Amazon secretly develops e-commerce website business to fight back against Shopify Bezos personally led the team

The Wall Street Journal reported on December 22 that Amazon had formed a “secret team” to study Shopify to build a “new online store model” to compete more directly with Shopify.

It is understood that Amazon appointed consumer vice president Peter Larsen (Peter Larsen) to lead a program called “Project Santos”, Santos is Portuguese for “saint”. In addition to Larson, dozens of Amazon executives joined the project, all of whom signed nondisclosure agreements.

Larson described Project Santos in a LinkedIn document as “something new on the horizon” and “a good thing going on.” According to reports, Project Santos has been taken over by Amazon CEO Bezos, but there has been no substantial progress.

Amazon, which has always been stable, pays such attention to and vigilance against a competitor, the hidden worry behind it may be the impact and disintegration of the platform e-commerce ecology brought by the independent station ecology.

fight back against Shopify,

What might Amazon do?

Why should Bezos lead the team in person?

An American Amazon employee told Ebang that since Amazon was founded, few new things have been directly involved in the founder. “The rise of the indie market, the growth of Shopify, makes Amazon feel on pins and needles. It’s impossible for them not to see a lot of businesses growing rapidly on the fringes of their empires, independent of the empire. Bezos may see ‘Project Santos’ as the future The second venture to ‘rebuild Amazon’ in 2018.”

Amazon has developed into a global e-commerce giant, with an exclusive market share of nearly 40% in the US e-commerce market, and its business covers almost all major commodity categories. At the same time, Amazon is also a cloud computing service provider, gadget maker, entertainment company and logistics company.

But Bezos’ philosophy is that employees will always see Amazon as a startup. He always liked to say, “Take every day as the first. The second is stagnation, followed by fall and death.”

It’s not hard to imagine that Amazon thought of building a “new online store model” when faced with the challenges of Shopify and the independent website ecosystem. Ebang tried to find Amazon’s detailed plan for this model, but the search on the whole network was unsuccessful. The Wall Street Journal reported that Amazon and Larson declined to comment on Project Santos. Shopify also did not respond to a request for comment.

Regarding the “new online store model” that Amazon is secretly planning, after communicating with a number of cross-border e-commerce practitioners, Ebang Power summarized several possibilities:

1. Restart Webstore, an independent website building service platform closed in 2016, and upgrade it to compete head-on with Shopify.

Amazon Webstore is an independent website builder that Amazon ran from 2013 to 2015. Brands such as Samsonite, Loom of the Loom, Black & Decker, etc. have used it to build DTC websites. At that time, Shopify was still relatively “weak”, with an annual revenue of only a few hundred million dollars ($205 million in 2015 and $390 million in 2016). The GMV of platform merchants was $7.7 billion in 2015 and 154 in 2016. One hundred million U.S. dollars.

In 2015, Amazon announced that it would be shutting down Amazon Webstore after a year and partnered with Shopify to make it the preferred migration destination for Amazon Webstore merchants. At the same time, Amazon also provides Shopify with three important e-commerce basic functions: Amazon Payments, Amazon Fulfillment, and Amazon Sales Channels.

“At that time, Amazon was a platform business and an independent website building service. For merchants, I didn’t really like this method. On the one hand, Amazon Webstore is only a website building tool, and building an independent website is often just a brand’s official website. Amazon’s open platform is simple, convenient, and has traffic support. On the other hand, the commission charged by Webstore is not low, and a single independent website is also competing with Amazon, which has established competition barriers in terms of convenience, price, and service. “A senior Amazon seller told Yibang Power.

“After giving up Webstore in 2015 and 2016, Amazon’s global store business has also begun to expand vigorously.” The seller pointed out that now, the rise of Shopify may rekindle Amazon’s confidence in Webstore. “It is not impossible to copy Shopify and launch direct competition.” .

Indeed, Shopify’s growth path has confirmed the greater possibility of independent website SaaS service providers-from simple website building tools to ecological services, it does not have to build its own infrastructure, but builds a power grid by integrating various third-party services. The “arsenal” needed for business development. And Amazon has built these basic settings for many years, and it is naturally more handy to use.

“From the perspective of Amazon’s consistent style, this is not impossible. After all, Amazon is very good at copying.” Another seller pointed out that in 2016, when Wayfair, an American home furnishing e-commerce platform, was developing rapidly, Amazon established a “Wayfair Parity” team of 100 people. , conducted an analysis of Wayfair’s business structure, looked at how Wayfair sourced, sold and delivered bulky furniture, and eventually replicated most of its products.

2. Integrate the resources of independent stations and let the value of independent stations return.

There are also many practitioners who think that Amazon is unlikely to copy a Shopify, but more likely to integrate the resources of the independent website, and return the value of the independent website to the Amazon platform in some way. change”.

“Whether it is to restart the Webstore, or to do another Shopify-like model, it will return to the original situation of fighting each other. When it closed the Webstore and focused on the global store business, Amazon had already made a choice. The reason why the Webstore failed is also Lessons learned, Bezos should not allow the same mistakes to be repeated.” A seller of Amazon’s home category said bluntly, “If I did that, I wouldn’t choose Amazon for website support anyway, and I would worry about data security issues. “

“The same company needs to do both a platform and an independent website building service, which are mutually exclusive. Faced with the same business, should he go to the platform to open a store or provide him with SaaS services? It’s difficult to have a bowl of water. Peace of mind.” The head of the overseas project business of an Internet company also pointed out that for a technology giant like Amazon, the winning point may not be to copy a competitor, but to create a means of surpassing the opponent or cooperating.

In his view, the rise of independent SaaS service providers is separated from the platform system, and e-commerce platforms such as Amazon cannot control it. But Amazon may use some methods to bring the value and traffic of independent websites back to its own platform. This is the same logic as the domestic “full network marketing Taobao transaction”.

A seller who is both an independent site and an Amazon store expressed the same sentiment. He pointed out that many independent websites jump to Amazon to do transactions. For example, many sellers’ deals independent websites are to divert traffic to Amazon stores.

“If Amazon has a way to better integrate the independent site resources of platform sellers and make the seller’s entire business more efficient, then the seller is also welcome.” The seller pointed out.

3. Invest in Shopify Competitors

The enemy of the enemy is a friend, and Shopify can partner with Amazon’s competitor Walmart, so will Amazon ally with Shopify’s competitor? It’s not impossible.

Such cases are numerous in the history of global business. In 2017, Intel and AMD, the “rivals” of the past few decades, officially announced their cooperation to form a team to fight against the bigger rival Nvidia; in 2018, Google became a shareholder of JD.com, intending to support JD.com to curb Amazon’s development; in order to compete with Uber, Didi has successively Invested in Grab, a taxi-hailing software in Southeast Asia, Lyft, a taxi-hailing application in the United States, and a taxi-hailing software in Brazil. In 2020, JD.com and Kuaishou reached a strategic cooperation.

According to public data, in the US market, Shopify has a market share of about 20% in the field of independent website building services, and its main competitors include WooCommerce, Bigcommerce, Wix, Squarespace, etc. Among them, Bigcommerce, which was listed on Nasdaq in August 2020, performed particularly well. Although it is still much smaller than Shopify, it has grown rapidly and is more open to alliances with e-commerce platforms. For example, It works with Amazon, eBay, Wish (BigCommerce merchants can connect their storefronts with several e-commerce platforms to reach more buyers), and integrates with traffic platforms like Facebook, Instagram, and Twitter.

“It is also possible that Amazon chooses to support Shopify’s competition.” A cross-border service provider pointed out.

The rise of Shopify:

opponents who are not head-to-head

Shopify founder and CEO Lütke has positioned his company as someone who will help people fight against Amazon. “Amazon is building an empire, and Shopify is trying to arm the rebels.”

This new force lying in ambush on the flanks and trying to overturn the world’s largest cross-border e-commerce empire has a “blessed future” under the urging of the epidemic. To sum it up in a few words:

beyond. In the third quarter of 2020, Shopify’s GMV reached $30.9 billion, surpassing eBay’s $25 billion. At the same time, Shopify captured about 6% of the U.S. e-commerce retail market, trailing Amazon’s 37%, but also surpassing eBay , has firmly secured the second position of the US e-commerce business. In addition, in 2020, Shopify sold a total of $5.1 billion worth of merchandise during Black Friday and Cyber ​​Monday, the most important shopping seasons in Europe and the United States, $300 million more than Amazon’s total third-party sellers.

soared. The growth rate can reflect the development prospects of a company. In the third quarter of 2020, the year-on-year growth rate of Shopify’s quarterly revenue was as high as 96.1%, while Amazon’s was only 37.39%. Also driven by the epidemic, Shopify’s growth rate was 2.5 times that of Amazon. many. The stock market reflects the capital market’s judgment on Shopify. As of December 30, 2020, the total return of Shopify stock was 191%, while the average return of all industry stocks this year was only 2.81%. Shopify stock has returned a whopping 1043% over the past three years.

Carve up. Shopify is constantly stealing the attention of Amazon sellers. In the past 12 months, more and more Amazon sellers have put into the arms of Shopify, and the number of Shopify global active merchants has exceeded 1 million. For merchants, Shopify not only provides convenient website building services, but lower commissions also mean more profits.

For example, if a merchant sells a piece of clothing for $50 on Amazon, Amazon will earn $8.50 in commission; if the merchant chooses to advertise on Amazon, Amazon will earn at least another $6.50; if the merchant also With FBA, Amazon earns a commission of close to 40% of the sale price. But if merchants use Shopify, transaction fees are much lower.

In addition to small and medium-sized sellers, Nestle, Pepsi, Unilever, Budweiser, WaterAid, Penguin Books, Red Bull and other brands have chosen Shopify services, and the independent website model has become one of the important ways for these brands to cultivate private domain traffic.
Although the market value is less than one-tenth of Amazon’s, Shopify has still become an “Amazon raider” in the eyes of cross-border e-commerce. In a way, Shopify tends to support partners who have been marginalized or even excluded from Amazon, allowing them to grow their business unhindered. This leads to Amazon having to do everything on its own, while Shopify can form alliances with other companies to grow together.

Today’s Shopify is no longer the simple website building tool of 15 years ago. It is already a listed company with a market value of more than 130 billion US dollars. It has a loan service Shopify Capital, a payment system Shop Pay, a merchant account Shopify Balance and other businesses, as well as integrated Diversified logistics supply chain and other back-end services have gradually established a relatively complete business ecosystem of front-end website building tools + internal integration channels + back-end operation management.

Shopify itself provides front-end website building tools, and gradually opens up sales channels such as Amazon and eBay to make multi-channel management more convenient for merchants; integrates Facebook, Instagram and other marketing channels, enabling merchants to market with one click; Force merchants to use Shopify Pay; cooperate with third-party developers to develop various operation management apps to meet the functional requirements of merchants’ inventory management, link channels, customer service support; cooperate with USPS, DHL and other logistics providers to provide logistics discounts for merchants.

Such a business ecology is destined for Shopify not to confront Amazon head-on, but to lead more new forces to “revolt” the Amazon empire in the form of an “alliance”. If the independent website brands are the fighters of the anti-Amazon alliance, then Shopify is the “arms dealer” that provides “weapons” for the independent website brands. It will not end in person, but has the ability to incite the war situation.

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Intensification of internal conflicts:

Let the “rebels” lead to Shopify

In addition to dealing with Shopify, the “invisible opponent” and the growing independent website ecosystem behind it, Amazon’s internal conflicts are also intensifying, including between the platform and sellers, between self-operated businesses and open platforms.

For small and medium-sized sellers, the high discount rate on the Amazon platform has brought huge operating pressure. It is understood that Amazon’s commission has increased from 19% in 2015 to 30%, coupled with advertising, FBA and other related expenses, the profit margins of small and medium-sized merchants continue to be compressed.

Many sellers on the platform are focused, and the competition for similar products is fierce. Consumers are prone to price comparison. Those products that do not have price advantages or are not at the forefront of the listing are difficult to win customers’ favor.

Small sellers are miserable: “The Amazon platform requires us to have low prices, good quality of goods, and high commissions. Now traffic costs are getting more and more expensive, and it is too difficult for small and medium-sized sellers to survive.” Relatively Shopify’s commissions are obviously more acceptable. According to Shopify’s official website data, users who purchase the basic version of Shopify will pay a commission of 2.9%+ using an online credit card.

For 30 cents, if you use Shopify Pay, there will be no fees, and you can also enjoy up to 74% off shipping.

The data shows that from the perspective of the annual income of Amazon’s third-party sellers, only 270,000 merchants have an annual income of more than 100,000 US dollars, and less than 170,000 merchants have an annual income of more than 1 million US dollars, and their annual income exceeds 10 million US dollars. of less than 1,000 businesses. There are more than 6 million merchants on the Amazon platform, which means that less than 5% of sellers have an annual income of $100,000. The increasingly obvious head effect makes most sellers “see no hope”.

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In addition to high fees and fierce competition, Amazon’s gradually tightening control policies have also made many sellers “frightened”. They often worry about the theft of store information and the closure of stores by Amazon. According to a JungleScout survey, about 76% of merchants have experienced a forced suspension by Amazon.

Once the seller is notified of the account suspension by Amazon, they need to provide details of the manufacturer’s product and the manufacturer’s invoice in accordance with Amazon’s requirements in order to verify the authenticity and wait for the account to be reinstated. For the slightly larger sellers, that means losing tens of thousands of dollars a day.

According to the Wall Street Journal, some sellers found that after providing these details to Amazon, the account unblocking was still a long way off. There are even rumors that Amazon is using the same manufacturer to launch its own similar products.

Even more worrying is the competitive pressure and distrust that Amazon’s self-operated business brings to third-party sellers. According to JungleScout data, 53% of merchants said that the competitive pressure mainly comes from Amazon’s self-operated business. Because Amazon’s self-operated products have strong price advantages, data and traffic advantages, Amazon was once suspected of being a monopoly. “Whether Amazon obtains hot-selling products through background data, and whether it puts its self-operated products first on Listing, no one can tell.” Some sellers expressed their doubts.

The suspicion of a monopoly has Amazon facing hefty fines in the European Union. Under new EU data usage rules, Amazon faces up to 10% of annual revenue fines if it uses any data from merchants to compete with them, or to favor its own products on Listings, or three fines within five years. Considered a violation of the system itself, may be required to divest the business.

These contradictions are pushing some sellers to other platforms, and the “rebels” of anti-Amazon imperialism are getting stronger and stronger. And Shopify connected these “rebels” to form an “anti-Amazon alliance”.

If Amazon’s success comes from putting buyers first, then Shopify’s success comes from putting sellers first.

Essentially, what Amazon does is to C business. Although Amazon started with books, Bezos’ dream is to create an online department store that serves a wider range of consumers, with sellers as part of the store itself. Bezos has always emphasized that Amazon must focus on customers and be obsessed with customers, and proposed the “three pillars of customer experience”: better choices, lower prices, and more convenient services. Amazon also uses this to regulate platform merchants.

Just as the reason mentioned when the fashion shoe brand Allbirds refused to enter Amazon: “Worry about damaging the brand and pricing power.” And many buyers also responded that the Amazon platform has always implemented the strategy of displaying products, not the strategy of displaying stores and brands. .

In contrast, Shopify does a to B business. It serves merchants rather than consumers. Its initial business is to sell website building services to e-commerce sellers, and then it also provides more services around the facilities that merchants need to run an online store.

“All of this has caused merchants to fall to the rising Shopify, intentionally or unintentionally.” A cross-border e-commerce observer sighed.