Assuming I am not that far from average, COVID19 has very likely changed our collective behaviors in a very big way.
Probably more Netflix. Probably more Zoom / video conferencing for work. Maybe some more gaming through console, PC, or mobile. And probably a lot of online shopping.
Over the last few days / weeks there has been an incredible shift in the ecommerce and omnichannel landscape. Given that ecommerce has been one of Capital Flywheels’ preferred themes and a major slice of the Paper Portfolio, this is a very exciting development. Nothing like a crisis to catalyze change in a short period of time.
Let’s jump right in.
Over the last few years, Capital Flywheels has touted Shopify on several occasions including their incredible efforts to democratize ecommerce as well as unite the rebels against Amazon.
Shopify has methodically added feature after feature in order to make it the easiest way to set up an online store and reach customers around the world. Not only does Shopify make it easy to build / design digital storefronts, Shopify also helps with payment acceptance, inventory sourcing, working capital, logistics, marketing and analytics, and more.
Part of the social contract with Shopify is that it is a neutral tool / launching platform for entrepreneurs. What this means is that Shopify has no intention to compete with the merchants they support. This is in contrast to Amazon, which has a very large 1P operation that occasionally copies successful products listed by 3rd party merchants…for example:
In one instance, Amazon employees accessed documents and data about a bestselling car-trunk organizer sold by a third-party vendor. The information included total sales, how much the vendor paid Amazon for marketing and shipping, and how much Amazon made on each sale. Amazon’s private-label arm later introduced its own car-trunk organizers.
They do look pretty similar…Understandably, most merchants likely are pretty fearful of being too dependent on Amazon.
To a large extent, Shopify offers many of the benefits of “Amazon”, while letting the merchant themselves retain control over their business.
This is why Shopify’s newly announced Shop app is both simultaneously exciting as well as unexpected:
We are setting out to reimagine the online shopping experience for customers — to provide them greater convenience, transparency, and personalization. As a result of social distancing and stay-at-home measures, customers have become more reliant on online ordering than ever before as it becomes more challenging to stay connected to the brands they love.
Designed to bridge the gaps in online shopping, Shop offers users the ability to easily discover local businesses, receive relevant product recommendations from their favorite brands, check out effortlessly, and track all of their online orders. We’ve brought together our expertise in commerce and proven features from Shop Pay, a one-click accelerated checkout, and Arrive, an app to track online orders, to make purchasing and order tracking frictionless for shoppers.
Unlike other ecommerce traffic aggregators, Shopify is not positioning Shop as a product search platform, but rather a recommendation engine based on brands that you buy from and follow:
Will definitely be interesting to see how merchants (and consumers) respond. The highly respected, Ben Thompson over at Stratechery is unconvinced. The Shop app will potentially give Shopify greater control and curatorial ability over their merchants, but this should not be confused with competition since Shopify does not have 1P operations unlike Amazon.
One of the things that I’ve been anticipating since 2016 is closer competition between Shopify and Square. For years, it’s been clear that Shopify and Square are similar in many ways other than Shopify focusing mostly on ecommerce while Square focused mostly on offline. However, the two companies were always destined to collide as all channels of commerce merge into an omnichannel experience.
COVID essentially accelerated that path by forcing Square to aggressively move online and Shopify vice versa, both aiming to better serve merchants in this challenging environment.
Shopify updated their offline POS terminal, which looks similar to Square’s, which might be concerning:
However, Square seems to be doing just fine according to their latest earnings release:
Our online store was an area of strong growth in acquisition, with weekly GPV up more than 5x since mid-March, and with the strongest adoption by sellers in two of the hardest hit verticals, food and drink and retail. Notably, we saw over 2/3 of Square Online Store GPV come from our recently launched pickup and delivery service.
Source: Square 2020 1st Quarter Earnings Call
But perhaps the most interesting thing to come out of Square during this period is the ability for merchants to take payments online without the need for any storefront at all:
Use Square Online Checkout links to allow your customers to purchase anything you want to sell online — without creating an eCommerce website.
That may be an indirect shot at Shopify given you don’t even need a website at all. But ultimately, that feature is aiming for a different market.
While Shopify and Square support merchants from the back-end, the front-end (consumer-facing side) is also seeing a lot of exciting changes.
Pinterest is one of the companies that is gaining a lot of traction right now (lots of people stuck at home browsing for inspiration) and is 100% focused on building a leading ecommerce platform.
Recently, Pinterest added a new “shop” tab:
Pinterest today is launching a new way to shop on its platform. Now, Pinterest users will be able to browse in-stock inventory from newly added “Shop” tabs on Search and on Pinterest boards. The company has also improved visual search to make more products shoppable from Pins.
The new Shop tab on Search will help users find in-stock items from retailers when they perform a search query, like “spring outfits,” “home office décor” or “kitchen remodel,” among other things. Before, users would have to scroll through a variety of search results, only some of which may have been shoppable.
In another change, Pinterest has updated visual search to make more products shoppable within Pins. Now, when you hover over a Pin, you can click “Shop similar” to see related in-stock products for looks and rooms.
Source: Pinterest via TechCrunch
I continue to think Pinterest is building out a differentiated and engaging platform that has >300 million MAUs already and still growing globally.
And as all roads used to lead to Rome, the roads all seem to somehow lead back to Shopify:
As more people than ever come to Pinterest to find inspiration for supporting small businesses, furnishing their work from home setups, gifts to cheer up friends, and activities to do with their kids, there’s an increasing opportunity for retailers to get their products in front of Pinners.
Today we’re launching a new app with Shopify that gives their more than one million merchants a quick way to upload catalogs to Pinterest and turn their products into shoppable Product Pins, in just a few clicks.
Another piece of the “anti-Amazon” alliance coming into place. And Shopify continues to unite.
All of the above changes are leading to dramatic shifts in the ecommerce landscape, but the overall picture is fairly clear. The one wildcard is Facebook and what Zuckerberg plans to do with Instagram and WhatsApp. As Capital Flywheels has previously highlighted, Instagram is a force to reckon with when it comes to ecommerce.
However, Zuckerberg never really seemed to be 100% committed to ecommerce as a monetization model compared to advertising.
But this likely changed with a massive deal announced recently:
Today we are announcing a $5.7 billion, or INR 43,574 crore, investment in Jio Platforms Limited, part of Reliance Industries Limited, making Facebook its largest minority shareholder.
This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country. In less than four years, Jio has brought more than 388 million people online, fueling the creation of innovative new enterprises and connecting people in new ways. We are committed to connecting more people in India together with Jio.
One focus of our collaboration with Jio will be creating new ways for people and businesses to operate more effectively in the growing digital economy. For instance, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.
Just in case that was just the lawyers speaking in a press release, here’s Zuckerberg in his own words during the recent earnings call:
One aspect of online commerce that I want to mention is the partnership that we just announced with Jio platforms in India. The largest Facebook and WhatsApp communities in the world are in India, and we think that there is an especially important opportunity to serve small businesses and enable commerce there over the long term. So by bringing together Jio Mart which is small business initiative to connect millions of shops across India with WhatsApp, we think that we’re going to able to create a much better shopping and commerce experience, and there’s a lot more that we can do here and I’m looking forward to making progress with the team at Jio.
Source: Facebook 2020 1st Quarter Earnings Call
Zuckerberg is not the most likable founder / CEO. But if there’s one thing he deserves credit for, he has more focus than most other CEOs out there. If he is indeed focused on ecommerce now, I think that’s a big deal.
Disclosures: I own shares in SHOP, SQ, and FB. I have no intention to transaction in any shares mentioned in the next 48 hours.
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