Shopify Counts on "Elastic" Logistics to Catch Amazon

If you measure progress in industrial footprints, Canadian e-commerce platform Shopify barely qualifies for a starting berth in a race for logistics hegemony with Amazon.

During most of the past year, Shopify has been adding tech muscle to its platform’s capabilities, acquiring Deliverr for $2.1B to add a critical inventory management piece.

Analysts have greeted these developments with barely concealed yawns. “If you’re going to compete with Amazon, when will you start accumulating warehouse assets?” the conventional wisdom wanted to know.

Meanwhile, Amazon has been busy for the past 12 months lopping off logistics assets as fast as it can, a cost-cutting binge of its overextended logistics network now totaling 32M SF and counting.

So, who’s the tortoise and who’s the hare?

If you ask Shopify, they’ll tell you they can beat the e-commerce behemoth at its own game by focusing on the speed of fulfillment with platform partners while controlling fixed costs.

At Morgan Stanley’s Tech, Media and Telecom Conference last week, Shopify CEO Jeff Hoffmeister said Shopify’s acquisition of Deliverr, an inventory management specialist or what e-retailers call fulfillment and order storage, provides the Ottawa-based platform with an “asset-light” logistics network that includes its warehouse partners, carriers and last-mile providers.

Hoffmeister said Shopify’s partners can help its core operations connect with areas where inventory is located “on the edge of the network”—meaning last-mile delivery facilities—what Amazon calls “delivery stations,” which are facilities Amazon has been eliminating as fast as it can to cut costs.

“The technology we got from Deliverr allows us to do this in a distributed way,” Hoffmeister added, according to a report in Supply Chain Dive.

In other words, Shopify is expanding its last-mile delivery services without incurring the huge operating expenses and excess capacity that Amazon is now struggling with.

Who’s the tortoise now?

Last month, Shopify announced a partnership with Flexport, a digital-oriented freight forwarder, to manage the flow of imported goods and provide estimated delivery dates for companies using Shopify’s platform.

Shopify last year invested an undisclosed sum in San-Francisco-based Flexport. The two companies announced they have jointly created a new app for shippers to book ocean freight and track shipments from Chinese ports to the US.

In the wake of the pandemic-driven boom in e-commerce—now plateaued at around 14% of retail—companies are considering cost-cutting options on the logistics end as they adjust online sales strategies that were developed when e-commerce was booming. Having the ability to manage goods from factories overseas has become a priority for logistics providers operating through an e-commerce platform.

Shopify bought warehouse automation firm 6 River Systems for $450M in September 2019.