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How This E-Commerce Platform Quietly Powers a $9 Trillion Market

By Christine Williams – Sep 8, 2020 at 11:51AM

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Adobe-owned Magento Commerce keeps Shopify on its toes, so why haven't you heard of it?

As more and more workers are displaced because of the coronavirus pandemic, an astounding number of fresh entrepreneurs and businesses have turned to setting up shop online. Shopify (SHOP 0.20%) seems to have been running the show, luring in many individuals with its easy-to-use interface and relatively cheap plans. But the real winner in the e-commerce fight may actually be a low-key platform bought by Adobe Systems (ADBE -0.48%) in 2018: Magento Commerce.

So why isn't everyone using it?

Magento targets a different customer

E-commerce platform Magento integrated with the Adobe Experience Cloud in mid-2018, marrying digital commerce with Adobe's marketing arm to serve both business-to-business and business-to-consumer customers across the world. 

Person holding laptop with shopping cart logo above it

Image source: Getty Images.

Unlike Shopify, whose main customers by volume are small businesses and entrepreneurs, Magento targets small and medium enterprises in consumer packaged goods, retail, wholesale, manufacturing, and even public sectors. The platform's partner ecosystem comes with thousands of pre-built extensions, including payment, shipping, tax, and logistics, which is ideal for client companies with complicated order structures or fast-growing needs. 

Of course, both Shopify and Magento offer basic and premium versions of their products. Additionally, both have a catalog of add-ons to improve and tailor the experience. However, Magento targets mostly customers who desire full control and flexibility, while Shopify is renowned for its user-friendly interface that greatly appeals to the average shop owner. 

Business is booming

In actuality, however, Magento's target customers -- growing businesses that need a wholly customizable online shop -- are the types of customers that Shopify really, really wants. Shopify has a large customer base that subscribes to its lower-priced plans, and the company uses the conversion rate to its $2,000/month Shopify Plus plans as a metric for revenue growth. But these Shopify Plus customers are exactly those to whom Magento appeals to since many enterprises have complicated needs that the easy Shopify interface may not necessarily address. 

So Shopify has moved to strategically pull in customers through creating an online ecosphere, setting up its payment portal Shopify Payments, and launching an app that aims to be a go-to consumer platform for Shopify storefronts. Why not go grab Magento's customers, since Shopify is such a user-friendly platform?

Models of globe and container of packages on laptop keyboard

Image source: Getty Images.

The fact is, Shopify's great user experience is slowly gaining traction, but Adobe's Magento still maintains its position as a leader in the digital commerce industry, with one of the largest increases in new customers by August 2020, according to Gartner. Integrating with Adobe Analytics and Marketing Cloud, the Magento-powered Adobe Commerce platform is able to provide a highly customizable end-to-end experience that enables brands like HP and Unilever to deliver their desired commerce environments to shoppers. Not only does Magento compare well against Shopify in its ability to execute, Adobe's integrated offering also ranks higher for its completeness of vision. The fact that Shopify is a real challenger is already amazing in and of itself, and Adobe would do well to learn from its competitor's user experience. 

Prospects are uniquely positive 

Ultimately, Magento is a powerhouse that fuels small and major brands alike. Adobe currently pursues a different type of ecosphere than Shopify, with a higher focus on customization and digital experience. Magento is a quiet, scalable platform that adjusts to the needs of many businesses across the globe, and this may prove a strong driver of further Adobe growth. 

E-commerce is booming nowadays, thanks in no small part to the coronavirus pandemic and its effect on consumer shopping habits. Magento powered 6% of the total e-commerce websites on the Internet in 2019, and Adobe's second-quarter results for 2020 indicated that its commerce sales had grown 5% year over year while improving its gross margin by three percentage points. The global e-commerce market is projected to grow 14% more every year, and if Adobe is able to deliver a consistent experience to its customers, the company's Magento-powered Commerce Cloud could be a future springboard for continued growth. 

As a mature company, this tech stock has the unique ability to deeply research customer needs and employ daring answers to meet them. Adobe has managed to continue growing even in the face of slumping economic consumption, and investors should expect further e-commerce growth as the economy recovers. 

Christine Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Adobe Systems and Shopify. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

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