The Future of E-commerce: Amazon vs. Walmart? Neither. I Choose Shopify.

Can Walmart dethrone Amazon as the top e-commerce player? 

It’s a long-standing question, and one that I anticipate coming up even more often now, following the report of Walmart’s rapid Q1 growth for its online offerings, as well as a potentially groundbreaking new partnership that hit the wire earlier this week (more to come on this later). 

It’s a topic that I’ve put some thought against and my answer (or lack thereof) may surprise, or even irritate you. 

But, here it is: Walmart can’t, but Shopify CAN. 

Or, at least Shopify has the greatest chance of disrupting the monopolistic e-commerce force of Amazon.

Okay, okay, I get it. It’s not an apples to apples comparison. Shopify doesn’t actually sell products. But, hear me out. 

What if the way to compete with Amazon was not to copy their strategy and try to do it better? If you’re waiting around for a challenger to come along and do this, you’ll end up disappointed.

The alternative to Amazon shouldn’t be a look-a-like substitute with a different colored box. The real alternative is a diverse market of independent businesses that can serve customers just as well, or better than Amazon. 

Sure, we’ll probably never see Shopify eclipse Amazon in revenue or market cap. Their success, at least in comparative terms to Amazon or Walmart, has to be evaluated in terms of GMV and the market share of e-commerce that they power. 

Shopify can beat Amazon by delivering the e-commerce operating system—or the single platform—that powers the greatest share of e-commerce GMV.

At its core, e-commerce is about facilitating genuine retail experiences between brands and their customers in a virtual setting. As consumers, we want to have real interactions with brands, but too often, are forced to choose between convenience and experience. And when I think about the future that we should strive towards, I say why not both?

Amazon’s advantage comes largely from their ability to be faster, more efficient, and more convenient than most independent businesses could be on their own.

Shopify, on the other hand, is solving these key pain points that traditionally have led to consumers flocking to Amazon, but doing so under a completely different motive.

Where Amazon and Walmart optimize for their own success, Shopify optimizes for the success of their merchants. In the words of Tobi Lütke, founder and CEO of Shopify, “Shopify exists to basically arm the rebels. We want a lot of people to go out and compete against Amazon.”

Shopify leads with a merchant-first attitude. Rather than pushing their own brand, which they almost certainly could do more of, almost all of their efforts serve to emphasize the merchant and their connection with their customers.

It’s not that they are forgoing their own business for the sake of their customers or that they are operating under a purely altruistic mission, but rather their business success is directly tied to that of their merchants.

The better the tools that Shopify offers, the more merchants will use their platform. The more their merchants sell, the more Shopify stands to grow. It’s a simple, but powerful, alignment of value exchange that sets Shopify apart.

Looking at Shopify as merely an e-commerce site builder would be an egregious oversight. Shopify is a platform that powers all things that e-commerce merchants need to compete in today’s challenging market. Essentially, they’re building Amazon Prime for everyone else.

The goal is to equip every independent Shopify merchant with the ability to offer experiences that rival Amazon. This is evidenced by Shopify’s increased investments in fulfillment, consumer-facing tracking, POS, and their app ecosystem, which allow merchants to add on more advanced tools for specific areas of their business, like Shippo for self-fulfillment.

Operationally, through better technology, access to partners, and fulfillment as a service, Shopify has come a long way in terms of delivering on this goal. Merchants can tap into Shopify’s platform to service their customers more efficiently and compete head-on with the ever-looming expectation of Prime 2-day delivery, on-demand tracking portals, returns, and more.

BUT, there’s still one major area where, at least until now, Shopify has lacked any meaningful ammunition for the rebels. The Achilles heel in Shopify’s push to be the ultimate platform for e-commerce enablement has been their lack of reach and discoverability. 

Without their own marketplace nor a scalable solution for helping consumers find Shopify merchants, they could never compete with the reach and marketing muscle that Amazon offers to sellers. 

Even with all of the necessary tools to offer the best customer experience, from the first site visit through to returns and repeat purchasing, merchants still need reach, in order to grow. Not to say that Shopify merchants aren’t invested in their own marketing efforts, because they absolutely are. Though, to date, Shopify has not been able to extend reach as a unique benefit to the merchants that use their platform.

Enter Shopify’s New Partnership With Walmart

The partnership, announced on Monday, gives Shopify merchants direct access to sell on Walmart’s marketplace.

The deal will allow Shopify sellers the ability to list their items on Walmart in one click, via a new app, and then manage their listings within their Shopify store.  

Why is this important? Simple. It provides a new avenue for Shopify merchants to gain reach. More specifically, Walmart’s marketplace already reaches 300 million customers and it’s growing quickly. 

Recently, Walmart announced that its e-commerce business saw 74% YoY growth for FYQ1(Feb – April). For reference, during the same period, Amazon’s e-commerce sales grew 29%. What is Walmart doing to capture a relatively outsized piece of the pandemic-fueled, e-commerce world of 2020?

They’ve bridged the gap between physical retail and digital e-commerce. Thus, making themselves a prime solution for reluctant online shoppers and previously retail-exclusive shoppers amid COVID-19.

Think about it. During a period where previously offline shoppers are forced to rethink their routines, they’re most likely to stick to what they know best. And for the majority of Americans, Walmart, with its 5000 locations and proximity of less than 10 minutes to 90% of the population is a familiar face amid challenging times.

And now, Shopify has a legitimate mechanism for passing this reach onto their merchants. 

Okay, So If Walmart’s Reach Is So Great, Why Is Shopify My Champion, and Not Walmart?

First, it’s worth noting that this new partnership, at least at surface level, is a win-win for both parties. Walmart gains much-needed product diversity—historically, they’ve only been able to offer roughly 5% of the number of products that Amazon offers—and likely a nice chunk of revenue from seller fees as more Shopify sellers adopt the marketplace integration. Shopify gains their long-standing missing piece of ammunition in the form of demand generation.

Now that we’ve established the partnership as a win-win, we can dig deeper into the relative value and the strategic implications of this partnership for both sides.

For Walmart, a successful rollout of this partnership, with success defined as strong adoption amongst Shopify merchants and subsequent strong sales, means chipping away at Amazon’s significant lead when it comes to third-party marketplaces. Given how far ahead Amazon sits today, even a “great” success for Walmart still leaves them as a closer 2nd, rather than a winner.

For Shopify, the ramifications are wider-reaching. There is the surface-level value of increased sales by Shopify merchants that adopt the Walmart marketplace program. But, that’s not the real value-add for Shopify. Or, at least, not in and of itself, it’s not.

To see the true value for Shopify, we have to look at the whole, which in this case, is very much greater than the sum of its parts. The Walmart partnership adds a critical and previously missing piece to Shopify’s arsenal. 

The added power to Shopify’s collective value proposition, in the long run, far outweighs the value of short-term increases in sales. The value is multifaceted. Shopify can leverage this partnership, and the reach it can offer merchants, as a differentiator in the market to fuel customer acquisition.

Hence, the value of a successful partnership to Shopify isn’t exclusive to revenue gained through Walmart. If used properly, this partnership will be a strong mechanism to retain and grow their existing customer base and a strong value proposition for them to leverage in acquiring new merchants. 

Merchants that Shopify acquires with the promise of tapping into Walmart’s reach, almost certainly won’t sell exclusively on Walmart. They’ll leverage Shopify for their DTC efforts and potentially future POS expansions as well.

A New Hope for the Future, But Still Much More to Do

The new partnership with Walmart adds a unique and previously elusive piece of ammunition to Shopify’s resistance. Even so, the path to changing the e-commerce status quo remains a challenging one, both for individual merchants and the platforms that enable them like Shopify. But, a fully armed resistance leaves new hope for a better, more equitable future.

Ultimately, if anyone is going to succeed at tipping the scales of e-commerce, it won’t be a new Amazon. It will be the player that finally evens the playing field for merchants and their customers. 

As consumers, we yearn for real interactions with brands. Too often today, this comes at the expense of convenience. This shouldn’t be the case. 

Call me a greedy optimist, but, I want both, and I think that independent merchants should be able to offer both. 

I have hope for a brighter future, one where independent brands have the power to service their customers at a level that even Amazon and Walmart can’t match. When that day comes, so will a change in consumer behavior. 

So, when people ask me if Walmart or Amazon will win the e-commerce space, I tell them neither. The future of e-commerce that I want to see is one that elevates the ones doing the hard work: the merchants. And it’s Shopify, along with a network of enablement partners like Shippo, that will lead this future.