Amazon.com (NASDAQ:AMZN) is the Western world's undisputed king of e-commerce, accounting for nearly 40% of the United States' online shopping, according to data from eMarketer. The next-nearest name is a distant-second Walmart (NYSE:WMT), winning about 5% of the nation's e-commerce revenue. It's certainly no slouch outside of the U.S. either.
But the thing about being the biggest and best in your particular market is that everyone else is mostly taking aim at you. So far the behemoth has fended those competitors off, but a couple of recent developments point to tougher times ahead.
In short, those rivals have finally figured out how to pick at Amazon. The trick is working together.
For years the prevailing opinion was that if any outfit was going to give Amazon a run for its money, it would be online auction platform eBay (NASDAQ:EBAY). That's not necessarily the case anymore, though. Last quarter, Shopify (NYSE:SHOP) facilitated more online sales, as measured by total dollars transacted, than eBay did. It wasn't a huge difference. Shopify's merchants sold $30.1 billion worth of goods, versus eBay's total gross merchandise volume (GMV) of $27.1 billion. But Shopify's GMV grew 119% year over year, extending a red-hot growth pace. eBay's comparable figure was only up 26%.
Shopify's rapid growth is telling.
As different as eBay may be from Amazon, it's more like Amazon than not. Sellers must still present their merchandise within the confines of both companies' websites, and must compete side-by-side with other sellers. Shopify, on the other hand, empowers merchants with tools that let them build and promote their own e-commerce platform.
The company is plugging into an increasingly successful direct-to-consumer movement that connects vendors directly with buyers, bypassing major platforms like eBay and Amazon. eMarketer believes the direct-to-consumer market in the U.S. alone will reach nearly $18 billion this year, up 24% from last year's tally. That growth has also given rise to a younger company called BigCommerce (NASDAQ:BIGC), which, like Shopify, empowers small merchants with tools that let them successfully bypass Amazon. BigCommerce is still nowhere near as big as Shopify is, but so far the market is supporting both outfits.
And the sheer caliber of some of these two names users should bug Amazon. Shopify has been tapped by condiment brand Heinz -- owned by Kraft Heinz -- and office supply retailer Staples, just to name a couple. BigCommerce is helping ice cream company Ben & Jerry's and consumer technology outfit Skullcandy.
Walmart is building its army
The world's biggest brick-and-mortar retailer may have gotten a late start on getting serious about e-commerce, but it's making up for lost time. Since 2017, strong double-digit growth in online sales has been the norm for this company.
Walmart clearly can't keep that pace up forever; much of the big growth rate is a function of how little online sales the discount retailer produced before it invested heavily in its e-commerce presence back in 2015.
To the extent the retailer was hindered by a lack of merchandise offered online, that shouldn't be a bottleneck much longer. MarketPlace Pulse reported last month that the number of third-party vendors selling via Walmart's online marketplace has doubled in just one year. The pace of additions is picking up, rather than slowing down, too.
Much of that growth stems from the partnership Walmart forged with Shopify in June, making it easy for qualified Shopify sellers to plug into the fast-growing online shopping platform. The partnership doesn't necessarily preclude a third-party seller from also using Amazon or eBay as a sales venue. It also doesn't inherently mean lots more revenue for the company; Walmart only collects a fraction of the sale price for an item sold online by vendor. Given Amazon's sometimes-shaky relationships with smaller sellers, though, it stands to reason these sellers prefer to be on platforms where they're welcomed and assisted rather than squeezed and resisted. And, like Amazon, Walmart can find other ways to further monetize that traffic and the data being left behind by consumers' purchases of third-party goods at Walmart.com.
Don't read too much into the message. Amazon's dominance of the North American e-commerce market isn't in jeopardy. It still enjoys an incredibly commanding lead on every other contender, producing more than $300 billion worth of revenue over the course of its past four reported quarters.
The strength and size of that lead, however, is finally under attack. As I suggested would be the case back in January, companies are collectively teaming up to tackle the proverbial 800-pound gorilla in the room. That's playing out in earnest right now, even if the effort is young and still a bit rough around the edges. Give it some more time, and you'll find Amazon's got a much tougher future than its recent past has been.