Shopify is Doomed - Standalone eCommerce stores are dead. Long live marketplaces.
TLDR
Shopify is the VBulletin of Ecommerce. It’s Simply outdated and a bad experience for customers.
Marketplaces, namely Amazon, will continue to capture larger and larger market share.
Standalone eCommerce stores are already losing market share to marketplaces. Other countries with a higher % of retail sales as ecomm are dominated by market places.
I am not short Shopify, but have zero interest in going long.
Anyone remember VBulletin? It’s the software that powers internet forums. Before Reddit and Discord exploded in popularity, people used to communicate on internet message boards / forums and while some still do, it’s mostly an obsolete medium. VBulletin charges website owners ~$200/year to license their software and it was well worth it as it was the most reliable and feature rich option. Despite being the best at what they did, new and better mediums like Discord and Reddit allowed communities to interact in a much better way. VBulletin is still around today, but given the massive decline of forums it's not nearly as good of a business.
Shopify today is like VBulletin and Amazon and other major retailers (Target/Walmart) are Discord and Reddit. Shopify is excellent at what it does, but the standalone ecommerce store run by small & medium businesses is a bad value proposition for consumers.
So why is Shopify the inferior option for consumers? Simple. No one prefers buying on a Shopify store vs Amazon or any major retailer. No one. They hate it. And rightfully so. Here’s why:
Every individual merchant has their own return policies and they’re ALWAYS worse for consumers than Amazon’s.
Shipping is slower. Amazon has pushed the envelope on logistics and almost always delivers within 2 business days and oftentimes 1 day if you’re in a major city.
Higher friction. Purchasing on Amazon is quick and convenient as practically everyone already has an account with saved credit card data. Shop Pay has bridged this gap to a degree, but friction remains higher.
As a consumer, ask yourself. Would you rather purchase something on Amazon or a random Shopify store? The answer is obvious to everyone except some Shopify bulls.
Marketplaces win. Just look at other Countries.
Marketplaces like Amazon and Target have only gained marketshare over the last few years with Amazon alone making up over 40% of all Ecommerce in the U.S. Marketplaces have dominated eCommerce in markets outside the United States as well. In China, which is years ahead in eCommerce adoption (vs the U.S.), Alibaba’s Tmall and Taobao which operate similarly to Amazon’s marketplace dominate.
While Shopify does offer merchants value by giving them greater control of their brand and customers, consumers ultimately prefer to shop on Amazon. Merchants benefit by selling on Amazon as it gives them access to an enormous pool of potential buyers. Products can easily get discovered on Amazon whereas finding customers on an independent Shopify store is much more difficult and largely requires advertising spend. Merchants will go to where customers are and that is increasingly Amazon.
Conclusion
Ultimately Shopify is uninvestable at its size today ($46b market cap). Broader industry trends are going against them with marketplaces gaining market share. If Shopify was a $2b company with profits, it could be interesting, but as-is, it’s a pass for me. I’ve been short in the past at higher prices, but at its current price I see better short opportunities.
Walmart, Target, and even Macy’s operate online marketplaces now. Amazon is the largest and most successful, but its worth mentioning that other major online retailers are moving towards the marketplace model.
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