Could the Walmart and Shopify Partnership be Disastrous for Amazon Sellers?
Paige Schueth
It’s no secret Amazon’s third-party seller business has been growing…
but you may be surprised at how fast.
In a 2018 Investor letter, Jeff Bezos shares data on Gross Merchandise Sales from third-party sellers going from 3-58%.
They’ve added over a million (1,029,528) new sellers so far this year alone!
For perspective, there are over 140,000 Amazon sellers in the US selling more than $100k worth of product a year. Another reason why we’ve written about how they could be worth $3T by 2025.
This is relevant because as a seller it’s important to understand the incentives of the platforms helping you run your business.
Amazon has recognized that the third-party model is better than wholesale for a number of reasons including making them more money.
- More third-party sellers = more selection. (Higher chance consumers come to them first).
- More third-party sellers = less risk. (No need for big wholesale purchases or expensive merchandising support staff)
- More third-party sellers = their ability to increase fees (Closing fees, referral fees, and fulfillment and shipping fees – to name a few)
It should be no surprise then that Walmart wants in on this game.
Enter the Walmart and Shopify Partnership
June 15th (yesterday), they announced a partnership with Shopify in an effort to expand its marketplace business.
I mentioned the scale of Amazon’s third-party business above to emphasize how far behind Walmart is.
In the Walmart and Shopify partnership announcement, they cite their goal of adding 1,200 new Shopify merchants to their marketplace this year.
It seems insignificant at 1/100th the rate of Amazon but there’s a kicker…
No fees.
They are only taking a commission on sales.
The only other stat in Walmart’s statement is the 74% that US e-commerce grew last quarter and it’s no secret they are coming for their share.
In this third-party sellers/marketplace world, it’s also worth noting how much leverage you have as a brand.
The same way that brands like Gravity blankets founder reported that if you have brand notoriety, Amazon will find you and try and make a deal… Walmart will likely be also looking for exclusive deals.
Alex Danco writes about this Red Queen effect and positional scarcity when it comes to streaming video on demand.
In a segment we’re all familiar with, streaming services are forced to pay ransoms like the $120m/yr Netflix agreed to pay Seinfeld. This is based on the assumption you will choose a SVOD provider based on one or two shows (brands) and stay for everything else.
If this partnership between Walmart and Shopify means that you can only buy Ripple Milk at Walmart and that is one of your strongest brand affiliations, it’s likely you’ll also move all of your recurring grocery and essential spend to Walmart. Or in other words, if you have a product with any brand notoriety you are the unsigned star basketball player coming out of High School.
My advice, you should find yourself an agent.
Paige Schueth
Growth Marketer
