Amazon Targets Logistics Void Left by Shopify’s Retreat, Promotes Buy With Prime
Amazon is capitalizing on the logistics gap created by Shopify’s sudden withdrawal from shipping services earlier this year. This move has provided an opportunity for the online retail giant to generate revenue by 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 sites. The company shared metrics that highlight the sales boost experienced by merchants when shoppers leverage 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 come from new customers to the respective online brands. Larsen explained that this service attracts these shoppers because they are already familiar with the Amazon experience and trust the prompt delivery of their orders. In fact, in January, Amazon revealed that merchants using Buy With Prime witnessed a 25% increase in sales conversions.
Amazon currently dominates e-commerce in the U.S., capturing nearly 38% of all online spending this year, as reported by Insider Intelligence. The company is increasingly focusing on providing services, such as product packing and delivery, to online merchants rather than solely selling products directly. With its own online sales growth slowing down, Amazon anticipates more shoppers will opt to purchase products directly from brand websites rather than through online marketplaces like Amazon and Walmart.
Insider Intelligence forecasts a 17% increase in direct-to-consumer sales this year, reaching $182.6 billion. This growth rate is nearly double the overall online spending growth rate of 9.3%.
While 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 of 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 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 utilize Amazon’s logistics network. Larsen stated that the integration went smoothly as both companies prioritize the best interests of merchants and shoppers.
“I don’t think we need to have this Amazon-versus-Shopify narrative anymore,” Larsen remarked.
Merchants have expressed satisfaction with Buy With Prime thus far. Aaron Cordovez, co-founder of Zulay Kitchen, which sells around 1,000 products on Amazon, stated that the service has helped increase sales on his website because customers trust the Amazon process. He believes that more people will be inclined to try it due to the limited downsides.
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, did not yield significant results. However, industry experts believe that the Buy With Prime initiative could achieve better 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 a growing interest among merchants to diversify to other channels. He highlighted fulfillment as a historical challenge in this regard and commended Amazon for seizing the opportunity at the right time.
This story was originally published on Bloomberg.com. [Read it here.](https://www.bloomberg.com/news/articles/2023-09-14/amazon-going-big-to-fill-delivery-void-left-by-shopify-retreat)