Shopify Says Purchase of Deliverr is Key to Building Fulfillment Network to Compete with Amazon
Shopify bought Deliverr for $2.1 billion last year, and says that it provides the company with an asset-light network of warehouse partners.
Shopify’s integration of Deliverr will help the company build out its fulfillment capabilities for merchants in a more cost-effective manner, CFO Jeff Hoffmeister said at Morgan Stanley’s Technology, Media and Telecom Conference last week.
Deliverr is an e-commerce fulfillment and order storage provider, and it provides Shopify with an asset-light network of warehouse partners, along with carriers and last-mile providers. Hoffmeister said partners can help core hub operations and areas where inventory is located “on the edge of the network.”
“Some of the technology we got from Deliverr allows us to do this in a distributed way, and then tackle some things which Amazon and others have in terms of problems we don’t have,” - Jeff Hoffmeister(Shopify CFO)
Building a fulfillment network that can serve both the needs of merchants and delivery expectations of consumers is an expensive and lengthy undertaking.
“With Deliverr, what they’re bringing is a network and fulfillment management software layer, which helps to predict demand and place inventory at a point that is closest to that demand,” - Jeff Hoffmeister
While the size of competitor Amazon’s fulfillment network remains unrivaled in the e-commerce space, it has struggled under the weight of fixed costs. Amazon rapidly expanded its distribution network during a boom in e-commerce sales, but growth slowed in 2022, resulting in excess warehouse capacity and inefficiencies.
Deliverr providing access to “elastic warehouse capacity” will advance Shopify’s fulfillment network vision, but it will take time for the company to fully realize the acquisition’s benefits. Deliverr users currently make up “a very, very small percentage” of Shopify’s overall merchant base, Hoffmeister said, which the company aims to change once the integration is complete.
Nucleus views this as an attempt by Shopify to build a multi-enterprise fulfillment platform. They are focussing on the warehousing piece. Which in our experience is not the most opportune area for optimization. In our experience, the transport side is. But this is a good start if it also provides access to an asset-light network of carriers and last-mile service providers.
"Part of the opportunity for us is once we do have Deliverr fully integrated to ramp that and get more and more of our merchants using Deliverr,” - Jeff Hoffmeister