Shopify takes direct aim at Amazon on fulfilment
E-commerce firm on path to becoming full ‘global retail solution,’ analyst says
Shopify Inc. executives are loath to mention the competition by name, but the Canadian e-commerce service provider is directly taking aim at Amazon. com Inc. by launching a network of fulfilment warehouses and shipping logistics capabilities in the United States.
By the end of this year, Shopify says that it will be able to offer two-day shipping for the hundreds of thousands of U.S. merchants on their retail platform.
“We plan on spending over $1 billion to build and operate the Shopify Fulfillment Network over the next few years,” chief product officer Craig Miller said during the keynote presentation at Shopify’s annual Unite developer conference in Toronto.
“So this is another example of how Shopify is democratizing commerce by taking the warehouse systems, machine learning and other technologies that used to be reserved for only the largest companies in the world, and making them accessible and affordable to all merchants including those that are just starting to take off.”
Miller didn’t say the word “Amazon,” but in announcing the new fulfilment network it was fairly obvious who he was talking about, when referring to other major shipping services.
“Some of these large marketplaces out there actually start taking the customer data and using it in other ways,” Miller said. “Let’s admit it: You want the package arriving in a box that has your logo on it, not theirs. And finally, and probably most scary is unfair competition. Recently we’ve started to see marketplaces using data like order volumes to actually create knockoff products for less money and lower quality, potentially actually competing with the merchants.”
Right now Shopify will offer early access for merchants who ship between 10 and 10,000 items per day, and by the end of the year the company aims to offer two-day shipping to 99 per cent of the United States.
In an interview, Miller said Shopify is planning on running some warehouses directly, but they also want to partner with third-party companies to run warehouses and do actual deliveries.
“We are a software company and that’s kind of what we do best, and we will partner and work with other people that have trucks and things like that,” he said.
Miller said that a big part of what Shopify will be doing is essentially building the software bridge that connects the Shopify e-commerce platform through to the fulfilment centres and shipping companies.
Shares of Ottawa-based Shopify jumped 6.8 per cent to close at $434.95 in Toronto.
The fulfilment network was the big news, and the flashy final announcement of the keynote presentation at Unite. But Ygal Arounian, an analyst who covers Shopify for Wedbush Securities, said that the other product announcements all taken together tell an interesting story about where the company is headed.
“Shopify product announcements today were impressive and a big step forward. Fulfilment is going to get the most attention, and can potentially be a game changer for Shopify, but many of the product announcements shouldn’t be overlooked either,” he said. “Adding customization to checkouts, allowing multiple sites/brands to be managed under a single admin on Shopify Plus, better integration with the point-of-sale software with online stores, and order editing should open up Shopify to more merchant opportunities over time.”
Shopify revealed it now has more than 100,000 merchants in bricksand-mortar retail outlets, out of a total 820,000 merchants using their e-commerce platform.
Overall, Arounian said that Shopify is moving beyond simply e-commerce to a full retail solution for small and medium-sized merchants. “No one is integrating in-store POS with online stores the way Shopify is. Those two things are usually separate solutions,” Arounian said. “Same thing with fulfilment. No e-commerce platform — outside Amazon — is building a logistics operation. They are moving towards being a fully fledged global retail solution.”
In an interview after the keynote, Miller downplayed any notion of tension between Amazon and Shopify. “I think we actually are inspired by Amazon. They offer two-day delivery for a lot of products, and we said, how can our merchants actually offer the same thing?” he told the Financial Post.
“I actually think Shopify as a company likes to look around and say, who’s doing something really great and innovative and pushing the boundaries, and how can we do something similar but kind of make that accessible for 800,000 merchants who prefer to sell direct and no go through some third-party system.”