Report comes as Shopify pursues Deliverr, Amazon encroaches on Shopify’s territory.
According to Shopify’s 2021 Economic Impact Report, Shopify merchants supported five million jobs and drove more than $444 billion USD in global economic activity last year.
This rise in economic activity—a calculation that includes profit, labour income, and tax revenues—represents a 45 percent increase compared to 2020. It also serves as another example of the growth Shopify has seen during the pandemic.
As Shopify has grown, its competition with Amazon has begun to heat up.
The report, which was produced by Shopify in partnership with Deloitte, relies on a combination of Shopify data and third-party data collected by Deloitte Canada. It found that Shopify’s partner ecosystem has also seen 45 percent growth since 2020. In 2021, it supported 656,000 jobs and generated $32 billion in revenue.
Shopify’s increasing economic impact continues to make the Canadian e-commerce company a notable competitor to Amazon. It’s a rivalry that has been heating up as of late, as the report’s release comes while Shopify is reportedly pursuing a move that will help the Canadian company keep up with Amazon, and shortly after Amazon announced plans that will put the two retail giants into more direct competition.
Bloomberg has reported that Shopify is currently in talks to acquire San Francisco-based e-commerce logistics startup Deliverr to expand its own warehousing and delivery capabilities. If the deal goes through, it will allow Shopify to tap into Deliverr’s nationwide, United States (US) fulfillment network—enabling Shopify to better compete with Amazon south of the border.
According to The Globe and Mail, Shopify’s Deliverr acquisition, worth about $2.5 billion USD, is expected to be finalized before Shopify’s upcoming May 5 first-quarter earnings call. The Globe reports that while a final decision on the transaction has not yet been made, the prospective deal represents part of “an ambitious strategic shift at Shopify to rival Amazon.”
These reports follow Amazon’s recent announcement of its new Buy with Prime feature, which will put the company into more direct competition with both Shopify and dedicated delivery services like FedEx and UPS. This feature will enable Amazon Prime members to shop directly on merchants’ websites using Amazon’s checkout, warehousing, and logistics infrastructure. According to Business Insider, the company intends to eventually roll out this capability to merchants not already selling on Amazon.
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According to Shopify’s latest Economic Impact Report, in terms of amount of economic activity, Shopify’s five largest markets for merchants are the US, Europe, the United Kingdom, Australia, and Canada, respectively. The US is Shopify’s largest market by far, according to this measure.
The report states that US Shopify merchants supported 981,000 jobs and $239.4 billion in economic activity. These numbers are shy of what Amazon reported in its 2021 Small Business Empowerment Report, which measures the impact of third-party sellers on Amazon’s platform, and represents the company’s closest comparison to Shopify’s report. Amazon reported that third-party sellers on its platform—a portion of Amazon’s overall business—created over 1.8 million US jobs between the end of August 2020 and August 2021, selling over 3.8 billion products, and averaging over $200,000 in sales.
Amazon and Shopify have both clearly benefited from pandemic-related tailwinds, which have fuelled a surge in interest in e-commerce over the past couple of years. Shopify in particular has seen growth in part due to its reputation for being friendlier to its small business merchants than Amazon, which has reportedly scooped up data from its own sellers to launch competing products. However, both companies have also experienced some decelerated growth as the COVID-19 lockdowns and stimulus tailwinds that drove the rise of e-commerce begin to subside.
This was reflected in their latest earnings reports, which saw both companies deliver lower than expected revenue guidance for 2022.
Despite beating analysts’ revenue forecast of $1.34 billion USD with $1.38 billion in Q4 2021, Shopify’s revenue growth eased up from the record 94 percent year-over-year rise the company saw in the fourth quarter of 2021. Shopify also generated a loss of $371 million, caused primarily by a sharp drop in the value of the company’s stakes in Affirm and Global-E Online.
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Since reaching a peak of nearly $1,522 USD per share in November 2021, Shopify’s stock price has fallen to about $416 at time of publication—around where it sat pre-pandemic—as the company has been caught up in a broader tech selloff amid rising inflation that has also impacted Affirm, Global-E Online, and to a lesser extent, Amazon.
In Q4 2021, Amazon’s revenue rose nine percent to $137.4 billion USD, in what was the company’s first period of single-digit growth since 2001. Amazon recorded net income of $14.3 billion, and a gain of $12 billion from its investment in EV company Rivian following its 2021 IPO.
Amazon’s stock price currently hovers around $2,763, down from its 52-week high of $3,733. Amazon boasts a market cap of $1.4 trillion, while Shopify is currently valued at about $52.42 billion.
While Shopify still has a ways to go to catch up to Amazon, its move into the logistics space has brought the two companies closer. Shopify first began moving into logistics with Amazon-style fulfillment centres in 2019. However, Shopify appeared to be scaling back these efforts in January, when it terminated several contracts with third-party warehouse and fulfillment partners.
But during Shopify’s February earnings call, Shopify CFO Amy Shapero said these changes were a way for Shopify to leverage more of its own warehouses, rather than independent ones. During this call, Shopify outlined plans to invest $1 billion over the next five years towards its fulfillment network plans. The reported Deliverr deal, if successful, could mark a big step forward on this front.
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Nevertheless, analysts say it will take years for Shopify to compete with Amazon on logistics and fulfillment. Business Insider reports that part of Shopify’s struggles on this front to date have been due to software.
Meanwhile, Amazon’s Buy with Prime feature stands to bring Amazon’s comprehensive logistics and fulfillment capabilities to even more online merchants.
Last year, Shopify did reportedly surpass Amazon on one front—online traffic—as the Canadian company beat Amazon out for unique visitors during Q2 2021.
In response to a report that Amazon plans to launch a rival service to Shopify as early as this year, Shopify co-founder and CEO Tobi Lütke welcomed the competition, telling Bloomberg Businessweek in December that he thinks of Amazon “as a worthy rival.”
With its cloud computing, streaming, and sizeable advertising businesses, however, Amazon caters to more than just the e-commerce sector. Given Amazon’s scale and reach, Shopify has its work cut out if it wants to compete with the American retail giant.
Feature image courtesy Shopify.
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