Shopify is expanding its logistics and fulfillment services as it aims to compete with Amazon, offering an alternative e-commerce solution to retailers who now are giving up half their sales to Amazon in order to use its logistics network.
Shopify’s e-commerce platform is partnering 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, according to a report in the Wall Street Journal.
Ottawa-based Shopify last year invested an undisclosed sum in San-Francisco-based Flexport. The two companies announced this week that 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—which at one point soared to a nearly 60% of retail market share, now plateaued at around 14%–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, according to WSJ’s report.
Shopify is expanding the capabilities of its e-commerce platform in order “to level the playing field” for smaller retailers, including startups, Aaron Brown, CEO of Shopify Logistics, told WSJ.
“The [biggest challenges] are almost always logistics and fulfillment,” Brown said. “If we can level the playing field and give any merchant in the world—before they’ve had their first sale—all the benefits of a large retailer, that’s just giving pure magic to merchants.”
Amazon, faced with slowing sales growth, rising costs and an overextended logistics network, isn’t giving away magic to merchants using its fulfillment: it’s now demanding more than half of their sales.
This week, Amazon informed third-party merchants using its platform they’ll have to pay Amazon more than 50% of the list price. Amazon is squeezing more money from the estimated 2M small businesses that sell products on its online marketplace.
Shopify bought warehouse automation firm 6 River Systems for $450M in September 2019 and in May 2022 it acquired shipping services provider Deliverr for $2.1B.
While Shopify continues to strengthen the capabilities of what it can offer merchants on its digital platform, several bricks-and-mortar retailers—including specialty apparel makers Gap Inc. and American Eagle Outfitters—are challenging Amazon’s dominance of physical logistics by reconfigure their distribution centers and warehouses to market logisctics