E-commerce

Watch out, Amazon. Walmart is back in the game, thanks to Shopify

Tim Breslin, CTO of O3 World, shares his insight on the Walmart/Shopify partnership and how it will help Walmart stay competitive with Amazon.

Photo by istock.com

July 22, 2020 by Timothy Breslin

The e-commerce deal heard around the world? Walmart's partnership with Shopify. The power move is taking Amazon by storm as it will allow Shopify's customers — mostly small- to mid-sized businesses — to sell on Walmart.com, which gets a whopping 120 million visits per week.

Although the exact details of how it will work from both a technological and financial perspective haven't been disclosed, this deal is huge for Shopify's customers as it instantly connects them to millions of potential consumers. Similar to Amazon or Wayfair, being able to sell through Walmart.com does not preclude them from selling on their own website, or through other marketplaces. This selling strategy has become critical for smaller retailers as these marketplaces from Amazon and Shopify become more ubiquitous.

The reach provided by Amazon and Walmart has long been coveted by smaller retailers. It makes the most sense for businesses that sell custom products that are not available anywhere else to use these larger e-commerce companies as a platform to sell their products. For these companies, having access to Walmart's huge customer base is a win-win-win. They get unprecedented access, while the customer gets to purchase from a trusted retailer and Walmart takes a bite out of the transaction while branding the purchase and building loyalty.

For retailers that just aggregate and resell others products — they may find themselves competing with impossibly low margins. This is the unfortunate artifact of the migration to the third-party marketplace model. The competition is fierce. As the world of online commerce evolves, I suspect this is not the last merger/partnership we will see. The battle for market share is just as fierce at the top as it is at the bottom. Retailers turned into tech companies and tech companies into retailers. The good news for us regular buyers out there is in their fight for dominance, it'll be easier than ever to get a good deal.

But the real winner is...

Walmart. Walmart needs every advantage they can gain as they are playing catchup with Amazon: a company that is literally 20 years ahead of them in terms of cultivating an all digital third-party marketplace. The recent global pandemic has accelerated digital transformation for everyday consumers. It's now part of our lives in ways we couldn't imagine, even a short few months ago. The path ahead is a digital-first strategy, which although core to Amazon's vision, was not as much so for traditional brick-and-mortar retailers like Walmart — until now.

What this means for third-party, e-commerce users

The Walmart/Shopify partnership allows Walmart to stay competitive with Amazon, whose third-party selling strategy has been at the core of the organization's business model since November of 2000

Small- to mid-size businesses that want cloud-based, customizable e-commerce have many more options today than they did a decade ago. However, the landscape is pretty fragmented with each player capturing a smaller piece of the market. It's also true that many of these companies sell in many marketplaces in addition to their website. It's not uncommon for smaller retailers to simultaneously be selling on Amazon, eBay, Etsy, Wayfair, etc.

What to expect in the coming years

It's hard to deny the success of Walmart over the last few decades. However, in the immortal words of Bob Dylan "The Times, They Are A-Changin'." Over the past few years I have noticed that foot traffic at our local malls have decreased significantly. Many of the retail stores are now being replaced by more experience-oriented offerings — things that are difficult to replicate digitally.

I suspect a similar fate could befall brick-and-mortar retailers like Walmart, as people continue to shift to purchasing online. The current pandemic may have given us a glimpse of what is to come. More likely, these companies will play follow the leader and compete with Amazon at their own game. Ultimately, Walmart's partnership with Shopify is a move allowing Walmart to stay in the game.

Tim Breslin is CTO of O3 World.