On the surface, ShopRunner appears to be an Amazon Prime clone. However, I’d argue that they’re actually more akin to PayPal, combined with an exceptionally data rich marketing capability.
Free 2-day shipping and free returns on websites like Under Armour, Neiman Marcus and Cole Haan! And free membership through my credit card company! What’s not to like? Well, FedEx liked it so much, they just bought the company – ShopRunner which provides these services to 100+ brands and over 3 million consumers.
For consumers, of course, ShopRunner is presented as a similar service to Amazon Prime. After all, over 112 million consumers have been conditioned to expect free express shipping on Amazon. With ShopRunner, you can easily access these same benefits across a wide range of other e-commerce sites essentially for free. Just sign up for a free membership as a benefit offered by Amex, MasterCard, Chase and PayPal.
However, when you look at ShopRunner’s business model, the similarities with PayPal become clearer. ShopRunner enables a digital wallet for consumers to store their payment credentials and speed through the checkout process on member sites with a single click. For every customer that ShopRunner brings, the online retailer must pay between 2-5% of the sale. If you squint hard enough, seems pretty similar to PayPal’s model. (ShopRunner was even run by PayPal’s former president, Scott Thompson, from 2012 – 2016)
Still, ShopRunner is no PayPal clone. According to their current CEO, Sam Yagan, ShopRunner is actually a “data-first” company, rather than a payments company. ShopRunner is able to aggregate data across their millions of members and range of brands to conduct sophisticated data-driven marketing campaigns on behalf of their partner brands. By bringing new, high-lifetime-value shoppers and increasing the conversion rate, ShopRunner is able to provide value and charge rather significant fees to their partner sites. As the company moved away from charging consumers for membership, the consumers themselves (and their data) have now become the product being sold to e-commerce partners.
(On a side note, I happened to attend a discussion led by Sam Yagan a number of years ago when he was CEO of Match.com and his data driven insights were fascinating! Who knew that iPhone users get lucky on Match significantly more often than Android users?)
As for the FedEx acquisition, the companies say their goal is to “create an open, collaborative e-commerce ecosystem”, whatever that means. My take is that this acquisition signals a move by FedEx to evolve beyond shipping, and offer their merchant partners additional value added services focused on data-driven marketing. It will be interesting to see if FedEx follows this up with additional acquisitions or partnerships to enhance their newly added, non-shipping related marketing services.