Amazon.com (AMZN -1.70%) will now allow Prime members to use their shopping benefits on third-party websites. Free, two-day shipping; easy returns; and checkout and shipping options like they have on Amazon can now be accessed on a retailer's own website if it uses the e-commerce giant's logistics platform.
While it could help expand Amazon's reach beyond the confines of its own site, making the Prime loyalty program an essential component for consumers and merchants alike, the real purpose is likely an effort to blunt Shopify's (SHOP -2.33%) ability to further build out its own fulfillment network.
Still, there's good reason to think Shopify can succeed and beat Amazon at its own game. Let's take a closer look.
A prime opportunity to expand
Buy with Prime is another way for Amazon to take the technological prowess it developed and transform it into a service.
Just as Amazon now runs many e-commerce sites through its Amazon Web Services unit and is selling its Just Walk Out cashier-less shopping to third-party retailers, it is now turning its Prime membership program into a service merchants can use on their own websites.
Initially, retailer participation will be invitation-only and open only to merchants currently using its Fulfilled by Amazon logistics platform. But Amazon says it will continue extending more invitations this year and will eventually open it up to any retailer, regardless of whether they have an Amazon presence or not.
Prime's vice president Jamil Ghani said, "With the introduction of Buy with Prime, we're expanding where members can enjoy trusted and convenient Prime shopping benefits beyond Amazon, adding even more value to their membership."
Program enhancements will be essential because the member loyalty service is getting pricey at $139 a year. Casual Amazon shoppers may begin canceling the service as they no longer perceive the program to make financial sense, although they also get free movies, music, and more, along with free, two-day shipping.
But Amazon is also looking over its shoulder at Shopify and seeing the e-commerce platform provider narrowing the gap between them. It might not be close yet, but Amazon wants to prevent its rival from making it a close horse race.
Becoming a bigger threat
Shopify is rapidly building out its fulfillment and logistics network to make its platform a one-stop-shop for small- and medium-sized businesses. Its payment options, for example, are now integrated through Alphabet's Google, Meta Platforms' Facebook and Instagram, and more recently through shopping tabs on TikTok.
The number of locations subscribing to Shopify's Point of Sale Pro nearly doubled in the fourth quarter compared to the year-ago period, and sales volumes for Shop Pay on Facebook and Instagram quadrupled.
Shopify has also expanded internationally, with its services now available to merchants in the U.K., Ireland, Australia, New Zealand, the Netherlands, Germany, Belgium, Denmark, and Spain. It also launched a JD.com marketplace sales channel in January, giving Shopify merchants access to the world's biggest e-commerce market. It can tap into JD's U.S. fulfillment centers, allowing retailers to ship quickly to customers in China.
The company is upgrading its fulfillment centers too, recently announcing it is consolidating its space into larger facilities that will allow its Shopify Fulfillment Network to achieve two-day (or less) shipping to 90% of the U.S. Shopify plans to spend some $1 billion over the next two years to expand operations further.
In addition, Shopify has launched merchant money management accounts and a small-business loan boutique. It also hosts an enterprise e-commerce platform for fast-growing brands and offers non-fungible tokens, or NFTs, to help businesses and brands better connect with customers.
Might not be enough
Amazon clearly appreciates Shopify's potential and wants to nip the competition in the bud with its Buy with Prime. There's no doubt that having the Amazon Prime logo on their website will be a big draw for retailers.
However, with it comes the specter that Amazon may have access to their customer data -- not just from the traffic generated on the Amazon site but on their own as well. That has always been one of the potential drawbacks merchants have had to worry about by partnering with Amazon: Will it use its substantial logistics network to pry the lucrative customer analytics for its own ends?
Amazon's answer is a resounding no. A spokesperson said, "Amazon prohibits the use of non-public information about products Buy with Prime shoppers purchased or viewed in merchants' stores for merchandising or personalization in the Amazon store." The spokesperson also notes that any non-public information that might be collected cannot be used for making decisions about sourcing, inventories, or pricing, including with any of its own branded products.
Even so, Shopify might not see its growth dented by this new program. Both companies are, no doubt, working overtime to win over shoppers.