In a recent discussion as part of the Amazon Advisor Call Series, Scott Devitt, an analyst at Wedbush, and eCommerce veteran Rick Watson, founder of RMW Commerce Consulting, speculated about a potential collaboration between Amazon.Com, Inc (NASDAQ:AMZN) and Shopify Inc (NYSE:SHOP). This possibility emerged from the backdrop of Amazon’s efforts to unlock more fulfilment volume in its strategically vital grocery category.
The two experts highlighted the critical role of the grocery segment for Amazon, in light of its extensive contribution to total retail, and the implications for achieving long-term, cost-effective fulfilment strategies. The conversation stressed the indispensable value of Amazon’s robust infrastructure and impressive scale in maintaining low incremental fulfilment costs.
They noted that increasing the volume in the grocery sector could serve as a catalyst to lower additional fulfilment costs and fortify Amazon’s logistics advantage. However, Amazon’s attempts to develop a unique grocery concept at scale remain ongoing, with continued investments directed towards a comprehensive, long-term omnichannel approach.
“Buy with Prime,” they argued, could be a significant factor in generating extra fulfilment volume for Amazon and potentially trigger a partnership with Shopify. They observed that Shopify recently offloaded its logistics business to Flexport, indicating a move away from developing internal logistics solutions.
Despite these developments, the probability and ultimate conditions of a potential Amazon-Shopify deal remain in the realm of speculation, mainly due to the significant role of checkout/payment procedures in Shopify’s operational model.
Devitt and Watson also recognized the potential upside in Shopify’s Point of Sale (POS) product, as it offers the company opportunities to cross-sell to omnichannel retailers. In addition, they discussed the recent launch of Shopify Components. This initiative allows Shopify’s services to be unbundled, enabling businesses to leverage specific Shopify features like Shop Pay.
The integration of Shop Pay with non-Shopify merchants, they noted, positions Shopify for more direct competition with payment/fintech giants such as PayPal.
The conversation also turned to the topic of social commerce, where growth in Western markets has traditionally not lived up to investor expectations. However, platforms like TikTok, characterized by high user engagement and the potential for viral content, present an exciting opportunity that may lead to the creation of successful eCommerce models other merchants or brands could follow.
They further examined the impressive growth of Shein and Temu, crediting this to advancements in global logistics, which have significantly reduced product delivery times from China. They also praised Shein’s strategic use of data and consumer trend analysis to inform its product manufacturing and selection, which has resulted in supply chain enhancements and faster market entry of trending products.
Finally, they reaffirmed the enduring role of traditional AI/Machine Learning techniques in driving efficiencies in retail/eCommerce, through superior prediction, forecasting, and allocation tools.
On the last check on Friday, Amazon’s shares enjoyed a minor boost, trading 0.43% higher at $134.88.