Burc Tanir is the CEO of Prisync, the pricing optimization software company helping e-commerce businesses apply smart data-driven pricing.
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We all have been there: In a multistep process, we promptly get hit by disappointment as soon as we fail at a step, regardless of how successful we’ve been at the preliminary steps. An e-commerce example of this is failing at the very final step of conversion, where you actually succeeded with traffic generation via paid channels or word-of-mouth. In today’s hyper-competitive landscape, e-commerce success requires operational excellence, if not perfection.
One e-commerce company comes to mind more often than others when it comes to operational excellence, and it’s no one other than Amazon. This excellence is a direct outcome of years of relentless execution with a bold vision that has been putting the customer at the very center of the shopping journey. One can break down Amazon’s retail execution excellence into various dimensions, from customer support to delivery or from personalized product recommendations to pricing prowess.
As Amazon dominates the e-commerce market, the market has always had this understandable eagerness to benchmark the company vs. all the existing or up-and-coming competitors. Walmart, for example, always took its well-deserved toll on those comparisons. However, in most of those comparisons (between Amazon and Walmart), Walmart—another retail giant with also an enviable degree of retail operational excellence—mostly failed to outperform Amazon, and this has only strengthened Amazon’s unbeatable image in the e-commerce world as the “everything store.”
However, in recent years, one other company that has been paving a rather different path since its inception has started to be mentioned as a competitor or more of a threat to Amazon, and that company is Shopify.
I say a different path because Shopify is not a retailer in the sense that Amazon is. Considering its major impact on the global e-commerce ecosystem, Shopify is an e-commerce enablement technology company. It does not carry its own stock—unlike Amazon—and it is not a marketplace where third-party sellers sell their own goods—again, unlike Amazon.
Contrary to these differences in the nature of the two companies, two things that are common to both companies are the massive amount of online shopping traffic that passes through them (i.e., on/via Amazon.com or its local sites and on two million-plus Shopify webshops) and their gross merchandise volumes (GMV).
What makes Shopify a serious threat to Amazon also relies on one of those two dimensions. As of quarter two of 2021, the total website visits to all Shopify-powered webshops exceeded total visits to Amazon’s worldwide domains for the first time in its history. However, during the same period, Amazon has made a whopping GMV of $113.1 billion versus Shopify’s GMV of $42.2 billion. In simple terms, Amazon has made three times the revenue as Shopify from the very same number of shoppers—or Shopify only made one-third of Amazon’s, depending on where you’re looking at the problem from.
E-commerce experts translate this comparison as both the superiority of Amazon when it comes to conversion rate optimization and also as an opportunity for Shopify in the long run. It’s fairer to judge this more as an opportunity for Shopify because this gap has never really been the center of attention as Shopify grew its business. Shopify aimed at becoming the easiest entry point to e-commerce for online businesses of all sizes across the world. In other words, it aimed at being the “everywhere store.”
With that being said, the size of the gap (i.e., the limitations of a typical Shopify webshop owner when it comes to converting online shopper traffic) is too big to ignore, and it’d not be fair to say that Shopify is ignoring it.
Similar to its enabler position in the e-commerce ecosystem, Shopify also follows more of a mediator role when it comes to webshop optimization (i.e., the solution to the above-mentioned GMV issue and the conversion rate problem). Unlike Amazon, Shopify does not build its own tools and distributes them to a two million-plus strong merchant base. It instead relies on its extremely engaged Shopify Partners community. The way it works is that Shopify offers a well-documented API and manages a 7000-plus strong app developer base, who builds and lists Shopify apps that solve various e-commerce problems for Shopify store owners. This ecosystem and the awareness that it generates for all those small- and medium-sized merchants might be Shopify’s indirect answer to this particular GMV gap.
One common theme in this ecosystem is what makes the comparison between Amazon and Shopify more interesting and more relevant, and this theme commonly involves "Amazon-ifying" merchants one aspect at a time. App developers and merchants analyze Amazon’s above-mentioned operational excellence and try to mimic that excellence in their own context.
One thing that's worth mentioning is that this approach is not necessarily only a Shopify ecosystem thing and can be generalized for all third-party merchants running their own webshop. It all starts with awareness on the merchant side, where you start thinking that you might actually execute bits of their business, well, like Amazon but with way less deep pockets.
A few areas where merchants and app developers like Gorgias, ShipBob, Suggestr, Prisync, Reviews.io and many others are already applying this thinking and execution are:
• Putting their customers at the very center of their operations and trying to offer authentic and scalable customer support.
• Perfecting their delivery experience.
• Going beyond dull merchandising approaches and implementing personalized experiences like AI-based dynamic product recommendations.
• Improving their sales margins and stopping leaving money on the table by dynamic pricing optimization.
• Generating customer reviews and feedback to build trust among their customer base.
Given the growing success of those small and medium-sized retailers and looking at the pace of adoption of this trend among Shopify store owners—fueled by Shopify’s push for its own ecosystem—one can expect Shopify and Amazon to get compared more often than today, and if things work out as intended for Shopify and third-party sellers using similar platforms, the balance might even shift one day—in favor of small- and medium-sized merchants.
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