Adobe (NASDAQ:ADBE) isn’t just Photoshop and PDF documents anymore. Indeed, ADBE stock has been an investment in a digital marketing company since early 2017. That’s when it debuted Experience Cloud and Advertising Cloud: two platforms that help organizations market and measure their online efforts.
It has been a solid success as a result too, if for no other reason than those offerings drive recurring revenue.
The company just took its e-commerce arm to a whole new level though, partnering up with sector giant Amazon.com (NASDAQ:AMZN). The deal helps Amazon’s third-party sellers cultivate relationships and manage their business better.
Most fans and followers of Adobe acknowledged and respected the development. Not enough investors, however, seemed to fully appreciate the potential of this new offering for the ADBE stock price.
Meet Magento
The rise of third-party sellers on e-commerce platforms represented a hot button for years. But the matter came to a strange head last month when Amazon CEO Jeff Bezos lamented, “Third-party sales have grown from 3% of the total to 58%. To put it bluntly: Third-party sellers are kicking our first-party butt.”
The math is presumably correct, but the premise is misleading at best. Third-party sellers have never made up a bigger portion of Amazon’s total sales than they do right now. However, they’ve also arguably never been more miserable about it thanks to their constant competition with Amazon’s own retail-sales efforts.
Amazon has been and continues to cheer “the little guy” using its sales venue, promising tools to better empower them. As it turns out, the company wasn’t just blowing smoke. Its latest option does that and much more.
The program is called “Branded Stores for Amazon Sellers.” However, existing AMZN customers may recognize the new features look very similar to Adobe’s Magento platform.
Regardless of the wrapper and label, the results are the same: faster page-load times, better conversions, options to scale for online-shopping surges and one-click checkouts, just to name a few features. The platform also raises the profile of Adobe stock.
Those niceties are secondary to what Magento’s Branded Stores for Amazon Sellers ultimately delivers though. As Adobe’s vice president of commerce product and platform Jason Woosley explains:
Small and mid-market businesses are taking direct ownership over how they manage customer experiences to differentiate, grow and build loyalty. Our work with Amazon empowers this large community of sellers to get closer to their customers while saving them time and money on development.
Relationship Building
It’s a product development that cuts straight to the heart of a matter which has long frustrated several Amazon vendors. No matter how well the seller serves the customer, Amazon.com owns the relationship, and oversees the experience.
Not any longer though. In an environment where would-be rivals like Shopify (NYSE:SHOP) are thriving explicitly because it’s helping budding online entrepreneurs develop real customer relationships, Amazon is being forced to do the same.
And Shopify is undoubtedly rattling Amazon’s cage in this way. Shopify’s director of product Michael Perry recently explained:
The most important thing for entrepreneurs is to establish that direct relationship with their customers. Personally, I don’t know why anyone would want someone else to own their customer relationship. Unfortunately, that’s the exchange that takes place with a digital marketplace.
It was a veiled jab at Amazon, but a well-deserved one. It’s the new norm in e-commerce. Shopify has got several quarters of strong double-digit sales growth to verify it’s this kind of platform that online retailers want.
Adobe’s solution is different than Shopify’s though, in that Adobe’s Magento isn’t a one-stop-shop. Adopters can integrate Magento with multiple e-commerce venues.
And it’s already been integrated with another big one, as the partnership with Amazon isn’t exactly exclusive. For instance, Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) now allows online sellers to manage their Google ad campaigns via Magento.
It’s hardly a threat (yet) to Amazon. But if Adobe continues to partner with anyone and everyone that wishes to take aim at Amazon.com, the half of the e-commerce market Amazon doesn’t own could collectively make a dent in Amazon’s dominance.
And Adobe is more than happy to sell them their bullets. That bodes well longer term for the ADBE stock price.
Bottom Line for ADBE Stock
It’s not necessarily a reason to step into ADBE stock, particularly right now. Shares are up 36% since their late-December low, and back within sight of record highs. The equity is vulnerable to profit-taking. This vulnerability is more pronounced in that Adobe stock never really burned off the froth of the 170% gain it reaped between the end of 2016 and September of last year.
Besides, it’s still the early innings for Magento’s Branded Stores for Amazon Sellers, as well as for Magento’s non-Amazon growth.
There’s little doubt as to the marketability of the new option for Amazon’s third-party vendors, however, as well as for online retailers not using Amazon.com. It’s one big step closer to the tool online sellers have been looking for.
Therefore, it wouldn’t be crazy to take a shot on ADBE stock on any decent pullback. The sentiment applies even before Magento has its full chance to make a fiscal impact.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
