Shopify or Amazon, that is the question

This business case is about the battle between Amazon Marketplace and Shopify in the competitive and fast-growing e-commerce market. It uses the decision-making process of the Pizza Pilgrims, a chain of pizza restaurants in London who pivoted to e-commerce during the COVID-19 pandemic. The case explains how the two platforms define their target customer and value proposition, how they make money and their strategies to scale. Students will be encouraged to study the differences between transaction, innovation, and hybrid platform models, understand the strengths and weaknesses of each, and reflect on the application of platform strategies to other industries. They will also consider what strategy Amazon Marketplace and Shopify might adopt for future growth and reflect on whether one model might be more successful than the other. Platform strategy is deployed by the most valuable companies in the world to create value by opening their platform to third parties with complementary innovations like Apple iPhone or Sony PlayStation, or by connecting demand and supply of a given market like Uber or Airbnb. The success and growth of platforms depends on a deep understanding of the types of platforms, monetization strategies and the complex dynamics of network effects. Pizza Pilgrims’ choice of Shopify over Amazon Marketplace demonstrates how Shopify developed a compelling value proposition to help merchants build their brands and leverage direct relationships with their customers across multiple channels. This matches their strategy to design an asset-light, open innovation platform where an ecosystem of developers helps merchants innovate, allowing the value capture (revenue and shopper insights to fuel future innovations) to be shared across all sides. By contrast, Amazon Marketplace is designed to offer variety, low prices, and fast delivery to shoppers; this matches with their strategy to design a transaction platform where value is extracted from merchants and offered to shoppers and used to support its asset-heavy and vast fulfilment operations. A key watchout is that while platforms are powerful in creating competitive advantage and competitive insulation, companies that grow to be hybrid platforms can also face anti-trust issues if they become too big to allow competition to thrive.

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