Amazon Seizes Opportunity to Fill Shipping Void Left by Shopify
Amazon is capitalizing on Shopify’s withdrawal from shipping services earlier this year, creating a lucrative opportunity for the online retail giant to deliver products ordered from websites other than Amazon.
At its Accelerate sellers conference on Thursday, Amazon unveiled Buy With Prime, a service introduced last year that offers fast delivery of customer orders placed on external websites. The company presented data showcasing the sales boost experienced by merchants when shoppers utilize their Amazon Prime membership for expedited shipping and other perks.
According to Peter Larsen, an Amazon vice president, three out of four Buy With Prime purchases come from new customers to the respective online brands. Larsen explained that the service attracts these shoppers because they are already familiar with the Amazon experience and trust the prompt delivery of their orders. In fact, Amazon disclosed in January that merchants using Buy With Prime witnessed a 25% increase in sales conversions.
With nearly 38% of all online spending in the US captured by Amazon this year, the e-commerce giant is increasingly generating revenue by providing services, such as product packing and delivery, to online merchants rather than solely focusing on direct product sales. As Amazon’s own online sales growth slows, the company anticipates more consumers will opt to purchase directly from brand websites instead of online marketplaces like Amazon and Walmart.
Insider Intelligence reports that direct-to-consumer sales, where shoppers buy directly from a brand’s website, are expected to rise by 17% this year, reaching $182.6 billion. This growth rate is nearly double the overall online spending growth rate of 9.3%.
Although Amazon did not disclose the number of merchants using Buy With Prime, Larsen emphasized that the company is fully committed to this initiative. However, he acknowledged that there is still work to be done.
The retreat by Shopify from logistics seems to have brought about a truce between the two companies. Tensions escalated last year when Shopify acquired logistics startup Deliverr for $2.1 billion, signaling its intentions to directly compete with Amazon. However, Shopify abandoned these plans in May when it sold its logistics unit to San Francisco startup Flexport, which is currently undergoing its own strategy shift after a recent change in leadership.
The truce was solidified in August when Shopify and Amazon struck a deal allowing merchants using Shopify’s e-commerce tool to utilize Amazon’s logistics network. Larsen stated that the integration went smoothly as both companies prioritize the best interests of merchants and shoppers, leading him to believe that the “Amazon-versus-Shopify narrative” is no longer necessary.
Merchants have expressed satisfaction with Buy With Prime thus far. Aaron Cordovez, co-founder of Zulay Kitchen, which sells approximately 1,000 products on Amazon, stated that the service is helping him increase sales on his website due to customers’ trust in the Amazon process. Cordovez believes that there are few downsides to using Buy With Prime and expects more people to give it a try.
Amazon has faced challenges in expanding its e-commerce success beyond its own online store. Previous attempts, such as the relaunch of Amazon Pay in 2013 and the closure of its Amazon Web Store business in 2015, did not achieve the desired results. However, industry experts believe that the Buy With Prime initiative may enjoy greater success as online merchants recognize the importance of selling through multiple channels, including marketplaces, their own websites, and physical stores.
Ben Rey, chief revenue officer at Boston-based software firm Teikametrics, which manages nearly $1 billion in annual advertising spending on platforms like Amazon and Walmart, noted that there is significant interest among merchants in diversifying to other channels. Rey highlighted fulfillment as a longstanding challenge and commended Amazon for seizing the opportunity at the right time.
This story was originally published at bloomberg.com. Read it here.