Deliverr marks Shopify’s largest acquisition to date.
Ottawa-based e-commerce company Shopify has reached an agreement to acquire San Francisco fulfillment startup Deliverr for $1.2 billion USD in cash and stock.
The acquisition was announced during Shopify’s Q1 2022 earnings, which saw the company’s growth continue to slow as the pandemic forces that drove the rise of e-commerce subside.
The deal will allow Shopify to tap into Deliverr’s nationwide, United States (US) fulfillment network, amid rising competition with Amazon. According to Shopify, Deliverr’s infrastructure and capabilities will expand the reach of the Shopify Fulfillment Network (SFN) and increase affordable access to two-day delivery in the US. Deliverr fulfills over one million orders per month, serving thousands of merchants across the US.
“Our goal is to not only level the playing field for independent businesses, but tilt it in their favor — turning their size and agility into a superpower,” said Shopify co-founder and CEO Tobi Lütke. “Together with Deliverr, Shopify Fulfillment Network will give millions of growing businesses access to a simple, powerful logistics platform that will allow them to make their customers happy over and over again.”
Shopify is set to pay $960 million in cash and the remainder in Shopify Class A subordinate voting shares to purchase Deliverr. Both companies expect the deal to close following regulatory review.
Shopify plans to integrate Deliverr’s network management software, team of software engineers, operations and customer service personnel. It will also add Deliverr’s asset-light network of warehouse, carrier, and last-mile storage and delivery partners to its own e-commerce ecosystem.
As part of the deal, Deliverr’s 400 employees will be joining Shopify, more than doubling the size of Shopify’s current fulfillment team. Shopify plans to combine 6 River Systems, SFN, and Deliverr into a broader logistics network under the leadership of newly appointed CEO Aaron Brown, who has led SFN since 2020.
RELATED: Shopify’s growth continues to slow in Q1 2022 as it reaches deal to acquire Deliverr
Shopify expects the Deliverr deal to impact the company’s profitability short-term, but argued it will be worthwhile long-term given that Deliverr will help expand the SFN.
Together, Shopify and Deliverr are launching Shop Promise, a new service that will offer consumers two-day and next-day delivery options.
Bloomberg was first to report that Shopify was in talks to acquire Deliverr to expand its own warehousing and delivery capabilities. In April, The Globe reported that the prospective deal represents part of “an ambitious strategic shift at Shopify to rival Amazon.”
Shopify first began moving into logistics with fulfillment centres in 2019. The decision moved Shopify closer to being an Amazon competitor, which has only amplified in recent years.
Earlier this year, Amazon introduced a Buy with Prime feature, which extended the Prime delivery and shopping experience beyond Amazon.com. This move put the company into more direct competition with both Shopify as well as dedicated delivery services like FedEx and UPS.
Lütke pushed away concerns of competition during the Q1 2022 conference call, however, claiming that any additional services that support merchants are beneficial to the overall e-commerce ecosystem, and Shopify in the long run.
The CEO noted that Shopify would be happy to integrate the service into Shopify. “It’s not nearly as zero sum as some people make it out to be, whatever is good for merchants will cause more entrepreneurship, which is exactly the vision of our company,” he said. “And from a business perspective, more channels that exist that are valuable for selling, the more important Shopify becomes.”
In January of this year, the company appeared to be scaling back these efforts when it terminated several contracts with third-party warehouse and fulfillment partners. However, during the company’s February earnings call, Shopify CFO Amy Shapero said these changes constituted a way for Shopify to leverage more of its own warehouses, rather than independent ones.
During the latest conference call, Shapero and Shopify’s exec team emphasized plans to focus on building out the company’s fulfillment network.
Shopify has outlined plans to invest $1 billion over the next five years towards SFN.
Feature image courtesy Shopify.
.
