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Now let's dive into this week's edition where I cover the Shopify vs Buy with Prime feud (and how it puts merchants in the middle), as well as recap Shopify's biggest investments this year. I also share stories about voice controlled video games, TikTok e-commerce stats, Pinduoduo's new US website launch, and Walmart rolling out the red carpet to Canadian sellers.
All this and more in this week's 85th Edition of Shopifreaks. Thanks for subscribing!
PS: Anyone in Bogota this week? I'm flying out tomorrow to speak at the SATW Conference about the future of live commerce. If you'll be in town, let's meet up.
Stat of the Week
76% of American Households have Amazon Prime membership, while only 54.4% have health insurance, 66.1% voted, 59% subscribe to Netflix, 38.4% own dogs, 50% use iPhones, and <1% drive electric cars.
1. Shopify vs Buy with Prime
Shopify doesn’t want merchants using Amazon’s Buy with Prime — a new service that allows Amazon merchants to sell their products directly from their own websites, while offering Prime benefits like fast fulfillment, free shipping, quick checkout with Amazon Pay, and free returns — and the company is warning them that doing so removes Shopify’s ability to protect against fraudulent orders which could lead to stolen customer data.
Personally, I feel as confident with Amazon handling my customer data as I do with Shopify. It'd be different if they were discouraging the use of Buy with Baidu, but come on, this is Amazon we're talking about. Say what you will about Amazon (I do all the time), but they are not in the business of having their customer data stolen.
I first reported on Buy with Prime in April, and since then, several Shopify merchants have been experimenting with the service. After a merchant signs up, Amazon generates an HTML button that they need to add to their product template, but just recently Shopify started warning merchants that the code includes an, “Unsupported external checkout script.” Merchants can still proceed, but must acknowledge that they understand Shopify will not be responsible.
The full warning message reads, “You have a code snippet on your storefront that violates Shopify’s Terms of Service. This script removes Shopify’s ability to protect your store against fraudulent orders, could steal customer data and may cause customers to be charged the wrong amount.”
Shopify’s Terms of Service state that the checkout must happen on Shopify. Merchants can use checkout integrations like PayPal, Affirm, Amazon Pay, Facebook Pay, etc that are part of Shopify’s payments platform, however in order to be part of the platform, those providers have to agree to Shopify’s Partnership Program Agreement ($$$) and API terms.
Shopify CEO Tobias Lütke said in April that Shopify had no problem with Buy with Prime. “We are actually thrilled with Amazon making a decision to take the amazing infrastructure that they’ve built because they have a second to none infrastructure and want to share this broadly with small merchants across the Internet. And so we are happy to integrate this into Shopify, just in the same way how we integrated what — the infrastructure that Meta built, the infrastructure that Google built and the infrastructure that TikTok built and so on. So this fits perfectly into our worldview. And it’s not nearly as zero-sum as some people make it out to be” — but a Shopify spokesperson later told The Information that his comments only represented his opinion and that there was internal debate about whether Shopify should support it or not.
Let's be real for a second — this isn't about security. Amazon Pay (allowed on Shopify) and Buy with Prime (not allowed) are backed by the same fraud protection technology used on Amazon.com. However Amazon Pay goes through Shopify's secure checkout system, whereas Buy with Prime circumvents it altogether, effectively turning Shopify's role into a glorified website builder. A security expert might argue that the Buy with Prime HTML implementation is different and more penetrable, and thus less secure, but that's a debate for smarter minds than me.
Amazon’s rationalization for their implementation method is that it allowed Buy with Prime to support all platforms, and also didn't require permission from them.
So who's right and who's wrong here — Shopify or Amazon?
VERDICT: They both are in the wrong.
While Shopify is truthful in informing merchants that Buy with Prime violates their Terms of Service, they are masking the move with overly severe security warnings to both dissuade merchants from using the service and negatively color the new service altogether. Reputations stick.
Bottom line is that Shopify is protecting their greatest source of revenue — transaction fees. You've heard me say many times that I feel Shopify's subscription and transaction fee revenue models are a race to the bottom, and that I think they are smart to diversify by investing in other ancillary services.
The wrong move is to attempt to create a higher wall around their garden. That's an investor-driven shortsighted move that isn't congruent with their previously stated spiritual alignment of decentralization. Preventing merchants from accessing services they clearly want to use can have bigger and longer lasting impacts than losing out on transaction revenue.
If I were a Shopify merchant who was also a bigtime seller on Amazon, and I was either told that I couldn't use Buy with Prime or that it was against their TOS (which could mean that my account gets suspended in the future if I move forward with it), I might jump ship. Nobody puts Baby in a corner.
Or maybe I couldn't jump ship right away because I'm too reliant on Shopify's other integrations. In that scenario, I'd be pissed that Shopify is preventing me (or encouraging me, depending on how you look at it) from doing what I feel is best for my business. And reputations stick.
Meanwhile, Amazon, who currently agrees to Shopify’s Partnership Program Agreement and API terms with Amazon Pay, knowingly and intentionally created an implementation method for Buy with Prime that would put Shopify merchants in violation of their TOS. Granted they said, “Well we did it so that it would work with ALL platforms,” — but let's be real about market share here. This wasn't an oversight; it was a direct attack.
Amazon could have worked with Shopify ahead of launch to build an implementation method that worked within their TOS to best serve their mutual merchants, as they did with Amazon Pay — but they didn't. They instead put Shopify between a PR rock and a hard place, which is exactly what Amazon wanted.
While objectively I can say that Amazon struck first, and that Shopify was backed into a corner to react, both companies are putting merchants in the middle of their feud, and that's not okay.
Figure it out amongst yourselves, and in the meantime, don't put merchants in fear of violating TOS as a means of fighting back.
What's your verdict? Who's in the wrong — Shopify or Amazon? Hit reply and let me know.
2. Shopify's biggest investments in 2022
Speaking of Shopify being smart to invest in other ancillary services, let's talk about some of those investments. Despite a recent downturn in e-commerce, Shopify has continued to invest in startups this year. Business Insider compiled Shopify's investments so far in 2022, which I'll recap below. You've seen me cover these stories individually in previous Shopifreaks editions, but seeing them all in one place has impact as well in regards to their magnitude.
- Thirdweb – a developer platform that makes it easier to launch Web3 apps. Shopify participated in their $24M Series A. The goal is to make Thirdweb's tools available to Shopify merchants who want to bring Web3 products and experiences to their online stores.
- Gorgias – a customer service startup that helps merchants provide automated and personalized responses to customer questions by centralizing support tickets from live chat, e-mail, phone, SMS, messaging apps, and social media channels. Shopify participated in their $30M Series C round which valued the company at $710M.
- Klaviyo – helps online merchants analyze customer data and create automated marketing messages sent via e-mail and text messages. Shopify made a $100M investment in the company and entered into a strategic partnership that included naming Klaviyo as a recommended solution.
- Single – makes an app that enables merchants to sell music, NFTs, and access to livestreamed events on their Shopify stores. Along with a strategic investment from Shopify, the platform launched a token-gated commerce and content feature on its Shopify app.
- Sanity – an API-based content platform that aims to make content creation more flexible for brands. Shopify made a $35M investment in the company.
- Codat – provides financial integration software for companies that work with small businesses, helping clients to access customers' data and standardize it across platforms. Shopify participated in Codat's $100M Series C round.
- Crossing Minds (Hi Isaac!) – makes product recommendations without using cookies or customers' personal data. The company received a strategic investment from Shopify and its tech became available to Shopify merchants following the announcement.
- Disco Technology – a network of brands that are banding together to lower customer-acquisition costs by leveraging data from similar shoppers. Shopify participated in their $20M Series A round.
- Flexport – a freight-forwarding company that plans the movement of goods across different modes of transportation including ocean shipping, air cargo, rail and trucking. Flexport received a strategic investment from Shopify as part of its $935M Series E.
And that's just their investments! Business Insider didn't cover their acquisitions including Deliverr, which I first reported on in April, and Dovetail which I covered the acquisition of in April, and the integration of into their new platform-wide affiliate program, Shopify Collabs, two weeks ago.
3. BigCommerce News (Sponsored)
This year, BigCommerce took home three MACHathon awards! The annual MACHathon event is an opportunity for teams around the world to showcase their most ground-breaking, innovative ideas using MACH technology and composable architectures. BigCommerce won:
- MACHnificent Champion: For the overall winners of the MACH Alliance MACHathon (sponsored by Actindo).
- The Integration Champion: For the team with the most innovative combination of solutions stacked together (sponsored by Contentstack).
- The Maturity Champion: For the most complete end-to-end solution (sponsored by Fluent Commerce).
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BigCommerce has a very different approach to e-commerce than Shopify. Where Shopify wants to try to build all the various services for payments, checkout, fulfillment, etc. and charge merchants for it, BigCommerce believes in open commerce and allowing partners like Amazon to integrate with their platform to give merchants the right to choose what works best for them.
Sharon Gee, BigCommerce VP of revenue growth and general manager of omnichannel partnerships, said, “Amazon’s Buy with Prime is an important tool for merchants to be able to meet consumer expectations for fast delivery, and BigCommerce is proud to partner with Amazon to offer Buy with Prime to our merchants. While some e-commerce platforms restrict merchant options on fulfillment, payments, checkout, design and other critical features, BigCommerce is committed to open commerce so that merchants can choose the best options for their customers. In a world where it is increasingly difficult to get a person’s attention, let alone make a purchase, merchants need more options not more limitations.”
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4. “Alexa, JUMP! Alexa, shoot!”
Amazon announced the launch of Alexa Game Control, allowing you to play games with your voice. The first compatible game is called “Dead Island 2”, which allows gamers to yell at zombies. (So pretty much my experience watching The Walking Dead, only Rick never listened to me!)
Alexa Game Control gives users an accessible, hands-free option that allows for a different kind of gaming. It can be accessed by either using push-to-talk on your control or keyboard, or by using Voice Activity, which detects when you start speaking automatically. Amazon clarified that you don't need to say “Alexa” to start the command. (Thanks, so now my headline isn't funny anymore.)
Alexa Game Control relies on the same tech that powers Alexa voice AI. It is currently in private beta and will initially only be available in North America, with no word on when it’ll be available in other countries.
In July, I reported that Amazon introduced a set of software tools to help developers more easily extend the capabilities of its Alexa voice assistant to new use cases. And one year ago in September, I reported that Amazon was rolling out its voice shopping experience feature in Hindi in the South Asian market, which allows shoppers to search for products and check their order status using voice commands such as “joote dikhao” which is Hindi for “show me shoes.”
Amazon launched voice shopping in English in 2020 and has seen wild success and quick adoption of the feature among English speaking customers. Opening their voice API to developers and adding new use features like gaming will have an overall positive impact on its accuracy while simultaneously allowing consumers to become more comfortable with using it. We should prepare ourselves for a future where we can control a lot more than our shopping and gaming with Amazon voice features.
“Alexa, write a positive review for Shopifreaks on Google.”
5. TikTok e-commerce stats
TikTok shared a few insights about the current state of e-commerce on its platform, which I'll recap below:
- Shoppers are 2x more likely to make a day-of purchase online than they are a traditional retail purchase.
- Compared to online marketplace shoppers, direct social commerce shoppers are 1.2x more likely to buy immediately and 1.3x more likely to buy to uplift their spirit or mood.
- 56% of TikTok users say that ads on TikTok lead them to discover new products and brands.
- 61% of TikTok users have engaged in e-commerce behaviors on the platform.
- 48% of TIkTok users are interested in making a purchase on or from TikTok in the next 3 months.
- When TikTok is a part of the e-commerce journey, users are 51% more likely to discover products from an ad, 87% more likely to watch a LIVE while considering a purchase, and 76% more likely to look at posts with a trending hashtag / brand while considering a purchase.
- 37% of users are open to buying directly from TikTok because it's entertaining, 21% because content and products are “for me”, and 20% because it “makes my day better”.
In July, I reported that TikTok had been planning to roll out its new e-commerce Shop marketplace in Germany, France, Italy, and Spain by now, and was hoping to launch in US later this year, but those plans have been put on hold. The company will instead solely focus on making the product a success in the UK for now.
However with those kinds of stats above, I imagine it's only a matter of time for Shop marketplace to make its way here.
I've had the pleasure of connecting with many of you on LinkedIn, and I've read some positive experiences you've had with e-commerce and advertising on TikTok. Have your particular results aligned with TikTok's stats above?
6. Amazon Video could surpass competitors soon
Analysts are predicting that Amazon Video could eventually surpass Netflix, Hulu, and Disney based on Amazon's use of an e-commerce approach to streaming service. Amazon Prime currently has over 200M users globally, versus Netflix's 221.6M subscribers, Hulu's 46.2M, and Disney+'s 152.3M subscribers.
Emmanuel Martinez, the CEO of Alphex Capital, discussed how Amazon Video's e-commerce approach is giving them an edge in the streaming industry:
- Price Difference & Perks – Since Amazon Video is tied to Prime membership, it's an easy decision for consumers to upgrade from the $8.99 Amazon Video package to the $12.99 Prime subscription, which includes it.
- Acquisition Versus Original Content – Like Netflix, whose original content constituted 51% of its released titles, Amazon Video has invested massively in original content, and even picked up 20 Emmy nominations in 2021. However, unlike Netflix, Amazon is not slowing down on acquisitions. Amazon Video already had 3x more movies than Netflix in 2020.
- The Power of Reviews – Unlike Netflix and most other major streamers, Amazon Video offers user reviews, which enables viewers to make better decisions with their entertainment choices. The result is reduced chances of disappointment, which leads to a better overall experience.
In August, I reported that Walmart was having discussions with major media companies like Paramount (which later happened), Disney, and Comcast about bundling streaming entertainment into its subscription offering, which would push Walmart+ closer to a multi-benefit bundled subscription like Amazon Prime, rather than simply a membership with shipping benefits. And last week I reported that Walmart was introducing a new cash back program for Walmart+ subscribers.
So apparently this e-commerce approach to streaming video that Amazon has got going on is working, and other companies are following suit. While I don't see Netflix on that list above of streaming services that Walmart is talking to, the two companies have collaborated in the past. In October, I reported that Walmart launched an Official Netflix Hub on their marketplace to offer items related to popular Netflix shows. So the idea isn't completely out in left field. Plus the way Netflix has been losing subscribers this year, an alliance with Walmart+ may be something worth considering.
7. Walmart invites Canadians to join its marketplace
Walmart is looking to recruit sellers based in Canada to join its American marketplace, which serves over 120M customers. Last week the company invited entrepreneurs and e-commerce merchants to sign up for its Virtual Global Seller Summit – Canada on Sep 8th, which will feature sessions run by Walmart and Payoneer executives.
Walmart said that its desire to attract Canadian companies expands on its longtime relationship with merchants and customers in Canada, and comes as local businesses, especially smaller ones, are hoping to capitalize on the Canada-United States-Mexico free trade agreement (CUSMA).
The news comes two months after Walmart invited retailers in the U.K. to join its online marketplace and over a year and a half since Walmart opened its marketplace to international sellers last March, including more than 5,000 sellers from China.
Walmart's marketplace has since been criticized for being filled with cheaply made Chinese products, so attracting brands and retailers from other countries could start to even out their offering. Although in the meantime, I'd look to remove some of those cheap and poorly reviewed items from their marketplace anyway, because they aren't doing Walmart any favors by being available for purchase.
8. Pinduoduo launched their U.S. website
Last week I reported that Pinduoduo announced its plans to enter the US next month, however, I didn't realize that meant on the 1st of the month. That was quick!
Temu employs a cross-border model in which most products will ship from overseas, primarily from China. Products could take 7-15 business days to arrive, with free shipping on orders over $49.
Their website says, “It’s important to keep in mind that you may see longer delivery times than you’re used to from other e-commerce websites. This is due to the fact that items that may be coming from another country or need to be bundled or packaged with other similar-sized items.”
Temu's advantage is its existing relationships with low-cost manufacturers in China, as well as its price. They've got some great prices! They also offer a generous 90 day return policy.
However challenges will include creating trust and awareness in the American market. U.S. customers have been burned too many times by Wish.com purchases, so it'll take some time to heal our wounds. There's also a limited selection of products, mostly by brands you've probably never heard of before (other than Lenovo) — so it's not quite the Amazon mega-store we're accustomed to.
With items that currently range from around $0.40 to $12.00, it'll take quite a lot of Add to Carts to hit the $49 free shipping tier, but perhaps you can stock up on holiday gifts early this year.
What do you think of Temu? It's only the (very) early days, but from what you see so far, do you think they have a chance at success in the U.S.?
9. Other e-commerce news of interest this week
- Erin Pelton, former Special Assistant to the President and Chief of Staff, Domestic Policy Council at The White House, joined Shopify to oversee communications and public affairs. She tweeted, “I’m thrilled to join a company that is such a powerful engine of innovation, removing barriers for millions of businesses around the world.”
- Jason Tigas, developer advocate at Shopify, is joining Ripple, a San Francisco-based blockchain. He tweeted, “I'm happy to announce that I have joined @Ripple to help create a world without economic borders.”
- Deck Commerce, an order management system for D2C retailers and brands, expanded its Board of Directors with the addition of Melanie Kalemba, who brings a track record of e-commerce experience and leadership at BigCommerce and Amazon.
- It's rumored that Etsy may be planning to give extra perks to sellers who qualify for its Star Seller program that it launched last year, including fee discounts, filtered results, boosted search visibility, and more. Don't hold your breath though if you're an Etsy seller… as it's just a rumor!
- Amazon is planning to close down Amazon Care, it's home-grown urgent and primary care offering, effective Dec 31, 2022, following the acquisition of One Medical, which I reported on in July. Neil Lindsay, SVP of Amazon Health Services and Amazon Stores, wrote in an internal memo that Amazon Care was not “the right long-term solution for our enterprise customers.”
- commercetools, a provider of headless commerce, announced new B2B functionalities as part of their core offering. The suite of tools provides access to the company's full API portfolio allowing users to create and customize experiences for their specific model.
- A United States federal judge awarded Express Mobile a lump sum of $40M in damages after finding that Shopify infringed upon three of their patents related to software for providing content to mobile devices. Express Mobile has also sued dozens of other tech companies for infringing its patents, including Google, Meta, and Amazon, in cases that remain ongoing. Shopify plans to contest the matter in the district court or, if necessary, on appeal.
- The FTC has begun a review into Amazon's $1.7B planned acquisition of iRobot Corp, which I reported on in August. The review will consider if the deal violates antitrust law and whether the deal will illegally boost Amazon's market share in the connected device market and retail market.
- A couple who married on Aug 21 had an Amazon-themed wedding to commemorate how e-commerce brought them together. Amazon packages in miniature shopping carts served as wedding gifts, and guests could pose for photos in front of a backdrop featuring a personalized Prime Day logo. Guests rated the wedding 5 stars.
- MWPVL International Inc, which tracks Amazon's real estate footprint, estimates that Amazon has either shuttered or killed plans to open 42 facilities totaling almost 25M square feet of usable space, while delaying opening an additional 21 locations totaling nearly 28M square feet. An Amazon spokesperson said it’s common for the company to explore multiple locations at once and make adjustments “based upon needs across the network.”
- Wix is partnering with Choice to bring ACH electronic funds transfer payments to U.S. based merchants. The solution includes ACH payments for subscription services and invoices, along with real-time data for simple reporting, reconciliation, and customer management.
- Qatar Central Bank issued the first license for digital payments to two companies that provide electronic payment services – iPay and Ooredoo. The central bank stated that the license represented an initial step to include all companies providing digital payment services under their supervision.
10. This week in seed rounds, IPOs, & acquisitions….
- Nerety, a Spanish fashion marketplace that promotes new designers, raised €200k in its second investment round raised by several business angels and Bcombinator. The platform currently has over 20k customers and 50 brands. It will use the funds to expand internationally into Italy, Germany, and the Netherlands.
- WPP, the largest advertising company in the world based out of Britain, acquired Newcraft, a data-first European e-commerce consultancy based in the Netherlands. The acquisition will strengthen WPP's digital commerce capabilities and reflects the companies ongoing investment into its commerce offer for clients. In May, I reported that WPP launched their own end-to-end e-commerce platform to handle the sales, logistics, and delivery of products sold by its clients.
- Wayflyer, an e-commerce funding platform, raised $200M and $53M mezzanine debt financing from Credit Suisse. The company will use the additional debt facility to provide finding to e-commerce businesses, as well as improve liquidity and offer more competitive rates to its customers.
- Instacart acquired Eversight, an AI company that helps consumer packaged goods brands and retailers determine pricing and promotions by continuously testing at scale. Instacart is hoping the deal will create a flywheel effect, where goods are priced at the sweet spot that drives sales and growth for CPG brands and retailers, while also leading to better promotions and pricing for customers. Sounds too good to be true!
- OneSignal, a platform that powers notifications for mobile apps, raised $50M in a Series C round led by BAM Elevate, bringing their total amount raised to $80M. The company will use the funds to make investments into machine learning, geographic expansion, and growing their team by 20% by the end of the year.
- Topi, a Berlin-based B2B hardware-as-a-service startup, raised $45M from Index Ventures, Creandum, TriplePoint Capital, and several undisclosed angel investors. Topi brings together various components that a seller needs for hardware subscriptions including payment plans, insurance logistics, and refinancing so that merchants can build rentals into their existing channels through their API.
- Progressive Care, an e-commerce company that specializes in prescription pharmaceuticals and healthcare data analytics and management, raised $7M from NextPlat, a global e-commerce platform that focuses on high-growth sectors. Progressive Care reported revenues of $40M in 2021. NextPlat CEO Charles Fernandez will serve as chair of their board of directors as part of the transaction.
- Duplo, a Nigerian payments company that recently branched out into B2B BNPL solutions, raised $4.3M in a round led by Liquid2 Ventures, Soma Capital, Tribe Capital, Commerce Ventures, Basecamp Fund and Y Combinator, bringing its total amount raised to $5.6M. The company will use the funds to launch new products and expand into new business verticals in Nigeria.
- EarlySalary, India's largest consumer lending fintech that provides accessible lending solutions for working professionals, raised $110M in a Series D round led by The Rise Fund and Norwest Venture Partners. The company will use the funds to continue enhancing its tech and analytics frameworks to achieve its 24-month growth plan.
- PT GoTo Gojek Tokopedia Tbk, an Indonesian tech company that formed as a result of a merger between a local e-commerce leader and an on-demand multi-service platform, acquired PT Kripto Maksima Koin, a local crypto exchange, for $8.38M in a bid to diversify its assets. PT Kripto Maksima Koin is one of the 25 crypto platforms licensed by Indonesia's Commodity Futures Trading Regulatory Agency.
- Proof, a members only collective of 1,000 dedicated NFT collectors and artists, raised $50M in a Series A round led by a16z. Proof is the organization behind Moonbirds and Oddities.
What'd I miss?
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See you next Monday!
Paul E. Drecksler
PS: I went to go buy a spider from our local pet shop and the clerk told me it'd be $200. I said, “$200?! It'd be cheaper getting one off the web.”