Shopify recently completed its acquisition of Deliverr. Deliverr is a fulfillment startup that integrates with marketplaces like Amazon, Walmart, and eBay.
This is all part of Shopify’s big plans to tackle fulfillment. Over the past few years, the e-commerce platform has tiptoed into the fulfillment space – first in acquisition of warehouse automation technology provider 6 River Systems in 2019, then by revise its execution approach and terminating agreements with several of the warehouses it previously partnered with and now with the acquisition of Deliverr.
According to Shopify CEO of logistics group Aaron Brown, while the internet has created a level playing field for so many parts of retail, logistics and supply chain continue to be a challenge. “We’re excited about Deliverr because we believe we have a chance to help independent merchants solve transportation, distribution and fulfillment challenges at scale. Deliverr has designed its software to provide network visibility across the entire supply chain. I think this is going to be a game-changer for traders,” Brown said.
He added that with recent software updates to Shopify’s fulfillment network, 70% of orders are delivered within two days or less.
The Canadian technology company first used 6 River Systems in an attempt to expand its beta-launched distribution network. He encountered some problems in February, Business Insider reportedwhile integrating its software with the various partner warehouses while the product was still under development.
But Shopify’s achievement ambitions have increased aggressively in recent months. In February, Shopify made a strategic investment in freight service provider Flexport to support the company in modernizing the supply chain.
Now Shopify is launching new fulfillment-focused programs. During his call for first quarter results, the company launched Shop Promise, to help merchants deliver faster. Shop Promise displays two-day and one-day delivery promises to merchants’ online stores and through places like Facebook, Instagram and Google.
In an interview, Brown spoke with Modern Retail about revamping its fulfillment business, two-day shipping for merchants, lower fulfillment costs for sellers, and competing with Amazon. This interview has been edited for length and clarity.
In the past, Shopify had issues when integrating 6 River Systems software. Can you provide an update on this?
In early versions of SFN [Shopify Fulfillment Network]we have had many partnerships with 3PLs [third-party logistics] who ran different types of warehouse management software. For what it’s worth, all of these bands were doing their best. It wasn’t that they were bad apples.
But what we realized was that if we wanted to be able to make a two-day delivery promise consistently, it had to be with the right 3PLs, in the right places, running the right software. So what we’ve been building over the last year and launching in our latest software update is a very small network of partner warehouses conveniently located for two-day deliveries. Traders have to give us a much smaller amount of inventory since we don’t spread it over too many warehouses. And now 100% of orders at SFN go through warehouse management software that 6 River built for us.
What was the biggest learning from this whole experience?
The biggest learning was twofold. First, Shopify needs to be much more intentional about where we put our inventory, and we need to put it in the right places near shoppers across the United States. And second, we need to have Shopify back office, Shopify storefront, and warehouse management. fully integrated software.
Tell us about the product integration with Flexport.
As we have come to know Flexport better, what Flexport does is it takes processes that were once very cumbersome for merchants and simplifies them. Most traders would say they would have to work with eight to 10 to 12 different companies to complete the entry process. Flexport allows merchants to have a relationship. It takes all that product and delivers it to an SFN hub. Thus, the trader never has to touch this inventory.
Flexport and Shopify also do bulk aggregation and booking. Previously, merchants had to fill a full container of inventory to get a reasonable price and a reasonable schedule. Shopify pre-books containers on container ships going between popular supply points and SFN hubs on a very regular basis as long as they can fill a cubic meter of space.
Typically merchants would say transit times are 45-60 days, our early pilot results are around 20 days with Flexport going straight into SFN. And second, it’s 50% cheaper. So typical pallet prices are $500 to $825, changing all the time. And we were able to get it down to $425 by pre-booking and global booking.
How does Shopify deal with Amazon’s pervasive competition with Seller Satisfied Premium?
The first is that we’re super excited about what Amazon is doing. Tobi [Shopify CEO and founder] called it infrastructure. There are amazing internet companies and logistics companies around the world that have built an awesome infrastructure and when they open it up to independent retailers and small merchants, it’s just a net positive for the world.
We are also working with Amazon, every week, at the moment to integrate the new platform and have super positive discussions. We are really optimistic about the partnership between Amazon and Shopify. What’s interesting about directing is that we’re solving fundamentally different problems. Shopify tries to provide an end-to-end platform that helps a merchant manage their entire supply chain across all channels. One of these channels may be fulfillment by Amazon. If a merchant wants to take all their inventory in a Shopify SFN cross dock and deploy a quarter of it in FBA, we help them do that.
We’re also trying to build a fulfillment solution that’s super integrated with Amazon’s online store, its channels, and very integrated with Shop Promise to help create a really compelling solution. And so we’re really excited about Amazon and the infrastructure they’re creating for independent retailers.
take us through Shop Promise and its progress.
The Delivery Promise and Store Promise are relatively new to Shopify, but it’s something Deliverr has been doing for years and so this is an opportunity for us to write up Deliverr’s learnings as we go. integrate them into the business. Deliverr has found that at scale, when you add a truly ambitious delivery promise to online stores, buyer conversion increases by over 33%.
Behind the scenes what we have been doing is piloting Shop Promise and building Shop Promise and trying to perfect the user experience in our online store and other popular channels like Google, Youtube, Instagram and Facebook and Tik Tok, etc. We want it to be super-fast with the lowest impact on storefront performance.