It will be a while before FB Shops and Shopify threaten Amazon’s dominance. Here’s why.

It’s been a big week for companies seeking to be king of the hill with respect to e-commerce dominance. Shopify is doing its dead level best to be the online store for mom and pop shops and main street local. They’re doing a great job at it by the way.

Shopify
Shopify from Yahoo Finance on May 22, 2020

Facebook announced Shops recently. With Shops, business owners can create a dedicated “shop” section of their Facebook or Instagram page and build out a catalog of their products for users to browse and buy. Importantly, most actual purchases won’t be happening on Facebook. Product listings will direct to a business’ existing website — unless it’s one of a handful of companies using Facebook or Instagram’s in-app checkout feature.

This is all great. Some see the Shops move by FB as another threat against privacy but the feature set is going to be robust. The company also plans to combine live video with shopping — a feature that’s coming to Instagram and Facebook “in the coming months” — which will essentially enable an influencer-lead version of QVC. Brands and influencers will be able to tag specific products before they begin a live stream and viewers will see prominent links to buy the items pinned to the bottom of the video. The move could also give Instagram’s biggest stars another reason to stick around, rather than depart for competitors like YouTube which offer influencers more ways to monetize their content.

These features are huge. I see the advantage at this point, if I had to choose between FB and Shopify going to Facebook. The video features with prebuilt community some of the brands and influencers have in place will be extremely scalable.

This post however is about how neither pose a significant threat to Amazon in the near future. The primary reason why? Amazon’s FBA (Fulfillment by Amazon) program and its network affects. For all the complaints lodged against the big A, it’s a go-to platform. When the mom’s and pop’s start to experience any degree of success out there, and it will be slow going, they will see how difficult two things really are.

  1. Driving traffic to your site or business page and..
  2. Packaging and shipping tons of products sold.

I predict that it won’t take long to see the light and the hassle associated with these issues. With both of the above methods, one will have to buy traffic. There will be few moms and pops out there that know how to effectively build traffic and get those carts humming. It’s a lot of work!

And packaging. Well, there is no free lunch. It’s time consuming and costly in space, people, and hard costs outside of those two areas are sky high.

Why is FBA so helpful to serious sellers? Here are a few reasons.

Amazon handles the logistics so business owners can do what they do best. Create, manage, build, etc.
  • It eliminates fulfillment headaches and allows scaling the business.
  • It outsources storage, customer service, and returns.
  • It offer free one- or two-day shipping to Prime members.
  • One has the ability to display the Prime badge on eligible products.
  • It improves the chance of winning featured offer spots on detail pages.
There’s no minimum number of units and no obligation to use FBA for all  products. Sellers have the freedom to customize your strategy to meet their own e-commerce business’ needs.
Less this become sounding like a commercial for Amazon, let me point out that there is no free lunch for Fulfillment By Amazon. There are plenty of fees charged. A run down is found here.
Even with the fees charged at the end of 2018, 61% of all sellers on Amazon utilized the FBA program. Going into 2020, the percentage of sellers using FBA was at 66%.
The reason in Blue Ocean Strategy are numerous. For the business customer it lies in a couple of areas.
The first significant advantage is the long tail of Amazon that delivers the third tier non customer in Blue Ocean terms. An article on the importance of the three tiers of non customers is found here. Be careful to note this distinction, spelled out in this brilliant piece on practicalecommerce.com. Amazon provides a marketplace for the long tail of everything. They leave the niche selling to third parties and their reach is what develops and delivers the long tail that ends up serving every seller on the platform. As an independent seller without those advantages, you don’t stand a chance.
The second advantage lies in a term called Supplements. In Blue Ocean terms, supplements are defined as anything else that is required to be purchased or used in order to properly utilize the product or service in question. It’s defined in context in use and implementation of the Buyer Utility Map. When a mom and pop seller of anything has to store items, buy packing material, hire people, ship products, build an online shopping cart, buy hosting, and the list goes on, they are dealing with supplements to the solution offered by Shopify and Facebook. For more visualizations, read this post.
So don’t buy into too much of the hype around Shopify’s performance and Facebook’s announcement. Will they thrive? Oh yes. Will they unseat Amazon? No, not in the near term with Amazon’s current trajectory.
If you’re being disrupted as a business in some way and would like an obligation free chat around your issues, I’m ready to chat. Set up a free hour with me here. 
Sherman G. MohrSherman G. Mohr is an Insead Blue Ocean Strategy Institute Certified Blue Ocean Strategist, residing in Nashville, TN. He serves as co-founder of marketing, tech, and healthcare firms.
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