E-commerce software and services provider Shopify will make use of industry giant Amazon.com's vast distribution network, though financial terms of a deal have yet to be disclosed. SHOP stock dipped Friday after a big gain the day before.
Meanwhile, Amazon was the IBD Stock of the Day on Thursday.
Amazon now offers its massive distribution network to merchants that do not sell goods on its website. The product fulfillment services are part of a program called Buy With Prime. Amazon late Wednesday announced it will release an app giving U.S. merchants access to the Buy with Prime service.
According to Deutsche Bank analyst Bhavin Shah, the new app integration will give Shopify merchants who are using Amazon's fulfillment network the ability to seamlessly add the Buy with Prime button. It can go on the detail page of each product they choose to include as part of the program.
Also, Prime members will select a payment method from their Amazon wallet and Shopify Payments will process the transaction — via Shopify checkout, he added. Customer data will remain with the merchant.
SHOP Stock: Amazon Now A Frenemy?
"Shopify will process all of the payments from Buy with Prime transactions which turns Buy with Prime from a potential threat to Shopify's Payments stream to an accelerant of Shopify Payments penetration of gross merchandise volume," Shah said in a note to clients.
In early June, Canada-based Shopify completed the sale of its fulfillment unit, easing investor angst over rising costs.
On the stock market today, SHOP stock dipped a fraction to 66.02. Amazon stock was nearly flat. On Thursday, Shopify popped 10.8% to close at 66.49. AMZN stock rose 2.2% to 138.01.
"Investors no longer have to worry about BWP eating into the (Shopify) total addressable market; and with transactions processed via Amazon Wallet through Shopify Payments, we expect full data access and at least some take rate participation," SHOP stock analyst Kenneth Wong of Oppenheimer said in his note to clients.
Shopify Sells Fulfillment Unit To Flexport
He added: "We see potential for the Amazon partnership to improve a merchant's fulfillment experience and increase conversion, consistent with Shopify management's core focus."
Shopify announced the sale of the fulfillment business to privately held Flexport on May 4. Further, Flexport will be Shopify's logistics partner under a revenue-sharing arrangement. In addition, Shopify now holds a 13% equity interest in Flexport.
Shopify sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping. Further, the company is building a U.S. distribution network to store and ship products for its merchant customers.
Through Thursday's close, AMZN stock has advanced 64% thus far in 2023. SHOP stock has jumped 92%.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
