Even pre-pandy, consumers spent $2 trillion globally—58% of overall sales—on online marketplaces in 2019. That trend has only gotten stronger amid the widespread shutdowns, as emphasized by recent IPOs in the space. Despite that, Guggenheim believes that the Shopify/Walmart partnership has largely been overlooked.
On Thursday, Analyst Ken Wong zeroed in on the space after discussions with a marketing agency. Recent IPOsof online marketplaces like ContextLogic [$WISH] and Poshmark [$POSH] have illustrated steadfast interest in the industry, but the deal between Walmart [$WMT] and Shopify [$SHOP] has been largely overshadowed by the pandy. This relationship, however, could “reinforce Shopify’s standing as the leading retail operating system,” he adds.
Wong mentioned that Walmart Marketplace doubled the total number of third-party sellers over the past year to 64,000, putting its sales volumes at nearly 20% of industry leader Amazon [$AMZN], which has more than 44 million listings. For the time being, he says, Walmart’s platform is likely best equipped to more experienced sellers, who can carry out quick fulfillment needs and provide customer support.
Even so, 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.”
Sure, it seems foolish to willingly engage in a David and Goliath-like duel with a mammoth like Amazon, but Wong sees opportunity as well. Walmart Marketplace has a relatively low level of competition in a new sales channel, which could attract gross margin growth. It could also lead to a virtuous cycle, as a growing merchant count brings in even more consumers over time.
Alas, what’s good for Walmart can benefit Shopify, too. The company’s unified dashboard and centralized inventory management system is a critical advantage, and the need for consistent pricing should continue to attract new users.