Amazon has been one of the best-performing stocks (if not the best) over the last two decades. Owning the stock since 1997 would have turned every $10,000 into more than $20 million by 2024.

Unsurprisingly, investors always look for the next Amazon, setting it as the benchmark for promising growth companies. Shopify, an up-and-coming e-commerce software company, is one of those promising candidates.

But is Shopify the next Amazon? Let’s explore this further.

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Shopify has been a remarkable growth stock

Like Amazon, Shopify has been an enormous wealth generator for investors. Since going public in 2015, the stock has increased by roughly 2,000%, as of this writing. To put it into perspective, every $10,000 invested at the start would have grown to more than $200,0000.

This remarkable stock performance resulted from its strong execution. Revenue grew from $105 million in 2014 to $7.06 billion in 2023, up by more than 6,700%! And its secret recipe? A fanatical focus on providing software and tools to help merchants become successful in selling online and everywhere else.

To do so, Shopify provides an easy-to-use software platform that enables merchants to start selling online almost immediately. On top of that, the tech company offers a wide range of tools to help merchants succeed, including payment processing, retail point-of-sale systems, shipping services, and more.

Beyond its platform and software tools, the company also works with other partners to provide almost everything merchants need to run a modern retail business: accounting and tax services, and marketing help. It all combines to make a platform indispensable to merchants’ long-term success.

The company has become the preferred provider for many merchants, which matters significantly because it becomes a sticky service that customers are unlikely to switch away from. This gives Shopify pricing power, which it occasionally exercises — for example, in 2023  to improve its monetization.

If management can continue adding tools and helping merchants succeed, it will strengthen its pricing power even more over time.

But there are many differences between Shopify and Amazon

There are some similarities between Shopify and Amazon. Both operate in the e-commerce sector, focus on customer satisfaction, and deliver remarkable returns to shareholders. Still, the two differ remarkably in many aspects. Let’s start with the business model.

Amazon operates a first-party and third-party e-commerce marketplace, selling directly to customers and enabling other merchants to sell on its platform (in return for a fee). This ensures that it has a complete online catalog to satisfy consumers’ ever-growing demands while building a diversified e-commerce revenue source for itself.

Unlike Amazon, Shopify doesn’t sell any products directly to consumers. Instead, it supports merchants so that they can sell their products everywhere — online, offline, and globally. As such, Shopify’s primary customer cohort is its merchants, and the company’s interest is aligned with them.

That means if they do well, the company does well since one part of its revenue stream depends on their gross merchandise value (GMV). We can’t say the same for Amazon, since it competes with its merchants for customer wallet share.

Another significant difference is that Amazon is a highly diversified tech conglomerate with other businesses including cloud computing through Amazon Web Services (AWS), logistics, advertising, and more. Shopify is narrowly focused on providing software and tools in the e-commerce space.

Amazon employs more than 1.5 million people, while Shopify has less than 10,000 employees. In other words, the former runs a heavy business model (with huge assets and human capital), but the latter is an asset-light software company.

Another aspect where both companies differ significantly is their prospects. While Amazon began in the e-commerce industry, its biggest future opportunity might come from elsewhere — mainly cloud computing and advertising. For instance, AWS generated $9.4 billion in operating profits in the first quarter of 2024, more than half of the company’s total operating profits of $15.3 billion.

Meanwhile, Shopify’s most significant opportunity remains in retail as it deepens its online e-commerce penetration and expands into brick-and-mortar and global commerce. Focusing on the retail segment alone will keep the company busy for many years, if not decades.

So, is Shopify the next Amazon?

The short answer is probably not.

Both companies operate in e-commerce, but they have very different business models. Shopify is narrowly focused on e-commerce, while Amazon generates the bulk of its operating profits from other segments, mainly its cloud computing business.

Still, Shopify doesn’t have to be the next Amazon to deliver good returns to investors over the long term. Just focusing on increasing its market share in e-commerce in the U.S. and globally will keep the company’s growth machine humming for a long time.

In short, it’s OK for Shopify just to be itself!