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.
The company is promoting Buy With Prime, a service introduced last year that offers fast delivery of customer orders placed on external websites. At its Accelerate sellers conference on Thursday, Amazon revealed metrics showcasing the sales boost experienced by merchants when shoppers utilize their Amazon Prime membership for expedited shipping and other benefits.
According to Peter Larsen, an Amazon vice president, three out of four Buy With Prime purchases are made by 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.
“Not only are you acquiring new customers, you’re converting them at a higher rate,” Larsen stated.
As per Insider Intelligence, Amazon dominates e-commerce in the U.S., capturing nearly 38% of all online spending this year. The company has shifted its focus towards providing services, such as packing and delivery, to online merchants rather than solely selling products itself. Anticipating a rise in direct-to-consumer sales, Amazon expects more shoppers to purchase products directly from brand websites rather than through 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 utilizing Buy With Prime, Larsen affirmed 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 ambitions to compete directly with Amazon. However, in May, Shopify abandoned these plans and sold its logistics unit to San Francisco startup Flexport, which is currently undergoing its own strategy shift after replacing its CEO.
The truce was solidified in August when Shopify and Amazon struck a deal allowing merchants using Shopify’s e-commerce tool to leverage Amazon’s logistics network. Larsen emphasized that the integration went smoothly because 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 approximately 1,000 products on Amazon, stated that the service has helped increase sales on his website because “customers trust the Amazon process. There aren’t many downsides, so I think more people will try it.”
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 could be more successful as online merchants recognize the importance of selling through multiple channels, including marketplaces, their own websites, and brick-and-mortar stores.
“There’s a lot of interest in diversifying to other channels, and the challenge has always been fulfillment,” said Ben Rey, chief revenue officer at Teikametrics, a Boston-based software firm specializing in managing advertising spending on platforms like Amazon and Walmart. “Amazon is striking when the iron is hot.”
This story was originally published at bloomberg.com. Read it here.