On December 1, brands using their platform sold $ 5.1 billion from Black Friday to Cyber Monday, up 76% from 2019, according to Shopify. This followed gains in the second and third quarters, which rose 97% and 96%, respectively.
Since its inception in 2006, Shopify has made a name for itself as the off-the-shelf solution for more than a million brands selling goods online, including direct-to-consumer (DTC) favorites like Allbirds, Brooklinen, and Rothy’s. After conquering the DTC world, Shopify began targeting bigger brands like Heinz and Molson Coors after launching its enterprise platform Shopify Plus in 2014.
In 2020, however, Shopify was gaining traction to an even broader range of companies like Poo-Pouri toilet spray and Hint Water beverage brand, which traditionally reached customers through retail stores and online marketplaces. Kevin Simonson, vice president of social at digital marketing agency Wpromote, noted that in 2020 a “big trend” was for brands to build their online presence on Shopify to offset the decreased opportunities for personal discovery in stores – and they ‘I’m hardly alone.
However, e-commerce experts believe that Shopify’s biggest challenges are yet to come, including how to defend that turf against a host of big-name competitors like Adobe, Salesforce, and Oracle.
The Empire and the Rebels
With the growth of Shopify, comparisons to Amazon are inevitable. However, there is a fundamental difference in how the two work. As CEO Tobi Lutke said in a 2019 Twitter Q&A, “If anything, Amazon is trying to build an empire and Shopify is trying to arm the rebels.”
These rebels have a decisive advantage: data with which they can communicate directly with consumers and serve them. Amazon, on the other hand, does not share comparable data on consumer behavior with the brands that sell on its platform. According to Forrester senior analyst Emily Pfeiffer, brands typically generate only a single-digit percentage of sales from their own websites. Hence, they need online marketplaces and traditional retail stores to make up for the rest.
Pfeiffer also pointed to research showing that more consumers use Amazon as a product search engine than Google. Brands that want to be discovered by Amazon’s 2.9 billion monthly visitors face challenges like counterfeiting and sometimes direct competition from Amazon itself.
Insiders say brands are adjusting their Amazon strategies to strike the right balance between discovery on one platform and data on the other. In some cases, it means only the most popular SKUs are sold on Amazon so the brands keep looking, Simonson said.
“The savvy will make the inventory very low so they just leave their dregs there,” he added. Then these brands hope consumers will make the jump to their own ecommerce websites. (Pfeiffer disagreed that this is an effective strategy, but said it is common to have only part of a catalog on some channels to ensure visibility while reducing channel conflicts and problems comparing purchases.)
Another strategy is to send excess inventory to Amazon instead of hosting Flash sales. That way, brands benefit from additional purchases without looking like discount stamps, Simonson said.
Former Amazon employee Faisal Masud, who is now CEO of the Fabric trading platform, agreed that brands trying to get a market position shouldn’t rely solely on Amazon. At the same time, he admitted that big brands have the luxury of potentially moving away from Amazon – think Nike and Birkenstock – while small brands still need Amazon to build speed.