When word of it first came out, no one was quite sure just how well the fulfillment agreement between e-commerce greats Shopify (NASDAQ:SHOP) and Amazon (NASDAQ:AMZN) would work. But now that it’s gone on for a little while, it seems to be working out pretty well for both sides.
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The agreement, when it was struck, called for Shopify vendors to be able to offer customers a Buy with Prime option. That option would route payment through Amazon, and also have Amazon fulfill the order. That’s when Bank of America’s Justin Post weighed in, saying that this could be better for both than the investors of either might realize. Amazon gets a chance to demonstrate its remarkable skill with logistics, and Shopify gets to maintain its status as a capital-light operation while still delivering substantial value to its user base and its investors.
Amazon got Shopify on board via a series of key principles. Amazon offered a means for merchants to raise sales while at the same time enjoying a delivery system that was similar in scope to Prime. Further, Amazon offered a “collaborative environment” that allowed both sides to profit, and let both sides go forward. There were certainly doubts; some wondered if this wasn’t a way for Amazon to quietly profit by routing some of Shopify’s business through its own operations. But thanks to some impressive negotiation, Shopify quietly managed to make this just as much a win for itself as for Amazon.
Turning to Wall Street, there is an interesting separation between the two. Unsurprisingly, Amazon is considered a Strong Buy by analyst consensus, while Shopify is considered a Moderate Buy. Meanwhile, Amazon’s average price target of $175.63 gives it an upside potential of 29.51%. Shopify, however, offers a 5.76% upside potential on its $68.09 average price target.
