Shopify Fulfillment Network Boosts Overall E-Commerce Business
E-commerce technology provider Shopify has experienced rapid growth in recent months. The growth is driven in large part by its logistics arm, the Shopify Fulfillment Network. With digital sales surging in the pandemic economy, Shopify’s platform has proved invaluable in serving the needs of businesses of all sizes. The Shopify Fulfillment Network complements Shopify’s core e-commerce business, by providing scalable warehousing space as well as order & inventory management services. It also handles the packing and shipping of goods for online sellers.
Recent Shopify Expansion
Shopify expanded into the physical distribution and fulfillment space relatively recently, launching the Shopify Fulfillment Network in 2019. In Q2 of 2020, the Shopify Fulfillment Network saw merchant enrollment increase to levels 2.5 times greater than in Q1.
Advanced robotic warehousing systems are deployed in order to optimize fulfillment functions including selecting, moving, and sorting items. Shopify purchased 6 River Systems, a warehouse robot-maker and fulfillment automation startup, for $450 million in 2019. This has helped lay the foundation for expanding its AI-powered fulfillment network. The Massachusetts-based robotics startup is particularly well-known for its Chuck autonomous vehicles: collaborative robots that can move packages in warehouses. Chuck’s battery life enables it to work 24/7 and the AVs use advanced battery technology to recharge rapidly.
Record Performance level this Year
Headquartered in Ottawa, Canada, the 14-year-old company has been performing at record levels this year. Shopify’s Q2 revenue was $714.3 million, around double what it was last year. Furthermore, from Q1 to Q2, the number of new stores created on Shopify’s platform increased by 71%.
Over 1 million businesses use the Shopify platform across over 175 countries. Small businesses have been especially reliant on Shopify’s platform during the Covid-19 pandemic. Shopify’s CEO Amy Shapero described the company’s particular focus on serving the needs of small businesses: “Now more than ever, Shopify needs to be there for our merchants, so our focus during these challenging times is to help solve their immediate pain points. We are well positioned to help our merchants, particularly given the accelerated shift to online commerce.”
Increased Commitment to Shopify Capital
The company has increased its funding commitment to Shopify Capital, its program for providing merchants with advances and loans. This has been useful for small businesses that have struggled as a result of the lockdown restrictions. The program currently provides access to advances and loans in the United States, Canada, and the United Kingdom.
Shopify’s stock price has soared in response to Covid-19 demand. The cloud-based commerce company’s stock, which trades on the New York Stock Exchange (NYSE) under the ticker symbol SHOP, has consistently been over $1,000 per share over the past couple months. Shares of Shopify have surged 167% so far in 2020, and this upward price movement is likely to continue. As a result, the company’s market valuation is around $125 billion.
Fulfillment Service Launched in June
The launch of its fulfillment service in June helped Shopify cope with the rapid switch online by merchants and unprecedented demand by customers for e-commerce orders. Thomas Epting, director of the Shopify Fulfillment Network, states: “Covid-19 has pushed e-commerce forward by 10 years. We’re building Shopify Fulfillment Network with the goal of having our merchants be as ready for the future of commerce as they can be.”
In late 2019, after announcement of the launch of the Shopify Fulfillment Network, the company pledged to spend over $1 billion over the next five years on expanding its fulfillment capabilities. Well-known for providing two-day shipping, Shopify’s goal is to make its two-day shipping service available to 99% of Americans. If successful, this would give it an edge in competing with Amazon.
Computer Operations Key
CEO Tobi Lutke founded the company in 2006 with Daniel Weinand and Scott Lake. Lutke used his background in computer programming to build the initial version of the Shopify online platform. In 2010, the company created a mobile app in order to make it easier for merchants to manage their online stores from their smartphones. Shopify raised $7 million in a Series A round in December 2010. A Series B round followed, providing $15 million in October 2011.
While Amazon also offers fulfillment services, Shopify has positioned its network as a safer, more affordable alternative. Concerns have been mounting over allegations that Amazon uses data from independent sellers in order to launch its own more competitive products. A number of former employees have revealed that Amazon analyzed data collected from sellers on its platform. Amazon used this data to determine whether to enter a product category, how to price items, and notable features of the product to replicate.
According to research estimates, the total market size of the fulfillment industry is about $500 billion. In light of this opportunity and Shopify’s already strong foothold in e-commerce and fulfillment services, the company looks like it has a strong future ahead.