Walmart recently sent a shot across Amazon\’s bow by partnering with Shopify Inc., the currently valued $88 billion, Canadian-based all-in-one e-commerce solution/tool. Shopify allows one to build a functional e-commerce store from scratch, without a designer\’s or developer\’s help. Shopify offers more than 75 million-plus products from more than a million merchants across 175 countries. So what?
Amazon\’s 2019 marketplace sales of about $230 billion, dwarfs the estimated $61 billion revenues across all of Shopify-powered sites. And since Walmart\’s 2019 U.S. e-commerce revenues of about $21.5 billion is even further behind Amazon\’s lead, how is the Walmart/Shopify partnership going to benefit either one?
[callout]A competitive advantage the partnership will have over Amazon is the Seattle behemoth’s tarnished reputation. Major retailers and brands are reluctant to cede control to Amazon, particularly regarding all of their transaction data, which in essence can lead to, and has in some cases resulted in Amazon’s copycatting hot sellers with their own private brands.[/callout]
The simple answer is that Walmart will be able to quickly gain more products and brands selected from the Shopify-powered products (beginning with 1,200 this year to add to Walmart\’s current 45,000) and Shopify\’s merchants get access to Walmart\’s roughly 120 million monthly online customers. Amazon has about 300 million visitors a month. Again, so what?
The Edge Over Amazon
Here\’s what. Walmart\’s bet on Shopify is in their long-term synergy as an accelerant to their combined growth. Shopify\’s model, launched in 2006, is a simple solution that anybody can use to build their own e-commerce store for a very minimum fee. For a starting fee of $29 a month, Shopify provides a virtual shop along with everything that\’s needed to operate it, including the e-tools necessary to manage things such as inventory levels, payments and shipping. During the beginning of the pandemic Shopify\’s sales soared by 60 percent and Walmart\’s grew by 74 percent (twice the growth it expected for the entire year).
A competitive advantage the partnership will have over Amazon is the Seattle behemoth\’s tarnished reputation. Major retailers and brands are reluctant to cede control to Amazon, particularly regarding all of their transaction data, which in essence can lead to, and has in some cases resulted in Amazon\’s copycatting hot sellers with their own private brands. Amazon is also fairly lax about quality control, vetting and allowing low quality and/or offensive products on its site.
Alternatively, Walmart rolled out a fulfillment service for its third-party sellers that allows returns to its physical stores. They also edited out of inventory about 20 million items that didn\’t pass their quality standards. Accordingly, Walmart will be equally selective among the new Shopify candidates for its site. So, over time Walmart will win retailers and brands on the strength of their reputation for quality and their positive partnership relationships.
Doug McMillon Breaks the Mold
Ever since Doug McMillon took the helm at Walmart, he has been constantly breaking the legacy mold. He rapidly embraced technology and has risked bold moves to fail often but fail fast in order to learn. One of his biggest moves, of course, was the acquisition of Jet.com in 2016 for $3.5 billion, instantly gaining the expertise of its CEO, Marc Lore. Between then and 2019, Lore acquired several digitally native brands, building a long-tail strategy. Many of those were jettisoned and finally, Jet.com was merged into Walmart\’s site. Fail and fail fast. Lore continues as CEO of Walmart e-commerce.
Shopify is another bold initiative to accelerate Walmart\’s profitable growth in its marketplace, which McMillon has defined as a strategic priority.
I have written often about my prediction that Walmart will become Amazon\’s biggest nightmare. I will say it one more time. Furthermore, if this new partnership with Shopify works as planned, accelerating profitable growth for both brands, I believe Shopify will become an attractive acquisition for Walmart.