Walmart is making a move to counter Amazon's fastest-growing retail business by partnering with Shopify
Walmart is partnering with Shopify, a fast-growing Amazon competitor, in its quest to expand its online business.
Shopify provides e-commerce tools to more than one million small and large businesses, such as Lively, Allbirds, PepsiCo, and Heinz. The company helps businesses quickly and cheaply set up online shops that include tools like payment and inventory management. Monthly fees start at $29.
The new partnership will enable Shopify sellers to list their items on Walmart.com. This could help fuel sales for these sellers by giving them access to a new set of customers.
The deal will also expand the assortment of goods available on Walmart.com, giving a boost to the company's third-party Marketplace business.
Both Amazon and Walmart have been rapidly growing their third-party businesses in recent years. These businesses can be easier to scale and more profitable than first-party operations, because sellers often handle the costs of delivery.
Walmart said third-party sales outpaced first-party sales in the first quarter of the year.
"The US e-commerce business grew 74% in total last quarter, and growth in marketplace outpaced the overall business even as first-party sales were strong," Jeff Clementz, vice president of Walmart Marketplace, said in a blog post announcing the Shopify partnership.
He said the deal with Shopify would focus primarily on bringing small and medium-sized businesses to Walmart.com "that have a track record of exceeding customers' expectations."
"Growing our Marketplace is a strategic priority, and we are going to be smart as we grow. We will start integrating new sellers now and expect to add 1,200 Shopify sellers this year," Clementz said.
(He said sellers interested in joining Walmart Marketplace can learn more at this website).
Amazon remains the leader in third-party sales
Amazon has also said that its third-party sales have outpaced first-party sales. The compound annual growth rate for Amazon's third-party sales was 52% between 1999 and 2018. That same metric for first-party sales was 25% over the same period.
"Third-party sellers are kicking our first party butt," Amazon CEO Jeff Bezos wrote in his 2018 letter to shareholders. "Badly."
Moody's vice president Charlie O'Shea said Monday that Amazon is the "unquestioned leader" in third-party sales, but competition in this segment of retail is "heating up."
"The ability of Walmart to offer space in stores, as well as placement on its website for select retailers... is a key competitive advantage that certainly has the potential to attract additional relationships," O'Shea said. "The affiliation with Shopify is a further indication that Walmart will continue to focus heavily on expanding its third-party relationships."