Behind the news headlines

The headlines first:

1. Amazon reported flat growth in the number of products sold in the first quarter compared to the last year
2. Shopify lost 80% of its market cap from its All-time-high six months ago
3. Affirm is trading below its IPO listing price

But behind this gloom, there are stories of massive ambitions all pinned on the ability of the consumer to spend. While the macros play out as they will, let's look at some of the recent moves by these players and the non-obvious driving factors.

Amazon offers 'Buy with Prime' because (among other things) it has excess fulfillment capacity

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There are many motivations.

Prime users will soon be able to discover and buy from merchants that are not part of the Amazon marketplace. It's being touted as a reach for merchant access and data. But there is also short-term pain alleviation. Amazon doubled its fulfillment network capacity that it had built over 25 years in just 24 months, in response to the pandemic-driven consumer demand. That demand is waning for various reasons. 'Buy with Prime' is a short-term answer to the fulfillment supply glut that pulled Amazon's earnings down. This year's 'Prime Day' and 'Holiday season sales' will be featuring 'Buy with Prime' in the forefront because fulfillment cost management depends on them.

Shopify owns the checkout because it needs its merchants to not die

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Bolt's trouble with Shopify is well-documented now. Shopify's clunky checkout experience is also well-known in developer circles. But it's not about the checkout experience per se. Owning checkout is the way Shopify gets hold of consumer information. This first-party data packaged as 'Audiences' is necessary to run 'look-alike' targeting on Facebook – a platform that every small eCommerce merchant depends on, to win customers profitably. Cut that oxygen, it threatens the survival of the merchants and the key feeder line for Shopify's revenue funnel. So checkout is as strategic for Shopify as it is for the checkout companies.

Even with the owing of checkout experience and launching 'Shopify Audiences', Shopify cannot hold the ground for long against 'Buy with Prime'. Merchants will need as many options to win customers as there are. Many of Shopify's merchants won't advertise. For them, 'Buy with Prime' presents a no-brainer channel (provided, that Amazon opens up the program without restrictions on merchant size).

The BNPL narrative of Affirm is short-sighted

Affirm is an embedded consumer financing product that happens to offer BNPL loans among other things. The ultimate game for Affirm is to replace card networks and offer a more granular embedded financing option down to underwriting specific SKU-level transactions for a uniquely identified shopper. By doing so, Affirm makes it a win for brands, merchants, and the shopper.

Ultimately, Affirm is a personalized product discovery marketplace – one that is aligned with shopper tastes and risk profiles. No financing product is able to do it at the depth and scale Affirm can. Affirm is a 'Shopper-Merchant-Brand' network that does not exist today.

What other non-obvious plays do you see and from whom?