Supply Chain Predictions for 2021
I think we can all agree that 2020 is a year that we’ll be excited to leave behind. With a global pandemic, and all its associated side-effects, day-to-day life has been a challenge. But with every challenge comes an opportunity, and this has certainly been the case in the world of e-commerce.
With millions homebound, the obvious benefactor has been online shopping. Amazon, with 60% of sales driven by 3rd-party sellers, has seen its quarterly profits set new records with 3rd quarter sales skyrocketing by 37%.
This boom in e-commerce has had a profound impact on all parties across the supply chain. The continued proliferation of 3rd party fulfillment options means that Amazon and its shipping partners—FedEx, UPS, USPS, DHL, and regional couriers—will have a hard time keeping up with the volume.
This got me thinking: What will 2021 bring? Will the trend continue? With their coffers full, how will the e-commerce giant invest its hoard? Will the shift to independent sellers continue? And what of the company’s competitors? Surely they will not sit idly by.
So with an eye to the new year that will soon be upon us, here are my predictions for 2021.
Amazon will acquire Shopify
Both Amazon and Shopify empower entrepreneurs to create their own storefront and sell products online, with the former’s highly-successful FBA program enabling sellers to leverage Amazon’s powerful logistics capabilities to great (and profitable!) effect.
Amazon and Shopify have been competing e-commerce platforms for some time now but with a different focus. Amazon gives you unmatched traffic and fulfillment capabilities, but less control over your brand. Shopify gives you more control, but you are left to drive your own traffic to your site and figure out fulfillment and other logistics on your own. Amazon undoubtedly sees the shift to 3rd party merchants within its platform and hears the feedback of brands wanting more control, so I believe that Amazon will acquire Shopify to create the ultimate e-commerce conglomerate. Imagine Shopify customers able to leverage Amazon’s fulfillment capabilities and Amazon brands able to link to their Shopify stores.
Amazon will Divest 1st Party Retail
We all know about Amazon’s early days operating out of Bezos’ garage and shipping books across the nation. Fast forward to the present and the company’s role has shifted significantly from being an online retailer to being mostly a marketplace that connects buyers and sellers and a fulfillment company. Third-party sellers have transformed how Amazon does business and there’s no sign of that trend stopping any time soon.
With an ever-shrinking reliance on maintaining its own inventory, it makes sense for Amazon to fully optimize its business model by focusing solely on third-party merchants. In 2021, I predict that Amazon will spin-off or sell its first-party retail business and become a pure-play third-party marketplace and fulfillment offering. The 1st party retail business will live on as a separate entity selling through Amazon’s platform, but it will be just another supplier competing for the millions of customers Amazon attracts every day.
This, coupled with their acquisition of Shopify, would give Amazon the ability to streamline operations and maximize revenue from third-party vendors across multiple platforms and fulfillment capabilities.
Google will get into Fulfillment
Not to be outdone, I predict that Google will move aggressively to gain relevance in the e-commerce space. Google is where people usually start a non-retail search query, but they haven’t made as much traction as you’d expect in e-commerce. In 2021, I expect Google to make a bold move to change that trajectory. Google already has the eyeballs and the tech capability - the main issue is that small businesses who want to sell on Google have to deal with all of the post-sale logistics themselves, which is both hard and expensive. Amazon has FBA, Walmart is building a 3rd party fulfillment offering, Google will do the same. I expect this will likely come through Google acquiring an existing 3PL, but they also have the cash and chutzpah to build it from scratch if they can’t find the right acquisition target.
With e-commerce growing so rapidly, customers are setting new buying habits now. It is unlikely that Google—known for making disruptive moves—will sit idly by and take no action.
Facebook and Instagram Shops revenue will exceed Walmart’s e-Commerce revenue
Social media has long been a place that brands go to create awareness and loyalty, but until recently they always had to direct traffic to another platform to transact. Now that Facebook is scaling their Shops capability, there will be a rapid shift of transactions onto these platforms. Expect to see more social media companies use their platforms to sell products like never before.
In 2021, Facebook and Instagram Shops revenue will exceed Walmart’s e-commerce revenue. These platforms will continue to build out their marketplace features and enhance the buying experience for users. Ultimately, social media based shops may even rise above traditional websites in their ability to drive a seamless customer experience and deliver outsized revenue.
Chris Bell, Founder and CEO, Perch
Prior to Perch, Chris designed and built the Wayfair Delivery Network, delivering over 3 million heavy bulky orders annually. At Bain & Company, Chris worked with fortune 500 companies on growth strategy and leading private equity firms on M&A, working on over 40 transactions representing $90B+ in value, including the largest tech merger in history. Chris has a BS in Computer Engineering from Georgia Tech and an MBA from Carnegie Mellon.