Shopify stock has risen nearly 90% so far this year.
Andrew Harrer/Bloomberg
Shopify
unveiled a deal that permits merchants on its platform to offer shoppers the choice to buy items using
Amazon
Prime perks. Analysts anticipate a boost in merchant usage, among other benefits for the tech firms involved.
Shopify and Amazon.com both offer services and tools for online selling, in turn competing for market share. Under the new agreement announced Wednesday,
Amazon
(ticker: AMZN) will release an app in
Shopify’s
(SHOP) ecosystem allowing merchants to integrate ‘Buy With Prime’ option into a product’s page. That will give customers the ability to use their Amazon wallets—as well as access benefits such as fast delivery and returns offered through Amazon’s fulfillment network. Shopify’s payment system will ultimately process the transaction at checkout.
Previously, merchants could only add Buy with Prime on their page independently, but that partly violated Shopify’s terms of service as it prevented the platform from collecting fees or seeing transaction data.
The new deal offers Amazon an easier path to capture Shopify’s gross merchandise volume, or GMV, which is expected to reach $230 billion in 2023, wrote Wedbush analyst Scott Devitt in a note Thursday. It also increases the value of Amazon’s Prime membership by extending its benefits to more sites, he wrote.
The analyst has an Outperform rating on both Amazon and Shopify stock, with price targets of $180 and $62, respectively.
Shopify stock rose 6% to 63.60 in Thursday’s premarket trading. Amazon stock was trading flat at $135.17.
Oppenheimer’s Ken Wong sees the potential for more merchants to use the option now that there is formal support, and that could convert more customers from browsing to actual product purchases. Wong has an Outperform rating on Shopify with a $80 price target.
Shopify investors also no longer have to worry about Amazon’s Buy With Prime taking a big chunk out of Shopify’s payment revenue. With transactions processed via Amazon Wallet through Shopify Payments, “we expect full data access and at least some take rate [commission] participation,” said Wong.
To be sure, merchants might still have to deal with potentially substantial fees and providing Amazon with insight into their inventory trends.
Write to Karishma Vanjani at [email protected]
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