Shopify has struck a handful of notable deals with other tech giants in recent weeks.
Analysts following Shopify say it's a sign the e-commerce company is looking to broaden its reach and ramp up its competition with Amazon.
On June 15, Shopify announced that its payment product, Shop Pay, would be available for any business selling on Facebook and Google, regardless of whether that business is a Shopify customer or not. On June 10, it launched Shop Pay Installments, a buy-now-pay-later product that the company will partner with Affirm on to power in the US.
And, as The Information reported on June 21, citing people familiar with the matter, Shopify is also rolling out an affiliate marketing program with publishers. BuzzFeed has reportedly already signed on for the program, which, like similar programs, would give publishers a portion of revenue for sales earned through links to Shopify sellers in articles. Amazon has had an affiliate marketing program with publishers for quite some time, while Shopify has largely pointed merchants towards third-party apps for this kind of offering in the past.
Shopify executives say the company does not directly compete with Amazon, arguing that Amazon is a marketplace, while Shopify favors the direct-to-consumer model, still, there's overlap between the two companies' seller base. And Shopify needs to make its product suite flexible and appealing to a broader range of businesses to keep them from going over to Amazon.
The introduction of Shop Pay to Google and Facebook is especially notable because it is the first time that Shopify has made one of its products available to sellers that are not already using its platform, Guggenheim analyst Ken Wong said.
"I think there is a little bit of 'the enemy of my enemy is my friend' here," Wong said. "They recognize that there's a little bit of competition even with the Googles and the Facebooks of the world, but it's definitely the lesser evil."
Shopify generates revenue from two main sources: subscription fees, which merchants pay on a regular basis to use the Shopify platform, and merchant solutions like payments, shipping, fulfillment, and business financing.
Wong added that Shopify has said it expects social commerce to be a larger part of its revenue mix going forward. He said it makes sense to begin those efforts with payments because all online businesses need payment technology to process purchases, and Shop Pay is a mature product that could have a broad reach.
"By going off-platform, it's enabled them to better support merchants, not just specifically Shopify merchants, but to support merchants across any platform to be successful," Wong said.
Mizuho Americas analyst Siti Panigrahi said these partnerships could also help Shopify to stay relevant in an evolving consumer landscape. While Shopify has attracted more than one million merchants to its platform, it does not have the brand name power that Amazon has with consumers. For example, consumers could be buying something from a Shopify-powered site without knowing it, while the same would not be true for Amazon. Plus, individual Shopify merchants are responsible for doing the marketing necessary to bring potential buyers to their businesses.
By turning to partnerships with Google and Facebook, Shopify gives its merchants more exposure and increases its own ability to generate increased gross sales volume.
"It all boils down to that piece: how can they bring traffic to the merchant sites?" Panigrahi said.
