Amazon Is the 800-Pound Gorilla of E-Commerce, but These Monkeys Are Worth Watching
More than half of the growth of American e-commerce in 2016 can be attributed to Amazon, according to a report by Slice Intelligence. If you’re like many American shoppers, that’s no surprise — nearly half of us live in a household with a Prime membership.
This comes at a time when physical retail stores are standing empty. “The simplest explanation for the demise of brick-and-mortar shops is that Amazon is eating retail,” Derek Thompson writes in The Atlantic, noting that “[b]etween 2010 and last year, Amazon’s sales in North America quintupled from $16 billion to $80 billion.”
While it might feel like it, however, Amazon is not the only player in the game. Aside from large retailers who are shifting more and more of their business online — most notably Wal-Mart, but also Target, Macy’s, and the like — a plethora of marketplaces and small-to-medium businesses want to capture consumer dollars online. Behind the scenes, there are platform and services companies eager to sell shovels to the proverbial goldminers of e-commerce. After all, that’s how you really make a fortune!
Foremost among the enablers of independent e-commerce is Shopify, whose SaaS product allows anyone to easily build an online store. Users don’t have to worry about scalability or uptime — or even design and functionality, since Shopify has a robust marketplace for themes and plugins. Since debuting on the NYSE in 2015, the company’s stock price has more than doubled, and is forecast to $100 in the next few months. Shopify is an easy choice for prospective users: It handles all of the e-commerce infrastructure, allowing sellers to focus on getting their products in front of buyers’ eyeballs.
Another of Shopify’s advantages is that the company is happy to serve all segments of the market. Subscriptions start at $30 per month, but high-volume merchants can make custom deals with Shopify Plus. Kylie Kardashian hosts her wildly popular, online-only makeup brand on Shopify, and established brands like Red Bull and Oreo have also turned to the Canadian company for e-commerce projects.
Shopify is the market leader, but it’s hardly the only option for independent e-commerce merchants. Magento is still a popular choice for complex or high-scale e-commerce setups. Shopify competitor BigCommerce offers many of the same features as its primary rival, along with an emphasis on making it easy for merchants to support digital wallets, in part to make cross-border trade easier.
BigCommerce VP of product marketing Leo Castro notes that international ecommerce is expected to grow at twice the rate of domestic ecommerce. He tells Inc., “A large percentage of our merchants want to grow their business by tapping into new markets but have been limited by their ability to offer country-specific payment options. BigCommerce helps answer that part of the equation by working with different payment technology providers like Adyen, who support payments in places like China, Latin America, and Europe.”
On the high end, an e-commerce website that’s processing a huge volume of transactions has to be foolproof. Testing and usability companies like Applause help their clients find the stress points and fix them quickly and efficiently, without triggering downtime or annoying consumers. “When you take into consideration omnichannel retail, pure-play ecommerce, travel, hospitality, startups, etc., about 30 percent of what Applause tests and provides usability feedback about is e-commerce-related,” a spokesperson says.
Payment processors are another layer of the e-commerce “stack” that will benefit from non-Amazon growth in the sector. Startup darling Stripe has the stated purpose of “increasing the GDP of the internet.” Old-school PayPal and its newer venture Braintree are still favored options, along with Authorize.net and traditional merchant accounts from banks.
Many smaller e-commerce merchants, who begin selling as a hobby or find the prospect of setting up their own website intimidating, start building their business on a marketplace like eBay or Etsy. Consumers are already heading there, so the marketing burden is lessened somewhat. It turns out that getting customers to show up and start typing in their credit card details is one of the hardest parts of running an e-commerce business.
MailChimp sees itself as a solution for that problem. The company wants to expand beyond its image as a solution for email newsletters, and be seen as a full-fledged marketing platform for small businesses. MailChimp has a particular focus on e-commerce, which constitutes 46 percent of its business after 46 percent growth in 2016. (Nonprofits are the second largest segment.)
MailChimp CEO Ben Chestnut says e-commerce businesses regard MailChimp as a no-brainer, since they can track exactly how much extra money they earn because of email marketing. A company spokesperson adds, “E-commerce customers more than pay for their MailChimp usage by implementing tools like the Abandoned Cart feature, which earns the average customer $610 per month.” Just as strikingly, “Small businesses make 31 percent more revenue on campaigns that use the Product Recommendations feature,” which shows customers other products that they might like, based on their past behavior. MailChimp has also built out support for Facebook ads and recently lifted the paywall on its automation tools.
Google and Facebook, the two digital advertising giants, are also positioned to benefit from growth in independent e-commerce. More merchants earning substantial amounts of money online leads to more merchants running campaigns through AdWords and Facebook’s various properties. Google’s targeted search ads are perfect for people who know what they’re looking for, whereas Facebook and Instagram’s idle-browsing environments are more suited to brand-building. In the same vein, a company like Gleam.io, which focuses on helping companies engage their potential customers, is poised to flourish, along with analytics solutions like Baremetrics.
The last step of e-commerce is fulfillment — actually getting the physical product to the customer. Amazon’s sophisticated logistics network and sheer scale mean that independent companies and even rival marketplaces have to work hard to keep up. A startup called Shippo exists in part to address this problem — it integrates with many different shipping providers, which serve different parts of the globe, to abstract away the headache of figuring out the cheapest and fastest option. Stamps.com also has a portfolio of shipping companies that serve e-commerce merchants, including ShipStation and ShippingEasy. Shippo customer ShipBob is a full-service fulfillment and warehouse startup, and there are others like it at various price-points.
The companies and solutions mentioned here are far from the only ones. Each part of the e-commerce value chain is served by multiple companies with various points of differentiation. What they all share is a bet that Amazon won’t devour absolutely all of retail — the little guy will still be around, selling brands that customers can’t find elsewhere and maintaining a direct connection with those customers.