Inside the clash between Amazon and Shopify over Buy with Prime
- Internal documents reveal tension between Amazon and Shopify as they worked on a new partnership.
- Amazon and Shopify announced a new Buy with Prime app for Shopify on Wednesday.
- In a rare move, Amazon has to compromise and give concessions in return for Shopify’s cooperation.
Amazon is the undisputed leader in e-commerce. That is the common assumption. An internal document and interviews with insiders indicate that this is changing.
For months, Amazon has been attempting to get its Buy with Prime service onto Shopify’s merchant platform. On Wednesday, it finally happened. However, the untold story of how it happened reveals that Shopify wielded surprising power over the negotiations.
Buy with Prime allows merchants to offer Prime benefits like fast shipping and free delivery on websites other than Amazon.com. Online shoppers see a Buy with Prime button and shipping information, and they can check out using payment and shipping information already saved in their Amazon account.
Amazon announced plans earlier this year to integrate Buy with Prime data with Shopify’s backend system. Amazon had hoped that Shopify would support this so that merchants could analyze data such as orders, returns, and traffic directly in an upcoming Buy with Prime app for the Shopify platform.
Shopify declined. According to an internal Amazon document from April, Amazon had no choice but to allow Shopify merchants to view Buy with Prime-related metrics on its own backend console rather than the unified Shopify Admin tool.
“Shopify has confirmed that they will not invest in any BwP-specific analytics functionality, meaning that our Merchant Console will be the only place merchants will have access to view and analyze this data,” according to the document.
This data integration was critical because busy merchants frequently do not have time to manually combine data about their business from various portals. Shopify merchants may not use the Amazon feature as much if Buy with Prime data is not seamlessly integrated into Shopify Admin. That would be a setback for Amazon, which is attempting to diversify its revenue-generating services beyond its own e-commerce website and app.
After four months, the two companies appear to have reached an agreement. Amazon and Shopify announced a new Buy with Prime app for Shopify’s platform on Wednesday, which will allow merchants to “automatically sync orders, promotions, catalog listings, and taxes within their Shopify Admin.”
According to the document and people involved in the project, other aspects of the tense negotiations did not go Amazon’s way. It’s a rare instance of a company being forced to compromise and make concessions in order to gain the cooperation of an increasingly powerful rival.
According to one section of the Amazon document, Shopify is the “largest turnkey ecommerce service provider in the market.” When the final agreement was announced, Shopify’s payment-processing service was chosen to handle all Buy with Prime transactions on the Shopify platform, a significant concession by Amazon.
Beyond their public statements this week, Amazon and Shopify declined to comment.
Project Santos
Buy with Prime arose from a covert initiative led by Amazon founder Jeff Bezos after the company became concerned about Shopify’s rapid growth. As previously reported by Insider, it was known as Project Santos.
By 2020, Shopify stock had skyrocketed, and the company was valued at around $130 billion. Initially, as Amazon executives scrambled to respond, there was internal discussion of developing a full-fledged competing service. That would have returned Amazon to a market it abandoned in 2015 when it discontinued its Webstore offering.
Instead, Buy with Prime will launch in April 2022. Even so, it caused friction between the two companies, with Shopify warning its sellers not to use it at one point. According to some analysts, Buy with Prime is a “Trojan Horse” that helps Amazon take market share away from Shopify.
Constant delays
A Shopify-native Buy with Prime app was described as a “flagship” goal for Amazon’s top leadership because it would make Buy with Prime more appealing to Shopify merchants.
According to the document and people involved in the project who spoke on the condition of anonymity because they were not authorized to speak to the press, Shopify repeatedly delayed the launch date and provided extended timelines.
According to the document, Amazon had already pushed back the general availability date of the new Buy with Prime for Shopify app from late July to August 14. Amazon anticipated even more delays because it wanted to launch with a new mixed-cart feature that allows customers to purchase multiple Buy with Prime products at the same time. Shopify has only committed to adding that feature by the second quarter of 2024, or approximately 12 months later.
“We’ll need to delay our V1 launch even further,” the document said, referring to the app’s first version.
According to people familiar with the project, Shopify refused to commit to a firm launch date due to limited resources. According to one of the sources, the lack of interest was expected because Shopify “really disliked” it when Amazon first introduced Buy with Prime last year. According to Wednesday’s announcement, the new app is still invite-only and will be available to all US-based Shopify merchants who also use Amazon’s Fulfillment by Amazon service by the end of September.
To expedite the launch of the mixed cart feature, which merchants and investors have been requesting, Amazon created a “light” version that required few changes to Shopify’s system architecture. According to the document, Amazon was willing to spend about 4 months building this on its own in exchange for Shopify’s commitment to provide support for the mixed cart feature later.
“If Shopify improves their systems to support mixed-cart (i.e., no longer requiring Light Cart), the only work wasted on the Amazon side is the effort to build the Light Cart UI (3-4 dev months),” according to the document. “While Shopify is aligned at a high level, we have not yet locked down low-level details with Shopify.”
Amazon was also concerned about Shopify’s request for real-time shipment tracking for packages shipped via Amazon’s own logistics service, and sought to prioritize it. According to one of the documents, Amazon Logistics handles nearly 70% of Buy with Prime orders, but Shopify does not have tracking capabilities for those shipments.
“Inclusion of AMZL tracking into the Shop App is an area of strategic importance for Shopify and will most likely be a point of contention if we do not prioritize this work,” according to the document. Shopify sold its logistics business earlier this year, effectively giving up on competing with Amazon in this space.
Can Amazon stitch a customer journey together?
Another source of contention was the complete measurement of click metrics such as views, checkout previews, orders, and latency. Amazon wanted Shopify’s assistance in gathering that data at the merchant, product, and shopper levels, but “due to Shopify being unable to resource this work” by the time the first version of the app was released, Amazon decided to use less-robust internal metrics as a proxy.
“This implies that we will not have the shopper-level granularity to stitch together a customer journey for deep-dive purposes, and the metrics will be less precise,” according to the document.
How many of these issues have been resolved is unknown. In a joint announcement on Wednesday, Amazon and Shopify stated that the two companies “will continue to iterate together” to “roll out additional features in the future.”
Wall Street has been waiting
For quite some time, Wall Street has been anticipating the release of the new Buy with Prime for Shopify app. Almost every Shopify earnings call in the last year had at least one analyst question about it. Shopify President Harley Finkelstein appeared irritated during the most recent call in early August.
“Yeah, I mean, conversations with Amazon remain productive, but there’s no news to share right now,” Finkelstein said on the call.
According to some industry experts, Wednesday’s announcement was lacking in granular details about the new service and appeared rushed.
“It seems more like a partnership announcement before the implementation was complete,” said Mark William Lewis, CEO of Netalico Commerce, an online shopping consulting firm.
A Shopify Payments win
The main highlight of Wednesday’s announcement for Shopify was securing the payment processing portion of the new Buy with Prime app. This is significant because payment processing fees account for a sizable portion of Shopify’s revenue.
Amazon was concerned internally about Shopify Payment’s low popularity among sellers. According to an internal Amazon document, this is the “biggest blocker for merchants not adopting the Shopify app” because they have already negotiated lower credit card fees with other payment providers, or they prefer receiving all payment processing through a single vendor, such as Stripe. Sellers who choose to use a different payment provider are charged an additional fee by Shopify.
A double-counting inventory problem
Amazon intends to integrate the Buy with Prime app with its multi-channel fulfillment service, which allows sellers to use Amazon’s warehouses and shipping network for orders placed elsewhere.
According to the document, this could boost merchant signups by simplifying onboarding and addressing a double-counting inventory issue, which is “a major concern for Shopify and a larger concern than previously anticipated for Amazon.”
According to people familiar with the move, Amazon merged the two teams internally as part of this effort. It’s unclear when the unified app will be available.
Some bright spots
The collaboration has had some positive outcomes. According to the document, the “Reviews from Amazon” feature, which displays Amazon reviews next to Buy with Prime products, has been a “gamechanger” for sellers. According to an internal survey, 61% of shoppers thought the feature gave them more confidence to buy from a lesser-known merchant.
The document also included a list of the “north star and tenets,” or guiding principles for the new Buy with Prime for Shopify app. The goal is to create “a native (i.e., built within Shopify systems) experience that is so compelling for shoppers that merchants would be irresponsible not to offer it,” according to the company.
Prioritizing merchant sales volume growth and meeting Amazon Prime’s high bar of quick delivery and free returns are among the 6-point tenets. It also emphasized the importance of resolving conflict and creating a “better together” service with Shopify.
“With Shopify, we believe we can create a ‘better together’ shopper and merchant experience.” “To ‘grow the pie,’ we lean in to the key differentiators that each company has to offer (e.g., Prime, MCF, Amazon App, Shop App),” it said.
