Throughout 2020-21, as the world went through multiple lockdowns thanks to COVID-19, demand for e-commerce services increased exponentially. While inflationary pressures may have slowed demand in the last quarter of 2022 and the start of this year (2023), e-commerce is still growing. Thanks to pioneers like Amazon, consumers are now used to super-fast or same-day deliveries. Businesses that want to stand out today need to ensure an omnichannel experience, where consumers can receive satisfying last-mile fulfillment super fast. In a bid to help companies of different sizes and values grow, Shopify is stepping up its logistics and fulfillment services. This expansion effort is probably going to help merchants compete with Amazon.
Shopify, which provides e-commerce tools for retailers, said it has struck a deal with digital-focused freight forwarder Flexport Inc. to manage the flow of imported goods and will add estimated delivery dates for companies using Shopify’s platform. The Canadian company is rolling out the new features as the pandemic-driven boom in e-commerce sales has receded and companies are fine-tuning online sales strategies that they built as consumers were ordering goods at a rapid pace.
Shopify in July said it was cutting 10% of its global workforce as it warned of slowing revenue growth. Meanwhile, the company has pushed forward with plans to expand its logistics services. It acquired warehousing automation firm 6 River Systems Inc. for $450 million in September 2019 and in May 2022 it bought shipping services provider Deliverr Inc. for $2.1 billion.
Last year, Shopify invested an undisclosed sum in San Francisco-based Flexport. The two companies have created a new app for shippers to book ocean freight and track shipments from Chinese ports to the US.
Other companies, including retailers, have been seeking to market logistics services to other retailers, echoing Amazon’s warehousing and delivery operations through its Fulfillment by Amazon division. Apparel retailers American Eagle Outfitters and Gap offer fulfillment services to other merchants through their networks while Target and Walmart allow businesses to use their local same-day delivery services.
Shopify’s new logistics features include a tool displaying delivery times on merchants’ websites, distribution of inventory by Deliverr to get goods closer to potential customers, and facilitating exchanges and credits on returns through service provider Loop Returns.
Key Takeaways
The challenges for small retailers in competing for sales are usually related to logistics and fulfillment. Shopify’s decision to get into logistics essentially allows them to level the playing field and give any merchant in the world benefits similar to a large retailer. While this sounds ideal, Shopify is still new to the logistics side of the business.
While merchants with Shopify will probably stand to benefit due to the platform’s success in the digital world, it remains to be seen how the company will perform with last-mile fulfillment services. Physical operations and physical execution bring a different set of complexities for Shopify, especially when it comes to competing with Amazon’s vast logistics network. Only time will tell how the company will face the new challenges that come with a physical logistics operation.
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