Canadian e-commerce specialist Shopify (NYSE:SHOP) keeps saying that it isn't trying to compete directly with Amazon.com (NASDAQ:AMZN), yet it continues to make moves that increasingly put the company on a collision course with The Everything Store -- including the recent launch of the Shop app, which helps users discover merchant stores on the Shopify platform.
In a potentially game-changing deal announced earlier this week, Shopify said it is partnering with one of Amazon's biggest rivals: Walmart (NYSE:WMT).
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Walmart has been aggressively ramping up its e-commerce ambitions in recent years in an effort to chip away at Amazon's e-commerce market share while expanding its own. To its credit, the retail behemoth is making progress: Walmart just overtook eBay in U.S. e-commerce market share in May, according to eMarketer (via MarketWatch). Shopify beat out the online auctioneer last year and is now the No. 2 player in the U.S., according to separate data from eMarketer (via The Guardian).
As part of the new partnership, Walmart will create a new section of its site where Shopify merchants can list their products. This is an entirely new model for both companies, which is precisely why it has so much potential to be a mutually beneficial strategy. Though Walmart launched its third-party Marketplace over a decade ago, this is the first time that it has integrated with another e-commerce platform, one that will also handle back-end services like inventory management, order management, and fulfillment.
Walmart's site garners over 120 million monthly visitors, a massive audience that Shopify merchants will soon have access to. Amazon says it gets 95 million monthly visitors in the U.S. Walmart expects approximately 1,200 Shopify Merchants to be set up on Walmart Marketplace by year's end.
"By partnering with Walmart, we will be able to connect merchants with consumers across America within a trusted marketplace, helping merchants drive new sales while consumers discover new products they'll love," Shopify product exec Satish Kanwar said in a statement. "Our expertise in multi-channel commerce, combined with Walmart's reach, will allow us to create better online shopping experiences for merchants and consumers alike."
Merchants on Walmart Marketplace don't pay listing fees but only a cut of completed sales to the company. In effectively outsourcing some of the operational duties to Shopify for those merchants, Walmart is essentially implementing a capital-light way to expand its e-commerce presence that will generate high-margin revenue from those commissions.
The cut on those sales will be pretty close to pure margin. Walmart's traditional referral fee structure varies from 8% to 20%, depending on the product category. However, merchants will still be paying fees to Shopify, which uses a subscription model. It's unclear if fees will be reduced for merchants participating in the new program.