2020 has been an excellent year for both Shopify & Amazon, well the whole e-commerce platform movement (Magento, Big-commerce, Woo-commerce, Ecwid, etc.). Still, undoubtedly Amazon is the Goliath & Shopify sells swords to a bunch of Davids. The analogy fits the two. Both platforms have had magnitudes of success for various reasons. Amazon has been the bedrock of the American internet of commerce (AiOC, laugh with me if you get the reference) & Shopify has allowed a plethora of businesses to quickly pivot from only having a physical retail presence to one that incorporates e-commerce as well.
Amazon – the 2 Trillion dollar company
There was an outcry on the 20th of July when jeff Bezos added 13 billion dollars in a day to his net worth. But what happened that day to cause such a drastic increase in Jeff’s net worth? — An analyst at Goldman Sachs increased the price target of Amazon to $3800 a share. What’s the price target? It’s basically what an analyst believes the share price of a particular company will reach in 12-18 months. Because Goldman Sachs is considered the smartest shop on the street, $3800 was the highest price target & every individual on the sidewalk decided to buy Amazon stock, which caused an 8% bump in the share price increasing Mr Bezos’s dollars by 13 billion — at least on paper. But the real question is why? Why is Amazon stock deemed more valuable than an ounce of gold? — The answer to this question is vital in understanding the long term play Naspers is taking with Takealot.
In Q2, Amazon’s revenue was up 40% to $88.9 billion & profits were sitting at a cool $5.2 billion, breaking the quarterly profit record of $3.6 billion set in Q1. Just Stripping out the AWS revenues & other revenues & focusing on the marketplace & e-commerce business only — $74.38 billion. Amazon prime’s subscription service was up 29% to $6.02 billion. There’s no doubt that Amazon owns the American consumer on the internet, but the reason they continue to grow is the cumulative growth of e-commerce from ‘convenience’ to necessity.
Amazon vs Walmart & the field
“The global retail market we compete in is strikingly large and extraordinarily competitive. Amazon accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S. Unlike industries that are winner-take-all, there’s room in retail for many winners” – Jeff Bezos
The first thing Jeff points to when Amazon gets called a monopoly is Walmart.
Amazon competes against large, established players like Target, Costco, Kroger, and, of course, Walmart—a company more than twice Amazon’s size. – Jeff Bezos
Jeff also points to the retail footprint of these retailers; specifically, advantages in presence for curbside pick up & click & collect. Even so, commerce on the internet is Jeff’s playground — Amazon has a market share of approximately 47% of e-commerce sales in America. The closest amongst the retailers is Walmart with 7%. The bet is that e-commerce will outgrow physical retail & that is the long term play.
But that does not tell the true story of e-commerce. The problem the House Committee sees is not how Jeff sees it. It’s not a story of Amazon vs Walmart & the field. It’s Amazon vs small business to them, the ones who choose to sell on Amazon’s marketplace & those who choose to have their unique brands built on Woo-commerce & Shopify.
Woo-commerce, Shopify & the rebels in arms.
Woo-commerce, the company which came out of Woo-themes, founded by South Africans Adii Pienaar, Mark Forrester & a Norwegian, Magnus Jepson. If you don’t know Woo-commerce, it’s a plugin that allows you to convert your WordPress website into an e-commerce store. Shopify is a Canadian based company that gives businesses of all sizes the tools to build e-commerce stores — founded in Ottawa, Canada by Tobi Ludke, Daniel Weinand, & Scott Lake. Together these companies power over 40% of the e-commerce stores in the USA.
This is just a few things that Shopify has launched to further help small businesses around the world. Shopify is the one that gets the most press, but all of the platforms in that pie diagram are playing their part in arming the rebels against Amazon.
While this was going on in the West — in China, e-Commerce was business as usual with an added twist — Livestream e-commerce. Livestream e-commerce is, as it sounds, purchasing products directly within a live stream. Imagine you are in a Zoom meeting & a colleague tags the vase behind them with a purchase price & starts selling it to anyone in the Zoom meeting.
Pinduoduo — in English means together, more savings, more fun. The company was founded in 2015 as a social commerce platform for farmers & is one of the fastest-growing companies in the world. The company went from 0 to $100 billion in market capitalization in 5 years. To simply explain what Pinduoduo is — Imagine it was Black Friday; every day. If you want to learn more about Pinduoduo, you can read the breakdown from Turner’s substack or listen to a podcast about the company by Acquired.fm. I would do a disservice to try to explain it further.
According to eCommerceDB, Takealot was the biggest mover of products on the internet followed by Makro, then Builders.co.za, Woolworths & Nike in 2018/19.
Over the COVID period, there has been a surge in online grocery shopping with Checkers & Pick n Pay leading the charge. The growth was due to working from home situations, fear & large awareness of third party delivery services. Checkers found a surge in growth from mid-to-upper-middle-class shoppers. People found out about their best-kept secret: Checkers Food Services, the bulk buying division that delivers:
While this was happening, Takealot CEO Kim Reid was still complaining on Techcentral. You see, Naspers, Kim Reid & I know that the Takelot’s biggest competition is not armed rebels, but Shoprite-Checkers. Like Amazon vs Walmart, Shoprite has distribution leverage in the form of its retail footprint but more importantly — distribution centres.
Shoprite-Checkers Online will be massive. If Shoprite-Checkers decides to take the Walmart.com approach with a marketplace for retail — Takealot will not be able to build distribution centres fast enough to compete. That’s why Takealot getting distribution is important for Naspers.
Level 4 & 3
Nevertheless, Takealot adapted fast to the lockdown, selling essential services where they could. Jumia, the largest e-commerce operation in Africa, quietly launched its South African operations, taking over from Zando. It became a scramble for small businesses to pivot & shift focus to e-commerce.
According to a report done by a new site called ecomm.africa, there has been a 306% increase in e-commerce stores from June 2019 to June 2020. The big bump came in May, likely due to the restrictions moving from level 4 to level 3.
There are now over 54 000 e-commerce stores in South Africa. But e-commerce penetration as a total of retail sits at 2%. Doing business online is not easy; there are a lot of things you need to consider when starting an e-commerce store; acquiring customers, marketing, logistics, payments, packaging, etc. There is no doubt that COVID has accelerated e-commerce growth, but the best approach will always be omnichannel & meeting customers where they are.