Can Shop app compete with Amazon?
You'd certainly be forgiven if after reading the title of this post you wondered if I've suddenly lost the use of proper english. In fact while 'shop' is a hugely generic name for somewhere you can make a purchase from, it's exactly the name Shopify has used for the app they launched as a direct competitor to Amazon. While it's not yet available here in the UK, all the signs are there to indicate it's coming soon. It's already gained a respectable market share in the US, and everything seems to be in place to launch in the UK soon.
Shopify launched 'Shop' back in 2020, being a rebrand and extension of the functionality already offered by 'Arrive'. While the focus of Arrive was purely around tracking the delivery of orders, Shop app retains this functionality, and adds a buying marketplace in direct competition to the ongoing dominance of Amazon. It sees around 6 million downloads year on year in the US - the only market where it's currently available, and has gained significant traction and interest. But can it really compete with Amazon, and will it's early success continue.
What exactly is Shop?
Shop is simply an app Shopify has developed to give sellers who already use their platform the opportunity to make their products available through an additional sales channel.
Shopify themselves don't need their own product lines, nor do they need a warehouse operation and delivery setup like Amazon. Instead, they're simply taking advantage of the many businesses that already sell and ship products using Shopify, bringing these offerings together into one place.
In doing this they're creating a convenient customer portal where people can go to buy a huge range of products in one place. This puts it in direct competition to Amazon, the largest eCommerce operation in the world.
How can sellers get their products onto Shop?
Shopify have made it easy for sellers to add the products they offer to Shop - by just adding a sales channel to their store. But there are requirements in order to be able to sell through Shop, and this is where I think we see the true motive behind what Shopify are offering with Shop.
Seller requirements for using Shop
In order to be able to have your products listed on Shop, you need to fulfill a number of requirements, with a couple of key points demonstrating a clear profit-driven motivation behind the Shopify offering. They would of course be stupid not to take advantage of any profit opportunity in what clearly hope will be a landscape-changing venture, but the profit focus does seem to be largely at the cost of any real seller or buyer benefits.
So in order to qualify for selling through Shop, amongst other points crucially you must:
- Have a basic or higher Shopify plan
- Have Shop Pay enabled
Why are there these requirements?
Shopify will of course be hoping that the requirement for a basic or higher plan will mean stores upgrading from the much lower-priced starter plan. Additionally, with Shop Pay being the only payment method available within Shop app, Shopify will see an increased profit from the transaction fees. Also Shopify will be hoping that the popularity of Shop alone will drive more Shopify store sales just so sellers can be a part of the Shop marketplace.
But driving uptake of Shop Pay is likely a key motivation on the part of Shopify with the end goal being to compete with the likes of PayPal. Transaction fees for using Shop Pay are significantly higher than other payment gateways, with a maximum and minimum of 2.9% and 1.2% for PayPal and Stripe, while with Shop Pay you're looking at a massive 5.9% maximum and 5% minimum.
What are Shopify trying to achieve with Shop?
Shopify do seem to be exploring a few different avenues with the introduction of Shop.
- They want to drive sales of more Shopify plans as you need a store in order to list.
- They want to upsell existing lower-tier Shopify plans to at least the basic package because of the desire to be a part of the marketplace.
- They want to push the Shop Pay payment gateway to become a key player in this space and expand outside of just the app, probably in much the same was a PayPal did with eBay.
- They're making a drive to effectively own the word 'Shop' which could represent any number of future expansion opportunities.
They're exploring the market in a few different avenues here, making efforts to both drive more Shopify plans with their standard eCommerce platform side of the business. But they're also introducing new, potentially even greater revenue streams with the generic, non Shopify branded Shop marketplace to compete with Amazon. Shop Pay, the payment gateway they no doubt hope will expand to be as widely used and accepted as PayPal across every store whatever the platform. Finally if they can manage to own the word 'shop' to the extent that Shopify provided solutions become the default goto for people buying online, then that provides huge and countless future opportunities.
Certainly they're dreaming big here, but are these kinds of lofty goals realistically achievable with the lasting dominance of Amazon, and in such a massively crowded, ever-evolving market?
Can Shop really compete with Amazon
When Amazon was initially launched as just a bookstore, a big draw was the unparalleled range of books you just wouldn't be able to find on the high street. As it's diversified into more and more product lines, choice has continued to be a key factor for customers. With Shop providing a common marketplace with combined access to a multitude of Shopify stores, it can realistically hope to compete with Amazon in terms of product range. But, Amazon offers more than just a wide range of products to keep customers coming back.
Pros of Amazon
A key point to remember with Amazon is that it was one of the earliest eCommerce stores to find success and become a default destination for many people to shop. This means they've had many years at the top of the pile to really understand and cater for their customer base. Because they've been around for so long, they've gained a huge amount of trust with the customer base and this is a significant driving factor in encouraging repeat orders.
Add to that the fact you can buy almost anything imaginable, and consistently get it delivered to your door in good time, and you can understand there's little to tempt shoppers to another store, even one offering a similarly large range of products.
Pros of Shop
It seems to me that with Shop app, Shopify have really put all their eggs in one basket and are counting almost entirely on a smooth checkout experience guaranteeing repeat business. Product range could certainly compete with Amazon, but with no control over how orders are actually fulfilled, or how quickly, Shopify will certainly find themselves on the backfoot compared to Amazon when it comes to consistently rapid order fulfillment.
Who will come out on top?
Something that's still a massive seller for Amazon, and was especially true when building early traction with customers is guaranteed quick delivery times. The fact that Shopify have no control or consistency in delivery times, or indeed anything that happens with an order after it's been placed through Shop is potentially a massive downside for shoppers.
Instead of dealing with an eCommerce giant carrying huge amounts of stock, and with a proven infrastructure to get products to shoppers quickly, people will instead be buying from a range of much smaller sellers, who could well be out of stock more regularly, and ship items more slowly.
From that perspective, the Shop app concept is reduced to little more than a collection of often small sellers accessible through a common portal much in the same way as something like not on the high street which has been around for many years in the UK but has never risen to great heights, or diversified into a wide range of product lines.
For me personally, I like their products but regularly long delivery times with no guarantee of consistency from item to item is a major down side so realistically I rarely buy from there as I can always find something very similar, often customisable, to be delivered sooner on Amazon. But having said that, successful eCommerce is a lot about customer convenience and reducing friction to making a purchase as much as possible, which is what Shop attempts to do.
However, competing with the service Amazon gives, but without the infrastructure that virtually guarantees the product you need will be in stock, and can be delivered quickly is virtually impossible. While each individual seller on Shop will have their own shipping fulfilment processes in place, typically they'll rarely compete consistently with Amazon on both cost and speed of delivery. The end result is likely to be a mixed bag of mostly average, sometimes poor and occasionally great delivery times when using Shop.
We can see early interest building a decent customer base with Shop, but there's nothing which really sets the service apart or improves on what Amazon offers. My opinion is that Shop will just become another sales channel for sellers, with no consistently fast delivery time being a key factor holding it back from really competing with Amazon. And this does seem to be supported by download figures where Shop app downloads have dropped 25% while Amazon app downloads have increased by 27% over the same period.
Shop app is a good concept on paper with Shopify leveraging the already huge range of shops using their platform to create a marketplace which competes with Amazon in terms of product range. But the lack of ability to offer consistently good delivery times across products really keeps Amazon as the front runner.
In my opinion, Shop will continue to be a relatively popular app for some time, and is likely to move to multiple other territories including the UK, but I just can't see it realistically competing on the scale of Amazon when fundamentally it doesn't really offer anything of substance over and above what shoppers already have.
Eventually something will come along that takes the crown from Amazon, but without some fundamental changes, I don't think Shop is it. Shopify have put too much of a focus on the potential for profit, and missed the opportunity to give the customer a shopping experience that actually competes with, or even exceeds what Amazon is doing.
I suspect that Shop will continue for a good number of years, but without a fundamental change to add more tangible benefit for both buyer and seller, as opposed to the entire focus being a profit exercise for Shopify, I can't see it becoming much more than a footnote in eCommerce history over the long term.