Is Microsoft a Viable Shopify Competitor?

There are widespread reports of two major new entrants into the mid-market eCommerce platform business: Microsoft and Salesforce. While you’ve likely seen several articles in the press about Microsoft considering entering the market, unless you work at an up-and-coming brand, likely you haven’t heard much about Salesforce. Keep in mind, new entrants to this space will also have to deal with both BigCommerce and let’s not forget Magento also. This article, however focuses more attention on Microsoft.

Let’s look at the things I’d love to see out of a new entrant.

  1. Has a unique value proposition.

  2. Has a different view of the world than the incumbent competition.

  3. Has a differentiated pricing model.

  4. With a built-up ecosystem.

Notice at this stage, we aren’t talking about needing something more “powerful than Shopify”. Shopify’s biggest advantage actually is that it basically can’t be killed by traffic. You simply don’t have to be worried about the thing going down.

Let’s review what’s there already in this segment:

  • Shopify, cloud-based, simple to maintain, large ecosystem.

  • Magento, more complex, on-premise, more fragmented ecosystem. Open source. Enterprise has traditionally been flat-fee.

  • BigCommerce, cloud-based, tries to thread the “more customizable” needle vs Shopify. % sales. This is squarely where Shopify Plus is targeted also.

At this stage, let’s be honest, Shopify is the 800lb gorilla in the market. And it has the rare and underappreciated advantage that they are a founder-led business with Tobi Lutke. In general this means they can afford to think longer term than the competition.

The question is, where is there an opening?

Microsoft has a number of significant assets in Azure, AI, perhaps IIS, Microsoft Dynamics is relatively well-known in retail. But none of this gives them any kind of serious leveragable advantage in the eCommerce space where the ecosystem of vendors required to goto market is quite significant. You might say it would be easier for Google to enter the retail software market than Microsoft.

So to answer my original question, I think at this stage no. And I think the chances of Microsoft building something new from scratch is quite a long shot. If they are serious about this, expect them to be acquisitive. In my opinion, they need a “Marc Lore”-type hire. Someone very senior with innovation experience in the space, who will help Microsoft CONTINUE to innovate. Even an acquisition by itself is pointless because unless you can retain talent, you will not be competitive long-term.

Rick Watson