Amazon Faces a Sharp Challenge From Walmart and Shopify

Tae Kim
·3 min read

(Bloomberg Opinion) -- If you’re going to take on a giant like Inc., it helps to have partners. Shopify Inc. just got a big one.

Walmart Inc. said on Monday that it has partnered with e-commerce store software company Shopify Inc., offering its third-party marketplace as a channel for the upstart’s merchant base. Walmart executive Jeff Clementz told Bloomberg News the retailer plans to add 1,200 Shopify sellers this year, citing recent positive results from a test trial. He also expects thousands of Shopify merchants to be integrated onto the retailer’s marketplace over time. The executive said it will focus on adding U.S.-based small and medium businesses with good records of customer satisfaction to its platform that can also complement its current product assortment. On Monday, Shopify’s stock rose 5%, while Walmart shares were roughly flat.The announcement adds another major player to Shopify’s growing alliance against Inc.’s e-commerce dominance. Last month, I wrote how Shopify CEO Tobi Lutke has often said his company’s goal was to “arm the rebels” against the Amazon empire. The Walmart deal comes just weeks after Shopify signed a partnership with Facebook Inc. that allows Shopify’s merchants to sell on the social-media giant’s platforms under the newly launched Facebook Shops initiative. Before these moves, the aggregated online sales of Shopify’s U.S. customer base already ranked as the second-largest in the country after Amazon, according to the company. And now with Walmart on board and the expanded deal with Facebook, they mark significant steps to expand Shopify’s eco-system, making its platform a more viable and an attractive alternative to sellers.

The battle for e-commerce leadership is especially important given the industry’s soaring sales in the era of Covid-19. Last month, Morgan Stanley analyst Brian Nowak said the trend toward e-commerce has been pulled forward by two years as consumers are preferring shopping online versus risking infection inside physical stores. Nowak predicts e-commerce penetration of U.S. retail sales will surge this year, rising to 23% versus 18% in 2019. In recent weeks, credit-card spending data for online shopping has stayed robust even as more states have re-opened their economies, pointing to a permanent shift of shopping behavior.

The slew of Shopify partnerships may be coming at the right time for another reason as well: Amazon is increasingly getting scrutinized over its competitive practices. In April, The Wall Street Journal reported that Amazon employees used third-party seller data to develop its own competing products, actions the company has explicitly promised it wouldn’t do. And last week, Bloomberg News reported the European Union is preparing a formal complaint against Amazon, alleging the tech giant may be misusing data from third-party sellers on its platform.

With more big players coalescing under Shopify’s banner, Amazon may finally be getting some serious competition in the e-commerce space. In turn, it will likely spur Amazon to do better, which is good news for all parties.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.

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