How Shopify and Amazon are cracking omnichannel & the opportunity it brings for brands
The concept of omnichannel has been around for barely a decade. Yet, it’s already a part of most D2C marketers’ playbooks. There are multiple reasons for the popularity of the omnichannel retail strategy. Let’s look at some numbers to understand more:
Using APIs, ecommerce companies can thus cut down on fixed tech overheads substantially.
- More than 50% of consumers research a product online but purchase it offline
- 47% of consumers are more likely to buy online if there is an option for in-store return
- Using 3+ Channels increases order rates by 494%
- Retailers who don’t sell on multiple channels miss out on 30% of sales
Even in the pre-digital era, companies had to consider various channels to sell. The traditional channels would be retail outlets (serviced via distributors), modern trade channels (serviced by companies themselves) , B2B channels such as HORECA, and other special channels (e.g., Armed Forces). However – these channels were independent, and rarely were synergies applied across channels.
In the digital era, the role of omnichannel is to integrate the various channels (offline and online) to provide a unified buying experience to the end customer. Until recently, one of the critical roadblocks for companies to adopt an omnichannel strategy was the independence of crucial channels like Amazon and Shopify. With Amazon and Shopify both taking strides towards omnichannel enablement, brands have multiple reasons to rejoice.
Omnichannel on Shopify
Shopify Plus’ omnichannel module allows brands to sell to 80+ countries. To enable the same, Shopify offers 70+ Shopify themes to customize their frontend look and feel and generate great user experience across devices and is partnered with 100+ payment providers. Furthermore, Shopify lets users create custom multichannel automation flows using Shopify Flow. Brands can now automate their customer journeys easily without causing breaks in the user experience.
There are multiple apps and fulfillment partners integrated into Shopify. Shopify also allows brands to use Fulfilled by Amazon for their orders. Much more interestingly, Shopify acquired Deliverr last month which now gives them the capability to extend their end to end software to actual warehousing, fulfillment and logistics. This, we believe, is in response to Fulfilled by Amazon which has seen a significant gain in order share on Shopify webstores. While Shopify does not intend to fully monetize their newly acquired 3PL and logistics capabilities, not having it was one of the serious limitations in their arsenal.
While there are hundreds of apps on Shopify’s webstore enabling all kinds of marketing workflows, another serious limitation was the lack of a systemwide marketing application that would build upon synergies created through the 3.4 million webstores built on Shopify. Marketing in ecommerce was initially pioneered by Alibaba through the launch of their Alimama, one of the most advanced programmatic marketing tools in the world powered by AI, enabling sellers to drive much higher order volumes, especially during sales. Taking a leaf out of Alibaba’s playbook, Amazon launched their extensive marketing platform in 2012 called Amazon Marketing Services (AMS). Since then, Amazon advertising offerings have gone through a flurry of changes, including the discontinuation of initial Product Ads and Amazon Text Ads and renaming of eCommerce Ads to Product Display Ads. This has been a significant differentiator, ensuring merchant loyalty to Amazon due to the higher order volumes that they could drive. Shopify just launched a new platform called Shopify Audiences intended to ultimately enable marketing synergies across 3.4 million independent webstores built on their platform by enabling independent brands to display ads of complementary products from other brands on their webstore, driving higher sales for all brands.
Unlike every other ecommerce marketplace, Shopify’s Hydrogen and Oxygen platforms (recently launched/being launched) allows companies to build more complex integrations and systems on Shopify, literally giving wings to what is now possible to build on top of Shopify’s already extensive suite of solutions. Shopify’s playbook is what every other platform on earth aims to build. What makes them special is that they already have built it. While they have seen a drop in their revenues this year, we are bullish on Shopify’s omnichannel vision in the long term.
Amazon’s omnichannel endeavor
Amazon’s omnichannel journey is centered around its grocery business. Amazon has realized that to sell groceries successfully; they need physical stores. Thus, the launch of Amazon Fresh – A physical retail chain powered by Amazon. A quick reading of Amazon’s history will tell us that groceries are merely a pilot. Eventually, they will likely sell most categories through the multichannel route.
What we find most interesting is that Amazon recently launched a major initiative called Buy With Prime. With this new initiative Amazon is telling merchants that irrespective of which platform they are selling on (Shopify, Bigcommerce, etc) or what kind of sales (retail, ecommerce, B2B, etc), they can simply sign up for Buy With Prime and Amazon will drive demand for them through their marketing channels and fulfill their orders through FBA. They are telling Prime customers that they can now search for products on their platform, find various options near them, such as a local store or a webstore that is not Amazon, or some seller on Amazon’s marketplace, place their orders with the same convenience that they get by being Prime customers on the Amazon marketplace. This has the potential to make Amazon indispensable to brands as they become the bedrock of commerce irrespective of where the sale happens.
Amazon has noticed 3 major changes in the last 2 years, leading to this new development.
- Customers are becoming agnostic to the channel of sale. They are searching on Google and buying from various different websites. In most countries, local ecommerce platforms are competing successfully with Amazon.
- Merchants are breaking away from Amazon. The average commission + marketing + FBA fees paid by a successful merchant selling on Amazon is close to 30% of their revenues. This is leading to many merchants moving to platforms like Shopify which offer a lot more flexibility at a lot less cost.
- Amazon has approximately 57% share of US ecommerce, 200M+ customers, 150M on Prime in the US, out of 300M US citizens. There is not much room left for Amazon to grow through the marketplace model.
How does this impact mid sized brands?
The advances of Shopify and Amazon towards omnichannel open up some exciting possibilities for mid-market brands. Using Hydrogen and Oxygen, brands will be able to build future-ready systems. We can see cases where the brands use Shopify to expand to multiple geographies and fulfill orders using Shopify’s new fulfillment capabilities or FBA. Similarly, we could see instances where products are advertised online, ordered on Shopify stores, but sold via Amazon’s physical stores and vice versa.
How will brands manage all the complexities thrown at them in this new world? Will they shy away and stick to their existing channels of sales and focus on where they are getting their orders from today? Even a novice at game theory will tell us that it is highly unlikely because, in a winner takes all business like ecommerce, no merchant can afford to stick to the status quo and not become irrelevant. As such, in this race to realizing higher revenues, remaining relevant for customers and keeping burgeoning costs under control, brands need someone on their side making it easier and taking care of everything, allowing them to focus on sales.
That is where brands using a platform like Eunimart end up with massive advantages over those who are not. Shopify, Amazon and other channels can all be operated from a single platform, leading to an unified end experience for the buyers. We have built an advanced, open, Platform as a Service (PAAS) powered by Deep Learning, AI and advanced technologies that can help create the exact solutions mentioned above. Eunimart is one of the first platforms to create a 3 sided flywheel integrating various channels of sales, merchants and ecosystem partners, covering multiple geographies. We understand merchant use cases deeply, and provide most of the solutions they need on the platform. For the remaining long tail of use cases, we provide a PaaS with separate frontend and backend architecture (similar to Shopify’s Hydrogen and Oxygen) to build their own apps, an iPaaS to integrate any additional software, partners etc easily, a low code layer to create new use cases with needing much coding experience etc.
Let’s consider some potential use cases –
- When a product is added or discontinued, brands need to update the individual marketplace catalogs separately; this can be improved by connecting all channels to a centralized product feed. We use AI to pull product details, optimize title, description, keywords, pricing, images, category, attributes to a 98% efficiency, enabling brands to go live across 100+ countries and dozens of channels of sales in no time.
- Using AI, we predict sales across different channels of sales and countries. Combine this with our powerful Inventory360 tool and you get one of the most powerful inventory management systems out there to manage everything from sourcing, replenishment, distribution, 3PLs, warehouses, B2B and B2C channels of sales etc from a single platform. To understand the impact something like this can create, I urge you to read our case study of Asian Paints and how they managed to grow in double digits consistently over the last 50 yrs.
- Going CrossBorder: Shopify and Amazon combined capture only about 15-18% of global ecommerce. In Europe and Asia, local marketplaces are competing successfully with the ecommerce giant. The trend might seem counterintuitive given media coverage of Amazon’s market share growth, but there is a significant undercurrent of merchants either becoming agnostic to the channel due to technology improvements or moving to DTC models to control customer experience and margins. Consumers are more willing to buy from foreign marketplaces if they get a better deal. McKinsey forecasts that cross-border ecommerce will account for 1 of every 3 shipments, over $2T*. Eunimart’s platform was built for crossborder commerce to manage all these different channels of sales, languages, units, currencies, SLAs, etc.
At Eunimart, we have been asking questions and framing problems on behalf of brands, retailers, and supply chain companies. Our vision is to help companies not just grow revenue today but also plan for the future. We have built a full stack of AI tools to power revenue, supply chain, and distribution combined with an incredibly flexible and advanced open source platform to power the next generation of brands in the online world.