Amazon vs. Shopify and its winning strategy
Updated: Mar 25, 2021
Customer segmentation and identification are showing that brand equity, diversified store designs, and individual brand marketing techniques are outpacing the Amazon Marketplace. Additionally, Amazon looks to introduce competing products to its most successful sellers on its own platform – thus cannibalizing its own successful drivers on its platform. This vertical integration move is driving successful marketers away from the platform to the likes of Shopify. The battle is clearly on.
A Shopify Shop gets defined by the store owner, products are all managed from its advertising, with a marketing funnel to it being shipped. The ownership of the customer experience is owned and controlled by the shopkeeper. The success is commensurate with the activities, definition, products, experience delivered by both the store’s performance and the store owner’s efforts. If the storeowner wins, Shopify wins.
While Amazon’s logistics are stellar, business model well-proven, as a marketplace it has a substantial share of shoppers. While the distinction of its customers is blended between consumers on its platforms and merchants feeding the platform with products, it's becoming evident that merchants are being targeted so that Amazon can vertically integrate for more control in costs and competitiveness, all the while reap additional profit pools. With the blurred line between its customers and vendors, it is slowly shrinking its offerings as well as being a turn off for vendors to adopt the platform.
Amazon set’s its target on Shopify
It has been reported that Shopify is now a serious competitive threat to its platform, and The Wall Street Journal is reporting that Amazon wants to aim at Shopify.
With Amazon’s current strategy, there is little that they can do, unless they change their business model to promote sellers, lower costs, and rebuild the merchant confidence that their platform is a worthwhile investment. This would be a double hit financially (stop competing with its sellers, and then invest in sellers) and a reversal which would hit them on a quarterly report.
Amazon Seller ride
When looking at the last 21 years, Amazon has had a strong performance with 1.7million third-party sellers registered. Since 2015, the Amazon logistics integration has been a key bottom-line impact on the business. The marketplace revenue increase from 14.9% to 19.2% of total revenue according to MarketPlacePulse.
During the journey of accumulating sellers, cheap knock-off products started to show up with Trademark/Copyright violations at cheaper prices from new sellers stealing the momentum of legitimate brands. Amazon took steps to push out the illegitimate sellers through technical procedures to authenticate product listings by business vendors. Whilst doing this through product registrations for listings, it was deemed a good idea to monitor competitive offerings at lower prices to pick up on any violators. However, these same tools were then used against the sellers themselves when Amazon started offering their own version of competing products, restricting merchants to shift prices to compete. Amazon told the Times that it is intending to prevent “practices that harm customer trust”.
While Amazon branding is strong on its packaging, however, their tools are boxing in their sellers in being less differentiated, placed in the background all the while piling on fees for them to be on the platform. This is turning into a hostile environment, opening the doors to Shopify and its merchant friendly platform.
Shopify Pricing and Support
Shopify provides a merchant a fair, differentiated, and branded environment for the store owner to carve their success. Shopify Pricing is managed based on the sales volume, and their Shopify Pricing Plans to scale down as your volume goes up. Shopify Support also scales accordingly but considers the adoption of the platform vs. upgrading your Shopify Plan and how you can engage the increased capabilities of new plans. Shopify Experts are at the ready to assist if the storeowner needs a hand to accomplish their store goals. With many thousands of Shopify Apps at the disposal of any store, thousands of Shopify Themes, it enables a huge variation of presentations for any Brand to adopt and stand out.
Amazon’s response to Shopify
The Journal has reported that an initiative focused on copying parts of Shopify and emulating a competitive offering is underway. Project Santos is its designation, and it is headed by Vice President Peter Larsen and directed by CEO Jeff Bezos. While it is an un-imaginative strategy, it is difficult to see how Amazon might stem the Merchants from jumping to Shopify.
Amazon is a marketplace while Shopify is a Platform for merchants. Shopify’s customers are merchants, while Amazon’s clients are everyone. By having conflicts of interest by directly competing against your own sellers, Amazon will continue to lose to Shopify since the investment made by merchants want to be protected, have their stores be competitive in their own right with the chance of pushing their brand out in the market.