Shopify will adjust its logistics business to improve the competitiveness of platform sellers

Introduction: Will Shopify increase investment in logistics business?

S Shopify announced on January 24 that it will make adjustments to its logistics business , which will help merchants on its e-commerce platform better compete with large retailers, and the company's delivery capabilities will not be affected .

“We’re making changes to SFN ( Shopify Fulfillment Network ) to help merchants compete with big-box retailers, such as prioritizing two-day shipping at affordable prices and enabling easy returns for U.S. shoppers , ” the company said Monday.

It is understood that Shopify launched SFN in 2019. At that time, it was a new way of logistics. SFN uses artificial intelligence-driven "intelligent allocation technology" to determine the nearest logistics center and determine the inventory level of each logistics center to ensure timely delivery of merchants and reduce transportation costs.

At the same time, Shopify said it has informed warehouse partners and merchants that warehouse capacity will not be reduced due to this adjustment , and it has sufficient capacity to meet the logistics needs of merchants using SFN. "We do not expect merchants' logistics and delivery to be disrupted. " Shopify said in a statement.

Reports last week that Shopify was terminating or reducing contracts with warehouse partners sent the company’s stock down nearly 9%. However, Shopify’s stock rose 7% following the company’s latest announcement.

As we all know, Shopify mainly provides various technical tools for online sellers to help them build and operate online websites. Its revenue also mainly comes from subscription revenue and merchant service revenue.

Therefore, some investors are concerned that Shopify 's latest plan may mean that the company will make heavy investments in its logistics business and shift from an asset-light model to owning its own distribution centers, and have questioned this.

One industry analyst said: "Shopify is still a long way from building an Amazon-scale logistics business, and investors should not expect such a thing in the short term. "

Shopify, which now ranks third among Canada's most valuable companies behind Royal Bank of Canada and TD Bank , said it would provide more details about its logistics business in its fourth-quarter earnings report .

Shopify

Merchants

logistics