Shopify and Amazon are more strategic partners than competitors, with Shopify needing Amazon the same way Harry Potter needs Voldemort
“This is where the magic begins once the customer hits the ‘Buy’ button,” a tour guide says as she shepherds a group through YYZ4, the noisy, busy, cavernous warehouse in Brampton, Ont., operated by Amazon.com Inc.
Mastering the enormous complexity of e-commerce fulfillment is a huge part of Amazon’s competitive advantage, and it’s territory that Ottawa-based Shopify Inc. has stepped into by announcing in June it will spend $1 billion to create its own fulfillment network. “Procter and Gamble used to be in the case and pallet business. Now I have to ship an individual pack of five razors to you when you need it,” said Dwight Klappich, an industry analyst focused on e-commerce at Gartner Inc. “You used to move more stuff in bigger volumes less frequently. Now we’re moving small things very frequently in very, very short amounts of time. That’s what’s changed everything.
These tight tolerances are also why Amazon randomly stores products throughout its robotic warehouses. If, say, one particular product is clustered on one shelf, a choke point that could slow down processing times might occur if the item goes on sale and there’s a surge of orders. By comparison, Shopify’s fulfillment network is still in its infancy, but the company has said that by year-end it will be able to serve 99 per cent of the people in the continental U.S., delivering packages within two days after ordering. It also said it can make this service available to merchants selling anywhere from three to 30,000 items per day.
“Between our clients, Amazon is an absolute love-hate relationship,” said Steve Izen, co-founder of Orderbot Software Inc., a Vancouver-based company that helps large merchants manage their e-commerce sales across Amazon, Shopify and other platforms. Shopify works with a broad spread of sellers, but its platform tends to be a good fit for merchants selling products with character and strong branding. Think of it as a collection of quirky stores downtown or in small villages where you can buy something unique and special.
But Shopify doesn’t need to participate in this competition, because buying a new snowboard or handmade scented candles is different than buying commodities. As long as Shopify can reliably deliver the products within a couple days, that’s good enough for a lot of merchants, especially if it doesn’t engage in predatory competitive practices.“I believe that we are solving a different problem.
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