The Shopify Inc. website
Andrew Harrer/Bloomberg
Even before the pandemic, consumers spent some $2 trillion globally—58% of overall sales—on online marketplaces in 2019. That trend has only grown in the wake of Covid-19, as emphasized by recent initial public offerings in the space. Yet Guggenheim notes that the Shopify – Walmart partnership has largely been overlooked.
Analyst Ken Wong takes a look at the space on Thursday after discussions with a marketing agency. The recent IPOs of online marketplaces like ContextLogic (WISH) and Poshmark (POSH) have highlighted continued investor interest in the industry, he writes. But the agreement between Walmart (WMT) and Shopify (SHOP)—announced in June 2020—has been largely overshadowed by the pandemic. This relationship, however, could “reinforce Shopify’s standing as the leading retail operating system,” he writes.
Wong notes that Walmart Marketplace doubled the total number of third-party sellers over the past year to 64,000, putting its sales volumes at roughly 20% of industry leader Amazon.com ’ (AMZN), which has more than 44 million listings. For now, he says, Walmart’s platform is likely best-suited to more experienced sellers, who can handle quick fulfillment needs and provide customer support. Yet more intriguing longer-term potential exists, he says: “The partnership could open up a compelling physical presence across the robust Walmart ecosystem not currently offered by other channel partners.”
It may seem like a tall order to grow against a behemoth like Amazon, but Wong notes there is opportunity as well. Walmart Marketplace has a relatively low level of competition in a new sales channel, which could allow attractive gross margin growth. It could also lead to a virtuous cycle, as a growing merchant count attracts even more consumers over time. If Walmart can lower marketing costs—a merchant complaint—that could also drive more adoption.
While this is a positive for Walmart, it can help Shopify, too. The company’s unified dashboard and centralized inventory management system is a key advantage, and the need for consistent pricing should continue to attract new users to the platform.
Shopify is down 1.3% in recent trading to $1,186 while Walmart is 0.4% lower to $144.95.
Write to Teresa Rivas at [email protected]
