What’s Next for Shopify, the Other Giant of US Ecommerce

On Dec. 1, Shopify said brands using its platform sold $5.1 billion from Black Friday to Cyber Monday, marking a 76% increase over 2019. This followed its Q2 and Q3 earnings, which were up 97% and 96%, respectively.

Since it was founded in 2006, Shopify has made a name for itself as an off-the-shelf solution for more than a million brands selling goods online, including direct-to-consumer (DTC) darlings such as Allbirds, Brooklinen and Rothy’s. After conquering the DTC world, Shopify set its sights on bigger brands including Heinz and Molson Coors following the launch of its enterprise platform, Shopify Plus, in 2014.

But it was in 2020 that Shopify became increasingly important for an even broader range of companies, such as the toilet spray Poo-Pouri and beverage brand Hint water, which have traditionally reached customers through retail stores and online marketplaces. Kevin Simonson, vice president of social at digital marketing agency Wpromote, noted that it’s been a “major trend” in 2020 for brands to build out their online presences on Shopify to compensate for diminished opportunities for in-person discovery at stores—and they’re hardly alone.

However, ecommerce experts anticipate Shopify’s biggest challenges may still lie ahead, including how to defend this turf against a host of big-name competitors such as Adobe, Salesforce and Oracle.

The empire and the rebels

As Shopify grows, comparisons to Amazon are inevitable. However, there’s a fundamental difference in the way the two operate. As CEO Tobi Lutke put it in a 2019 Twitter Q&A: “If anything, Amazon is trying to build an empire and Shopify is trying to arm the rebels.”

Those rebels have one key advantage: data, which they can use to communicate directly with—and cater to—consumers. Amazon, on the other hand, does not share comparable data on consumer behavior with the brands that sell on its platform. But per figures from Emily Pfeiffer, a senior analyst at Forrester, brands typically only see a single-digit percentage of sales through their own websites, so they need online marketplaces and traditional retail to make up the rest.

Pfeiffer also pointed to research that shows more consumers use Amazon as a product search engine than Google. So brands that want to be discovered by Amazon’s 2.9 billion monthly visitors have to put up with challenges like knockoffs 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, that means selling only their most popular SKUs on Amazon so the brands still appear in search, Simonson said.

“The savvy ones will make inventory super low, so they’re just leaving their dregs there,” he added. Then, these brands hope consumers will make the leap to their own ecommerce sites. (Pfeiffer disagreed this is an effective strategy, but said it is common to carry only a portion of a catalog in some channels to maintain visibility while mitigating channel conflict and comparison-shopping issues.)

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 brands, Simonson said.

Former Amazon employee Faisal Masud, who is now CEO of commerce platform Fabric, agreed brands trying to carve out a market position should not rely solely on Amazon. Though, at the same time, he conceded large brands have the luxury to potentially move away from Amazon—think Nike and Birkenstock—while small brands still need Amazon to build velocity.

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