Amazon Targets Logistics Void Left by Shopify’s Retreat
Amazon is seizing an opportunity created by Shopify’s sudden withdrawal from shipping services earlier this year. The move left a void in logistics, allowing the online retail giant to profit from delivering products ordered on 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 shared metrics that demonstrate the sales boost experienced by merchants when shoppers utilize their Amazon Prime membership to receive expedited shipping and other benefits.
According to Peter Larsen, an Amazon vice president, three out of four Buy With Prime purchases are made by customers who are new to the specific online brand. 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 previously disclosed that merchants using Buy With Prime witnessed a 25% increase in sales conversions.
Amazon currently dominates e-commerce in the United States, capturing nearly 38% of all online spending this year, as reported by Insider Intelligence. The company is increasingly generating revenue by providing services, such as product packing and delivery, to online merchants rather than solely selling products itself. As Amazon’s own online sales growth slows down, it anticipates more consumers will directly purchase products from brand websites instead of relying on online marketplaces like Amazon and Walmart.
Insider Intelligence predicts a 17% increase in direct-to-consumer sales this year, reaching $182.6 billion, almost double the 9.3% growth rate of overall online spending.
While Amazon did not disclose the number of merchants currently utilizing Buy With Prime, Larsen emphasized that the company is fully committed to the service. However, he acknowledged that there is still work to be done.
Shopify’s retreat from logistics seems to have brought about a truce between the two companies. Tensions escalated last year when Shopify acquired logistics startup Deliverr, signaling its intention to directly compete with Amazon. However, Shopify abandoned these plans in May when it sold its logistics unit to San Francisco startup Flexport, which recently underwent a change in leadership and is undergoing its own strategy shift.
The truce was solidified in August when Shopify and Amazon struck a deal allowing merchants using Shopify’s e-commerce tool to also access Amazon’s logistics network. Larsen stated that the integration went smoothly since both companies prioritize the best interests of merchants and shoppers.
Aaron Cordovez, co-founder of Zulay Kitchen, a seller of approximately 1,000 products on Amazon, expressed his satisfaction with Buy With Prime. He believes the service is helping him boost sales on his website because customers trust the Amazon process. Cordovez sees few downsides to the service and expects more people to give it a try.
Amazon has faced challenges in expanding its e-commerce success beyond its own online store in the past. Previous attempts, such as the relaunch of Amazon Pay in 2013 and the closure of its Amazon Web Store business in 2015, were not as successful as anticipated. However, industry experts believe that the Buy With Prime initiative may fare better as online merchants recognize the need to sell through multiple channels, including marketplaces, their own websites, and physical stores.
Ben Rey, chief revenue officer at Boston-based software firm Teikametrics, which manages almost $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. He believes that fulfillment has always been a challenge in this regard and commends Amazon for capitalizing on the current opportunity.
This story was originally published at bloomberg.com. Read it here.