Is the retail e-commerce market about to get a major new player to take on Amazon? The scuttlebutt this week is that Microsoft is planning one of two things - either unleash a Shopify competitor or try to buy up Shopify itself.
While Microsoft has previously dipped its toes into the retail e-commerce space, what’s fuelling the current speculation are comments made by Shelley Bransten, Microsoft Vice President of Retail and Consumer Goods, during an interview with The Information.
Bransten, who jumped to Microsoft from Salesforce last year and previously spent 15 years with The GAP, said she has a “lot of respect” for Shopify, but added that this is an area in which Redmond has its own ambitions:
It’s something we’re looking at very seriously because our customers are asking us for it.
Of course nothing may come of this, but it’s another pressure being brought to bear on Shopify, which was set up 15 years ago after its founders were unhappy with the then available offerings on the market when they tried to open an online snowboard shop.
The result was a platform for building e-commerce stores for both enterprise retailers and ‘mom-and-pop’ outfits. It ended 2018 with more than 800,000 customers and an annual turnover in excess of $1 billion, a 59% year-on-year growth rate. The platform enables merchants and brands to design, set up, and manage their stores across multiple channels.
Speaking last month, Chief Operating Officer Harvey Finkelstein pitched the company’s mission statement in simple terms:
Merchant success has been and will always be our top priority. It guides the decisions we make on a daily basis and is infused into everything we do at Shopify…We aim for Shopify to be the first thing that merchants open in the morning and the last thing that merchants close at night. In other words we want Shopify to be the heart and soul of our merchants' business helping them sell more and work more efficiently so that they can focus on the things that really matter to them.
Finkelstein argued that Shopify is attracting more ‘celebrity’ brands today:
We're seeing more traditional retailers that traditionally only existed in shopping malls that are coming on. So we're seeing all these different verticals. The sort of celebrity brand vertical is really heating up and we seem to be the platform of choice for them. So that is really exciting to us. Some of these verticals we've never anticipated would be verticals that we would be able to attract in the early days and being very successful with that today.
In terms of where they're coming from, certainly some of them are migrating to us from more traditional enterprise e-commerce platforms. Usually they're coming to us for one of three reasons - either ease of use, pricing or flexibility. When they hear that Apple is releasing Apple Pay, they want to be able to use it right away and not have to wait six months and have a bunch of meetings to talk about that or augmented reality for that. So we're actually seeing a bunch of different ways they're coming to us. Some of them for the first time ever are selling direct to consumer and that seems to be a really important piece of retail and the future retail.
That growing roster of impressive retail logos does of course only serve to make a potential Microsoft acquisition look all the more appealing if the Redmond firm is serious about making a bigger push into this space. On the other hand, it may choose to build on its own initiatives, such as the partnership signed with Walmart last year.
This basically sees the US retailer planning a five year transition across to Azure and Microsoft Office 365, but will also see the two firms working on retail innovation. One project involves the creation of AI-enabled
checkout software to eliminate the need for cashiers in physical stores, something that Amazon has also been working on.
As well as the Microsoft rumors, Shopify potentially has other problems. Its stock price recently dropped on the news that Facebook’s Instagram arm is trialing a checkout feature for retailers that will allow users to buy items without leaving the Instagram app.
When customers tap to view a product from a retailers, a “Checkout on Instagram” button appears, offering customers the ability to choose appropriate options around size and color. Once the correct version of the product is selected, customers move to payment, adding their name, email, billing details and shipping information, all without having to move away from Instagram.
With so many retailers building out social commerce campaigns via Instagram - 130 million monthly users of 'shoppable posts' is the current claim from the firm - being able to remove friction from users seeing something they want to buy and being able to buy it there and then would be a big selling point. There are 23 retail brands currently in closed beta for Checkout on Instagram and there are some big hitters in the mix, such as Adidas, Burberry, Dior, H&M, Michael Kors, Prada and Zara.
At the ‘mom-and-pop’ end of the market, there’s also a new push by Square following its acquisition last year of online store builder Weebly into its own Square Online Store and the Square for Retail Point of Sale offering. CEO Jack Dorsey clearly has retail in his sights as a growth area:
We’re going to continue to strengthen our omni-channel offering. That means that we add strength to in-person payments, to mobile payments, and also to online….one of the interesting things about the acquisition of Weebly was how global they were and how much insight that gave us into where we can make new moves and how we might open entirely new markets or just might deploy parts of the ecosystem that we would be able to move much faster than our in-person credit card terminals.
The potential threat to Shopify from Instagram is a long term game. There’s a simple enough question that will need to be answered in the short term and that’s, ‘Do you trust Mark Zuckerberg with your credit card information?’. That said, the emphasis placed by retailers on Instagram-centric marketing campaigns and the increasing interest in social commerce capabilities makes it impossible to write off the provider here.
The Microsoft rumors on the other hand are a short term issue. It’s clear that the firm is planning something. A Shopify acquisition, which of course both firms are declining to comment on, could enable Microsoft to accelerate its push into ‘Amazon territory’ by fleshing out its retail offerings alongside its drive to convert more retailers like Walmart onto Azure. Definitely developments ahead to keep an eye on here.