Shopify, the company that began out of its founders’ frustration trying to list snow gear to sell online, has become, in its purest form, a software as a service (SaaS) firm that powers more than 500,000 online stores around the world.
When I think about Shopify and its current role in e-commerce, enabler comes to mind. Customers are able to pay a monthly subscription fee to power their ecommerce store using Shopify’s platform, one that compete against the likes of BigCommerce and Magento to provide small and medium-size businesses (SMBs) with peace of mind regarding the technology required to manage their online stores. Like Magento and BigCommerce, Shopify has done so by raising large amounts of venture capital and providing this functionality to SMBs independently of Amazon and other commerce businesses.
The end of Webstore, and the birth of a partnership
In 2015, Amazon closed down its Webstore business, which competed against startups like Shopify and BigCommerce. Amazon was also losing customers due to business owners’ concerns over the impact Amazon was having on their businesses. According to Peter Sheldon, former VP and principal analyst for ecommerce at research firm Forrester who has since moved to Magento, “You can always tell if a merchant is running an Amazon store — the flow, the structure, the UI and the checkout process — it was all Amazon. So in terms of trusting Amazon as their core channel, it was probably a step too far for some of these merchants.”
Not long after announcing the shutdown of Webstore, Amazon said it would partner with Shopify to provide web stores for all of Shopify’s third-party merchant customers. “We’re pumped about it,” said Harley Finkelstein, Shopify’s chief platform officer. “Even before Shopify was around, Amazon was a very, very big player in this space, so to have one of these players shut down one of their products and endorse our product, it’s wonderful.”
The similarities—and differences—between Amazon and Shopify
Amazon is a technology company that does online retail, but it’s also different things to different customers. For some, it’s a large marketplace that provides customers with infinite selection (retail customers); for others, it’s a place where they can sell their products to a large customer base (third-party sellers); and for another very large group of customers, Amazon is the “pipes” and large technology stack that provides the tools to run their businesses (startups). It’s in that third category where Amazon and Shopify interact.
Shopify, meanwhile, has sellers that sell long-tail items that are very niche-specific. While it does not have a marketplace of its own, Shopify’s recent partnership with Snap and Darkstore is more than enough evidence that the company is looking to widen its horizons.
To be fair, Amazon and Shopify also share a variety of traits. Primarily, they are both founder-led and obsess about customer satisfaction. According to The Motley Fool, both Amazon and Shopify are customer-focused and increasingly dependent on their customers for success.
Shopify, like Amazon, has also created an ecosystem of third parties that assists customers with services they need to run their businesses. App developers, design agencies, and theme designers have built businesses of their own by creating value for merchants on the Shopify platform.
There’s one major difference between Amazon and Shopify, and that’s their total addressable market size. Due to Amazon’s large lineup of businesses and business models they have a larger potential area from which to generate revenue. Shopify, on the other hand, has one market with many competitors that all are impacting Shopify’s potential to generate sustainable revenue.
Amazon also has a tendency to compete against its partners, whereas Shopify tends to support partners and let them grow their businesses unhindered. This leads in my opinion to Amazon having to do everything by itself, whereas Shopify can partner with companies to grow their potential.
What brands should be aware of when it comes to Shopify
In a way, Shopify offers brands the best of both worlds: independence, as well as the assurance that their products can be found on Amazon if they use the appropriate Shopify apps. Brands that are looking to move their technology platform should consider Shopify as an option on which to run their business, especially as Shopify has a premium option that enables larger brands to run their businesses on the platform.