Should Shopify And Amazon Be Worried About Pinterest’s New CEO?

Key Takeaways

  • Pinterest brought in a new CEO, Bill Ready, who has an impressive background in e-commerce and payments processing at the likes of PayPal and Google
  • It’s expected that this appointment will mean Pinterest making some waves in the e-commerce market, to monetize its 400 million+ monthly users
  • Existing online retailers like Amazon and Shopify stores probably won’t be negatively impacted by Pinterest’s move, but individual creators on the platform could see their earning potential slashed

Pinterest wants in on the e-commerce pie. At least that’s the takeaway from the company’s appointment of Bill Ready as CEO and his post announcing the new role on LinkedIn. He’ll replace co-founder and CEO for over 10 years, Ben Silbermann, who’s moving to a cushier role as executive chairman.

If Pinterest wants to make a dent in the fiercely competitive e-commerce space, Bill Ready’s the man to lead the charge. Over the past decade, he’s headed up big names in the payments and e-commerce world, including as chief operating officer at PayPal and Head of Commerce and Payments at Google. So yeh, he knows what he’s doing.

Ready announced his appointment on LinkedIn, and he included a line that has the e-commerce world buzzing, “In the next phase of our journey, we will help people engage more deeply with all the inspiring products and services they find on our platform. “

Given his background, it’s clear that ‘engaging more deeply’ means buying stuff. So what does this mean for more established e-commerce companies? Shopify is one example that’s been in the headlines recently for both its stock split and its lackluster Q1 earnings results. Does Pinterest represent a further threat to their business, or will it serve as a more direct route from social media to retail?

The e-Commerce Landscape

It’s no surprise that online spending is demanding a more significant share of overall retail dollars. The trend has favored online retail over brick-and-mortar retail for years, but the pandemic shifted this into overdrive.

Being stuck at home and unable to go to the shops forced many purchases to be made online that previously would have been made in person. Consumers have tried out new stores, ordered larger items that they wouldn’t have considered ordering online before and had more time on their devices being served ads for products.

Despite the massive Jeff Bezos-sized elephant in the room, the US e-commerce market is pretty fractured outside of Amazon. They have a stranglehold on market share at 41%, with Shopify stores coming in at second on the list with a 10.30% share. Other big names in the top ten include Walmart, eBay, Target and Best Buy.

Unlike Amazon, Shopify doesn’t sell products in its own store. If you’re unfamiliar with the company, they offer a website builder, allowing budding entrepreneurs to set up an online store. They can do it without the need to code, learn web design or integrate payment processing themselves.

The stores on the Shopify platform are super wide-ranging, with everything from t-shirts to pet food to custom bobbleheads available through different websites built on Shopify.

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What’s Pinterest’s e-commerce play?

We don’t know yet, but at the moment, the most obvious path would seem for Pinterest to become a massive storefront, similar to how affiliate marketing works. Affiliate marketing has been around for ages, and it operates behind the scenes in almost every online industry.

An affiliate link is when a website, an influencer or anyone else receives a cut for referring customers to a business. So when you’re on a website like Gizmodo reading a review of the latest Macbook, they’ll have links to buy one. If you buy one after clicking the link, Apple will give Gizmodo a cut of the sale.

This is likely the best way for Pinterest to monetize its vast traffic levels. Pinterest works because users love to share cool products and hacks that they find online. Whether you’re into gardening, barbecue, football or kittens, you can find excellent items and guides from around the web that users have ‘pinned.’

Currently, users of the platform will be sent away from Pinterest to an external website where they can purchase the product or service. These are often affiliate links, but the individual creator would receive the affiliate commission, not Pinterest.

And that’s a lot of commission walking out the doors each month. Currently, Pinterest has over 430 million monthly active users of its platform, and they’re the 14th largest social network in the world.

It’s potentially not that different from the way we’ve seen Instagram aggressively implement retail stores within the app. Brands have used paid and social advertising on Instagram for a long time. But before the shopping feature in the app, businesses ran ads to get customers off Instagram and over to their retail websites. Not anymore.

Now you can shop within the app, buy a new t-shirt or pair of custom sneakers and then go back to looking at pictures of your cousin’s new dog. Instagram has moved from being a place to discover new brands to a place where you can directly purchase from new brands.

Pinterest could do the same thing. With a huge number of users devoted to their favorite niche, the customers are there and ready to buy. One analogy that’s out there is that Pinterest could become like an online shopping mall—providing a place to browse, socialize, share and shop around common interests and hobbies.

Should Shopify and Amazon be worried?

Probably not. If Bill Ready’s plans look anything like we’ve laid out above, this has the potential to funnel more business to Shopify, Amazon and thousands of other online retailers. Pinterest users will pin products available for sale on Shopify stores and Amazon, which could help remove friction from users who want to purchase the items they find.

The end company selling the product won’t change, but they’ll likely have to pay a cut of their sales to Pinterest. This type of commission is commonplace in online retail, so who loses in this situation?

It could be the Pinterest creator. Pinterest is way behind other platforms like Instagram, YouTube and even Twitter when providing a space for creators and influencers. Even so, plenty of individuals make big money on the platform.

Affiliate marketing is a significant source of this, with items added to the platform with an in-built affiliate link, automatically paying the creator a commission when an item is purchased. There’s no way to know for sure right now, but this is likely to be one area that will come under pressure if Pinterest changes to focus on monetization.

While e-commerce retailers won’t have a problem paying commission on a sale, they’re unlikely to be prepared to pay a commission to both Pinterest and the individual creator. These businesses often operate on relatively slim margins, and if the overall cut is too big, they’re not going to want to support it.

That’s not to say we should expect smooth sailing for every e-commerce company. Shopify recently completed a 10-1 stock split, but this year’s price has taken a hammering and is down over 70%. Its revenue and profit figures have been below expectations and, despite e-commerce growing, there are concerns that this will slow as we get further away from the pandemic living and working patterns.

Even the Amazon juggernaut has wobbled this year, with the stock down over 35%. Last week a leaked memo also surfaced, which suggested that they could run out of new workers for their warehouses as early as 2024.

All in all, the takeaway is that we’re still not sure what normal looks like in the retail space, and it will likely be some time before we understand how the pandemic has impacted the long-term habits of shoppers.

E-commerce for investors

Online retailers made bank throughout the pandemic, but in 2022, it’s been a bit of a reality check. Stock prices have plummeted and analysts are worried about what the future might hold for them in a world that isn’t only online.

It’s been a broad theme for tech in general. The NASDAQ has been smashed, including companies like Apple, Microsoft and Meta, in addition to Shopify and Amazon. We think this might have gone a bit far, and big tech is starting to look like decent value.

That’s why we created the Tech Rally Kit. We’ve designed the Kit to take advantage of what we think is mis-pricing between the tech sector and large, traditional companies. To make the trade work, we take a long position in the tech sector and a short position against the Dow 30 to aim to hedge out market risk.

Our AI rebalances this every week to seek out the optimal mix for the trade. This kind of trade is usually only for high-flying investment bank clients, but we offer it to everyone.

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