Tyler Kovacs, founder of Store Leads, a service that collects data on 5 million online stores worldwide. Many small sellers start on Amazon, due to the full service approach and instant audience. But even retailers new to Shopify can potentially list their items on Amazon and other marketplaces, due to the additional exposure and additional revenue, Kovacs adds.

Shopify portrays himself as a fierce competitor to Amazon, and its executives often say that large markets have opposing interests to those of the merchants they partner with. Yet Shopify offers the same kind of direct integrations with the biggest online marketplaces as BigCommerce.

“We see our role as leveling the playing field so that retailers can, rather than hire customers on these platforms, take ownership of the relationship with customers,” said Harley Finkelstein, president of Shopify.

There are dozens of ecommerce platforms that help merchants build online stores; retailers tracked by Store Leads use 37 different ones, says Kovacs. Shopify has set itself apart from its competition by going beyond simple software and meeting Amazon and other giants in arenas where most others cannot compete.

Shopify Capital, for example, has loaned small businesses $ 1.7 billion since its inception. Shopify is building its own nationwide network of distribution warehouses, intended to compete directly with Amazon’s own truck logistics operation. Shopify has its own way of accepting payments, like PayPal or Apple Pay, intended to make one-click payment possible on any merchant that uses it. Shopify’s payment service accounts for the majority of its revenue.

Herein lies the irony of painting Amazon as the Goliath au David of independent online retailers, as Shopify often does: Collectively, the world of ecommerce outside of Amazon is still bigger than Amazon. And Shopify, which is quickly becoming the glue that holds 1.7 million of these retailers together and would like to be seen as their champion, is itself a growing giant. Shopify has a valuation of around $ 130 billion and eclipses its next big competitor, BigCommerce, which is currently valued at around $ 4 billion.

As it strives to become a one-stop-shop for merchants who want to sell online, it’s obvious that Shopify’s Million-Headed Hydra is already giving Amazon heartburn. The Seattle-based tech giant has even set up a secretive team, called “Project Santos,” to create its own version of parts of Shopify, the Wall Street Journal reported in December. In February, Amazon announced it had acquired Selz, an Australian company that, like Shopify and BigCommerce, helps merchants build their own online stores.

If Amazon strengthens Selz, or otherwise offers a serious competitor to Shopify and companies like it, the company may need to work to rebuild trust after years of difficult relationships with its own merchants, including copying their products and selling them. selling its own version at a lower price. . An Amazon spokeswoman said Amazon acquired Selz to continue Amazon’s mission of supporting small businesses.

I asked Mr. Finkelstein of Shopify if the warm and ever-more comprehensive embrace of the business could one day turn into a website that traps merchants in toxic codependency, just as the Amazon Marketplace has led many. distracted merchants with increasing fees and increasingly strict rules. “Our business model is that we only succeed if our traders are,” he says. This is a different focus from Amazon’s philosophy, which puts the customer first.

“Amazon is so difficult to manage,” laments Toolstop’s Bruce, whose company was once a wholesale supplier to Amazon’s own retail operation, but now chooses to list its wares only as a third party on the business market.

“Amazon made its own rules and would fined you in the blink of an eye if you were seen to be doing something wrong,” he said. “We have decided that we will never win this game when Amazon is in charge.”

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Write to Christopher Mims at [email protected]