How Shopify’s New Fulfillment Service Puts It in Competition With Amazon

Shopify has taken a page out of Amazon’s playbook.

The Canadian e-commerce platform has unveiled plans to invest $1 billion in a network of fulfillment centers across the United States, helping speed up delivery and drive down costs for merchants — placing it in competition with the retail giant’s extensive Fulfillment by Amazon business, which boasts one of the most advanced fulfillment networks in the world with dozens of centers across the U.S.

Dubbed the Shopify Fulfillment Network, the distribution service is currently in the early-access stage, with logistics providers and software partners located in seven states including California, Texas, New Jersey and Ohio. It utilizes machine learning to predict demand, allocate inventory and find the closest fulfillment centers for quicker and low-cost deliveries.

“A large number of orders are lost in the final stages due to complex shipping costs,” chief product officer Craig Miller said yesterday at Shopify United, the company’s annual developer conference in Toronto. “Our aim is to make fast and inexpensive shipping the new standard on the internet.”

According to the company, the new service was created in part to help solve the problems of merchants using third-party providers and marketplaces. Unlike Amazon, Shopify is integrated into these businesses’ own websites, providing custom packaging and branding as well as managing returns and exchanges. Among the company’s clients are sustainable footwear brand Allbirds and grunge-wear fashion label House of Holland.

Prices for the deliveries will vary for the company’s more than 800,000 merchants in 175 countries, based on factors including product type and distance shipped. The network currently supports merchants that ship between 10 and 10,000 packages each day, but Shopify hopes to ultimately roll out the service to all small- and medium-size businesses.

Other major product news announced on Wednesday includes a revamped online store, new point-of-sale system and an updated Shopify Plus experience as the online platform seeks to grow its market share in the U.S.

In April, the company posted first-quarter revenues of $320.5 million — up 50% from the previous year — and profits of $10.3 million, versus $4.2 million during the same time in 2018. Shopify’s stock closed in the green on Thursday, up 0.21% to $328.01.

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