Shopify Gets the Strongest Endorsement Ever, and Zeros In on Amazon

If the COVID-19 pandemic and the instant recession that followed it have proven anything about the economy, it would be that essential retail operations and those that can cater to the delivery and pick-up model will win in the new economy. If a business cannot cater to that, it’s model is toast. Shopify Inc. (NYSE: SHOP | SHOP Price Prediction) has proven over and over that it can help small and midsized businesses create an online presence that makes them look and feel just like some of the greatest retailers of them all. So what happens when the greatest brick-and-mortar deal is so impressed that it signs its own pact with Shopify?

Walmart Inc. (NYSE: WMT) announced on Monday that it is expanding its e-commerce marketplace to more small businesses in a pact with Shopify. The company is effectively opening up the Walmart Marketplace to their sellers. While the news might sound odd, like it is helping the competition in retail sales, Walmart claims that competition is good and that it wants to see more retailers rather than fewer.

According to the Walmart release, its eCommerce business in the United States grew by 74% in the most recent quarter. The company also noted that growth in the marketplace outpaced total business growth, even though first-party sales were strong.

While the offering may sound like it is bringing in competition, the Shopify integration appears to be focused on domestic small businesses and medium-sized businesses, where their assortment complements Walmart’s offerings and where they have a track record of exceeding expectations.

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According to the Walmart release, the Shopify integration will allow “approved” Shopify sellers to list their own items on the Walmart.com website. So while this may sound like direct competition, it is really aimed at offering Walmart’s customers a broader offering base to its own customers.

As for the real rub here, it is obvious that Walmart is using Shopify to boost its rivalry against Amazon.com Inc. (NASDAQ: AMZN). Amazon has its own online stores and its own online verticals, but Amazon has many aspects of the goods it sells that the company never actually touches. After all, much of Amazon’s online sales offerings are from third-party sellers who simply use the Amazon retailer platform to sell to the public.

Another aspect to consider is that in increasing its focus on Amazon, Walmart’s effort here is not limitless, and the company does not sound as though it is opening the floodgates of third-party sellers on its marketplace. Walmart’s announcement noted that it will start integrating new sellers now and that it expects to add 1,200 Shopify sellers this year.

Walmart and Shopify likely already have identified some of those third-party retailers that it wants to add, but the company also has opened up an app for companies that are interested in joining the effort.

The overall indexes traded lower on Monday, with more profit-taking and on the increase in U.S. COVID-19 cases and an additional outbreak seen in China. Shopify shares traded trading up about 5% at $778.00, while Walmart was down just 0.1% at $117.60. Amazon stock was down 0.5% at $2,5321.25 on Monday right before the noon hour.

Shopify may be benefiting from one of the top analyst calls of the day. Piper Sandler changed its Neutral rating to Overweight and raised its price target to $843 from $733.

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