Bert update on Shopify

Bert stays positive, puts everything into the big picture context and also clarifies some of the margin dynamics.

https://seekingalpha.com/article/4198491-shopify-shares-sale…

Thinking about the bigger picture on this I think there are 2 very compelling reasons why Shopify has a very very important value proposition and way to win in eCommerce.

  1. International expansion
    Right now as amazing a job as Amazon has done, it has been painfully slow at rolling out worldwide beyond North America and parts of Europe. A major part of that is because Amazon is tied to its own Fulfilment By Amazon logistical set up. Even in UK where it has been forever it has just been slammed for over stating its next day or 2 day delivery promise.

Shopify (and Ali Baba) is not tied to its own in house delivery so it should be able to move internationally much faster than Amazon and even over take it at its logistics network fringe and beyond. Now that Shopify is committing to language translations and localisations this is becoming a reality.

  1. Value proposition vs merchants (and retailers) getting Amazon’d
    Right now every manufacturer, merchant and retailer is scrambling to avoid being Amazon’d. Shopify plus offers a way out of that. Manufacturers, merchants and retailers rather than submit themselves to the Amazon commoditised market place pricing/margins can use Shopify plus to establish their own presence but intercept traffic at Google, Social and mobile before buyers descend to the Amazon price points and margin killer transaction levels.

For these 2 reasons alone I feel Shopify has a viable and promising future. I find their execution exceptional although I have to say as authentic as he is I don’t find Toby’s communications inspiring. (Go compare vs Square or TTD’s CEOs etc).

FWIW I also don’t find the Solutions vs SAAS argument and the margin cross over as materially concerning as others do here. I think it is worth seeing this through to the other side of 1) AWS transition and 2) the Cannabis launch which is only really 6 months. Sure Shopify with its sky high P/S and EV/S ratios could get caned in the meantime but I wouldn’t write this off right now.

Ant

9 Likes

I’m not sure I understand the 1st point. If I look at it from the merchant’s point of view, this is what I see:

Amazon

  • get just listed at amazon, they have millions of active users, user interface, handle payments
  • get listed and fulfilled by amazon, no need to ship yourself
  • sell to amazon and let them handle everything

Ali Baba

  • listed by Ali Baba, they have millions of active users, user interface, handle payments

Shopify

  • integrate online shop in your own user interface and handle payments, no active shoppers provided

Now, I understand that having your shop in your hands has its advantages, but I don’t see how not providing anything above a shopping and payment platform is a clear advantage. Isn’t it like saying that small 7-11 corner stores have an advantage over Walmart because there are places where there’s no Walmart stores?

5 Likes

"Amazon

  • get just listed at amazon, they have millions of active users, user interface, handle payments
  • get listed and fulfilled by amazon, no need to ship yourself
  • sell to amazon and let them handle everything"

The downside is if your sales are great AMZN knows it and will outsource to offer similar items at lower prices than yours. This phenomenon is playing out to the tune of 20% of AMZN in-house brand sales and climbing. I have an in-law whose company sells on AMZN. His goods are thankfully proprietary but AMZN is constantly on him to lower prices. He refuses saying if you want go ahead and delist us from your platform because they sell a lot on AMZN and AMZN makes money from his company’s sales and they can’t offer an equivalent competing product. That is not the case in many situations.

I found this interesting from someone in the trenches with AMZN.

Rob

27 Likes

But I don’t see SHOP’s advantage in that scenario. If you have a proprietary product, you can sell on AMZN without worrying about the prices and take advantage of the millions of users on the platform. If you are selling a commodity, why can you expect people buying directly from you instead of getting the low price on AMZN?

1 Like

To summarize my ideas better. I think there are three reasons why merchants use SHOP:

  1. They already have a frequented website or social media presence that can be leveraged for selling stuff. I think this is where SHOP will always shine - they are the best platform and there’s nothing AMZN or anyone can do about it.
  2. Provide online sales in places where AMZN does not have much presence. While this is still a large field that can be taken advantage of, it’s not a viable long term strategy. This is the corner store vs Walmart kind of situation.
  3. Provide an alternative to merchants disenchanted with AMZN. This is the farmer’s market vs Walmart. It’s not like there’s no money to be made, but it’s not going to be a blow out. For one, SHOP is only one of the alternatives. There’s also Etsy, Ebay, Ali Baba and more. The second problem is that AMZN is not just going let somebody eat their lunch. If they should notice falling sales they will adapt. The farmer’s market will remain a niche in comparison to Walmart.

All in all SHOP’s outlook is good, there’s plenty of ground to cover. However the two reasons given by Bert seem dubious to me at best.

8 Likes

“If you are selling a commodity, why can you expect people buying directly from you instead of getting the low price on AMZN?”

I think most companies do not sell a proprietary product. If they have a nice design for example clothing, they can sell quite a bit of product. Why use AMZN and let them see how your sales are doing?
You’re just asking to be knocked off. At least that’s my take.

Rob

2 Likes

Hi Stenlis

My point is Amazon manages its inventory and paces its internationalisation with its logistical presence. Ali Baba doesn’t do this - it does what eBay does and leaves inventory and logistics to the merchants etc. Shopify also doesn’t limit its presence to its own in house logistical presence so both companies can expand their offerings faster and further than Amazon.

Shopify has done a massive deal with Google and has in place deals with social media, eBay and Facebook etc. It doesn’t have its own in house walled garden of millions of users but has the entire web to source from and can intercept them via social and via google search before heading to Amazon. I think they are some pretty decent customer acquisition strategies.

Cheers
Ant

5 Likes