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Roundtable

Roundtable: Rumor Mill: Amazon vs. Shopify

When the rumor mill starts humming that Amazon is contemplating a Shopify killer, it's time for Rob and Peter to talk D2C turkey. What would this deathmatch mean for brands? Should each stay in their lane? Tune in. 

TRANSCRIPT

Peter:

Coming to you from snowy Cape Cod. Rob is on from the even snowier Berkshires. How is it out there, Rob?

Rob:

It's very snowy, 18 inches. It's about half the height of my daughter who cannot love snow and can't actually move around in it. There's so much snow.

Peter:

That's awesome. The best memes I've been seeing on Twitter today are dogs loving the snow, which makes me very happy.

Rob:

Dogs do love a lot of snow.

Peter:

Yeah. It's a beautiful thing. Hey winter! Um, well, Rob, to move on to business for, you know, for the podcast, I saw a headline in Business Insider last week that really caught my attention. Uh, Jeff Bezos and Amazon execs have discussed launching a rival to Shopify who's meteoric rise has increasingly intruded on the online giant's turf. That was Eugene Kim and Business Insider. So, what do you think they already tried to do that once, right. With Amazon web store?

Rob:

Yeah. I mean, you look in the two thousands. I remember at Endeca, you know, we'd built target and target search and nav and Walmart and search and NAB home Depot search and nav and so on and so forth. Target had actually originally outsourced its web presence to Amazon. So tar target.com in the mid two thousands was hosted on Amazon in a version of this, right? So Amazon was basically staying look, we've got core technology for hosting an e-commerce presence. We've got a search algorithm, we've got the ability to just store catalogues. We've obviously got a shopping cart, blah, blah, blah. Why don't we host other people's websites too? And ultimately any retailer of size realized that existentially they needed to control their own blood presence. And, uh, you know, didn't want, didn't want to have their web presence owned by, uh, I competitor it's kind of funny.

Rob:

And in retrospect, think Target and Amazon, um, cooperating with each other. Uh, but yeah, I generally think that when Amazon goes head to head with a market leader, they tend not to do that well, and I'll give you examples. They, they wanted for years and years to out compete eBay with auction, never worked. The, you know, ultimately what ended up happening is even today, they don't, out-compete eBay with auction. They just found another market for the third-party seller market, which ended up being bigger than eBay's. Right. But eBay is still basically, you can't compete with them on auctions. Um, another example is, and this is, this is more in the weeds, but MongoDB is one of the better tech IPOs in the last 10 years. Really, really excellent, no SQL database. Amazon released a version of, you know, sort of a database compatible with Mongo, hosted on AWS, uh, to go head to head with MongoDB and MongoDB has fought off that threat and is more valuable than ever. And so I'm pretty skeptical when Amazon looks at a business model and says, Oh, I'm going to replicate that business model and go after it because there's not a tremendous amount of track record of success there. You know, you look at a company like a shot, sorry, go ahead.

Peter:

Well, I was just going to say, I can see why they, you know, are turning their Soran eyes over there though. I mean, uh, Benedict Evans posted a, um, a chart saying this year sales on Shopify will probably be 40 to 45% of sales on Amazon marketplace. And that's, that's tremendous growth.

Rob:

It's tremendous growth. I mean, hats off to them. And, you know, Shopify is a Canadian startup. It's an Ottawa, um, it's worth well over a hundred billion dollars right now. And, uh, I bought theirs, I bought their stock at IPO and then sold it when they were not that much bigger, really, really kicking myself now. But the reality is that the Shopify product, it's a hard product to build. I mean, it's not like Shopify is just some crappy SAS, SMB e-commerce platform out of tech. It's a lot of tech. I mean, they came up in a space where there were a lot of other eCommerce platforms that were out there. There was Magento, which was free, you know, open source and, and the market leader. Uh, there's big commerce that competes with Shopify up and down in the market today there and there there's like a dozen others. And, and so in a crowded space with a lot of people that are those whose entire businesses depend on beating Shopify in some way, shape or form Shopify is still dominant. So it's pretty hard to see Amazon just throwing a shopping cart together, um, that they can license out as a SAS product and, and really just compete with Shopify and market share shop Shopify. I mean, it's an incredible company. They've got over a million stores on it today, over a million. Yeah. So why I wanted to go check out to see,

Peter:

You know, what Shopify had to say about Amazon, and this is from 2019, the CEO, Toby lucky said, if anything, Amazon is trying to build an empire and Shopify is trying to arm the rebels. What do you think of that star Wars reference?

Rob:

Well, uh, w what's the old quote, um, a one man's terrorist is another man's freedom fighter or whatever. So I, I, you know, I think it's a cute quote. I think it's, I disagree with it. Um, Amazon has created more millionaires in America than any other company in history because so many people on the Amazon marketplace have built businesses and become millionaires. I think the second place, if I remember correctly, was the subway. It's like, you know, franchise owners of subway, uh, in the nineties in particular created a lot of millionaires in America. And so I, you know, if Amazon's creating more millionaires than any other company ever, then it's, it's not exactly like, Amazon's not good for mom and pop business owners and stuff like that. And so I think Amazon marketplace and Shopify both in their own ways enable businesses to thrive in America. Um, and so, so I it's, for me, it's like arm the rebels. I, I don't know it's cute, but I don't know that I agree with it.

Peter:

Well, and, and an article from, uh, ad week, Lisa Lacey, she interviewed Emily Pfeiffer, you know, is a wonderful analyst for, for B to C at Forrester. We work with her a lot and, and, you know, she was pointing out that brands typically, they only see a single digit percentage of sales through their own websites, whether, you know, they're hosting them or they're on Shopify. So they need Amazon and other online marketplaces and traditional retail to make up the rest. Like the, you know, if you want to get new customers that you're not driving to your own site, the place to go is where they have a lot of customers who are looking for stuff. And that's where that's where Amazon's business model comes through.

Rob:

Yeah. Yeah. I mean, ultimately, I'm going to take what you just said and build on the last statement, which is customer acquisition is the hardest problem there is. Right? And, and, uh, if you're a small business owner, that's, that's the whole ball game. Amazon has a huge audience. So if you're a mom and pop or you're, you've got a new product to offer the market, then that's a good place to go because there's a lot of customers there. You know, there's a, there's a lot of search happening on Amazon and you can, you can buy ads and you can drive traffic to your PDPs and you could build businesses that way. I mean, I think the biggest business built on Amazon is anchor, which is worth over $11 billion today. And it was just, it's just, it was really just an Amazon, uh, brand for a long, long time.

Rob:

And so, you know, one way to start a business is to start it on Amazon. And you've got to build an audience. If you go directly to consumers with a Shopify site, that's hard. That's pretty hard. You've got to, you've got to build your customer base some other way. And traditionally it was through Instagram, it was through developing compelling content that was shareable. Uh, it was through Facebook and Facebook advertising. It was through Google and Google advertising. And pay-per-click, it was by galvanizing an audience on Kickstarter. You know, it was like, what's that even newsletters here's by he's using newsletters. It was by using a fan base that you already had. Um, I mean, there's a lot of different ways, but you know, going the Shopify route gives you a direct relationship. That's unmitigated with your con with your customer. The margins are better for you, but customer acquisition is a lot harder. And so depending on the product that you've gotten a category and all this sort of stuff, I don't know that one is necessarily universally better than the other. I think both, both can be good options for the right business.

Peter:

Yeah. I mean, there's a reason that, you know, you were talking about Amazon's built in audience and there's a reason why their forecast for, um, for their ad revenues went from by 20, 22 to be originally, they said in June, it was going to be like 20 billion in ad revenue. And now they're predicting almost 25 billion by 2022. I mean, there's a reason it's because they have the audience to talk to and they got the targeting data, et cetera.

Rob:

Yeah. Yeah. And I mean, think about it this way too. Shopify is going up market with Shopify plus. So they're serving more enterprises these days. And if you're like a Procter and gamble or Unilever or Coca-Cola or whatever, like you're just not going to host your website on Amazon. Like there's, you know, there's no way you're going to trust Amazon enough to do that. You're going to be worrying about them using your data against you, even if they swear to their blue in the face that they're not going to. So you're going to, you're going to use Shopify. You're gonna use big commerce. You're gonna use Salesforce commerce cloud. You're gonna use Vtecs you're gonna use literally any other company that's out there. That's neutral. That's a tech provider. That's not Amazon. So what I dunno. I mean, it's hard to see the market for Amazon that would really embrace, um, having an, you know, an e-commerce platform that is Amazon built that doesn't have an Amazon audience, but has these other risk factors, right. It's just, it's just, I don't, I don't quite understand what the play is there.

Peter:

Yeah. I mean, I'm one of the people that they talked to in the Adweek article, a guy named, uh, Feisal Massoud, who's now CEO of commerce platform fabric. He was, he was pointing out that the potential that Shopify has is to take all of Shopify's network of, of, of consumers that have sort of signed up for the app, et cetera, and start providing combining and curating brands together. Or like his quote was if you're selling a buck Mason shirt and want to cross sell with an Allbirds sneaker, why not? Why would you not do that? So you can sort of see, and I think Shopify could be potentially very good at this, um, at creating sort of these curated, um, specialized experiences cross-brand that would drive value across a bunch of different, um, retailers.

Rob:

Yeah. That's a really interesting idea. I mean, Shopify has been doing more stuff over time. That's cross brands. So, uh, I buy a lot directly from manufacturers. I mean, we, we work with manufacturing. I'm a huge fan of manufacturers. If I've got an, if I've got a space in the market where I have empathy and loyalty it's to the manufacturer, not the retailer so much. And, um, if you buy on Shopify sites, nowadays, your buying information is saved by Shopify across Shopify sites. So the checkout experience, even though the relationship is owned directly by each individual brand, and they can email me separately and, and all this sort of stuff, the, my payment information and shipping information is shared across the sites, which means that it's a great experience. Right? And, um, and so Shopify is starting to do these network plays. They also launch that website for product discovery, which was an attempt to basically compete with Amazon search algorithm as a place to start your shopping journey, you know, go to this site, search across all the Shopify sites for all the products you find one you like, then you click through to the individual Shopify site.

Rob:

Um, I think they're really just getting started in, in that front, but, uh, I mean, generally speaking, Amazon's reputation these days, um, in terms of the antitrust stuff in Europe, using data to compete with their, with the third-party marketplace sellers on the platform and all this sort of stuff, I, it's just hard to see them producing a SAS product where they're able to own to really overcome the concerns that people will have. Not only that, but Shopify has been around for 15 years. So it's not like they've spent 15 years not building software, their product is

Peter:

They know how to do it. Well, I just, I just felt I, when I saw that headline and I think about sort of, we, you know, we talk a lot here and we'll continue in 2021 to talk about the omni-channel the digital first omni-channel opportunity for brands and the need to show up in a bunch of different places. And, and it's, it's no longer going to be a, you know, uh, it's not going to be either or it's going to be. And, and the question is, you know, what is the, you know, what is the audience at each channel and how do you specifically serve and create shopping experiences that make sense to that, to that audience? And it's a, it's a big challenge, but I think it's also exciting. It puts the brands much more in the driver's seat in terms of their own destiny.

Rob:

Yeah. I agree with that. It's the idea that Amazon has to dominate direct to consumer in addition to dominating retail search and retail advertising and retail three P I it's just silly. I mean like ultimately consumers, consumers want choice, um, Americans as a culture, don't like power centralization and, and, and they'll always be, you know, whether, whether it's there people look them as rebels like Toby Luca says or whatever there's going to be, there's going to be the cure-all plurality of retailers that matter. Amazon is not going to be the only retailer. And, and so, I dunno, it feels to me like if I were Amazon and I want it to help drive branded experiences, I would spend a little bit more time on those brand pages on Amazon and figure out a way to make those valuable. Yes. I mean, I go to those things sometimes, and man, they're just not great. Um, they could be useful, they could be great, but they're not.

Peter:

Yeah. And, and I, I do, you know, there's opportunities like really doing, you know, live marketing well on the site live selling on the site, you know, uh, like you, you, you know, I mean, I know clearly North America and sort of the Western world is a different culture than, than in China where Ali-Baba, and, and T Mahler are big, but the live interaction with shoppers and live presentations right. In the experience, I think there's a powerful thing to, uh, for them to invest in there that goes more towards their wheelhouse as I agree. I mean, it's not like, you know, Amazon is the, you know, and not, or culture if there ever has been one in the universe. So it's like, why not do both? Why not do all the things they're going to do all the things and try and succeed?

Peter:

Yeah. They just keep going. It's fine. It's like if they, if they try this direct to consumer thing and spend a billion dollars on it, and it doesn't work fine, but if it does work, they make a ton of money. It's, you know, it's basically on some level, it's a, it's Amazon having an option call on what has become a big market. Yeah. And so from that perspective, it's a totally rational thing to do for Amazon, even if the odds are stacked against them. And, and, uh, and so I don't think it's a bad strategy move. I think they're being smart, but I also don't think it's going to work. I'm, I'm, I'm a, I'm putting my, my bet down on the table that it's not going to work. And, uh, and I wish they would focus on other places. What would that be, uh, that letter to Jeff Bezos back to back to him? Um, we were talking about, you know, the ability to control your own destiny. And, um, and so I want to take a second to thank someone who's helped us control ours, uh, for the past six months and is about to go control hers. Andy [inaudible], who is our, have been our production assistant through a co-op program at Northeastern university. This is her last episode with us. Andy, are you there?

Annie:

Yes, here I am. I've had a fantastic time helping you both. Just thank you so much for this opportunity. Thanks to this I've really realized that going into e-commerce is the next step for my career. I can't wait to see how this podcast will grow.

Peter:

I can't believe that we didn't scare you off from e-commerce. Why is that your, is that your choice?

Annie:

I just love that it's like a growing and new industry. People aren't afraid to experiment, and I think that's what really interests me.

Peter:

Well, I'm speaking for myself. Uh, if anyone out there is looking for raw talent, who's had experience in e-commerce with us and certainly has a marketing brain, uh, Annie Shum. She's on LinkedIn. S H U M. Um, that's where I should send them, right, Annie?

Annie:

Yes. Yes.

Peter:

Thank you. Great. Well, Rob and I both just sincerely appreciate you keeping us on track and, and, um, and getting the word out about the podcast. You know, you also did all of the social posts and built our content library. So we can't thank you enough.

Annie:

I appreciate that.

Rob:

Annie does all the real work, Peter and I just mostly try not to embarrass ourselves.

Peter:

Mostly yes, mostly. And as a result of us continuing to embarrass ourselves all year, we're actually gonna unplug next week. We won't be posting an episode next week. We're going to take that week off. We'll be back on January 4th with a new episode to begin 2021. So thanks Annie for being part of our community and thanks as always to all of you for being part of the DSI community.