Flexport successfully completed the acquisition of Shopify’s logistics arm and Deliverr subsidiary. Now the company can start the integration of staff. With the acquisition, the leading tech-driven logistics platform can add multiple services to its portfolio such as last-mile delivery e-commerce fulfillment and B2B distribution. It will also boost the company’s effort in the AI sector of streamlining the complete global supply chain, slashing costs and improving reliability.
“We are excited to welcome our new team members as we grow Flexport’s fulfillment, distribution and last mile delivery offerings, democratizing and levelling the playing field of cost and speed of delivery for all businesses,” said Dave Clark, CEO of Flexport, in a press release.
At the closing of the deal, Clark said, “We expect to rapidly integrate the core assets of the acquisition into our operations, including 3 million square feet of warehouse space, to support merchants during the upcoming holiday season. We are ready to build as we expand into e-commerce fulfillment and last mile delivery services”. Flexport recently roped in several Amazon executives including CEO Clark to focus on e-commerce.
ALSO READ: Flexport to Stick to Original Strategy; Despite Deliverr Acquisition
$357.45 Billion Market
By 2031, the last-mile delivery market is predicted to reach over $357.45 billion with an increase in trade activity between cities and neighbouring countries. Developed countries such as Canada, the United States and nations in the Asia Pacific Region will also profit from the last-mile delivery revenue.
As per InsighAce Analytic, “This is attributable to the growing need for customized workflow, automation, and simplifying complex operational processes, which have greatly influenced how firms conduct their operations”.
Neel Jones Shah, EVP and global head of airfreight, for Flexport, told The Loadstar, “The Deliverr platform gives us two more pieces of the puzzle, from factory-to-door visibility. We now have to stitch it together with technology. We have all the pieces of the puzzle. It’s a very exciting time for Flexport.”
“We now have a platform, but there is a lot of heavy lifting still to do. We will hit the ground running, we’ve been doing a lot of planning. There is a lot to get done, but we have the right people with the right experience. We’ve hired a lot of people who are really good, and we are still hiring engineers, aggressively looking for engineering talent. We are now closer than ever to achieving it. SMBs want the option to deliver to the door. OEMs don’t want that really, but the bulk of shippers do. It’s super exciting,” he further said.
Shah was speaking on the sidelines of the CNS Partnership conference, in Miami.
Shopify’s Stake
With the closing of this deal, Shopify has a 13 percent stake in Flexport. Hundreds of staff will now work for the latter company. Flexport will now also serve as the preferred provider of Shop Promise and the official Shopify Logistics Partner. For the unversed, Shop Promise allows transparent shipping timelines. Customers also get next-day and two-day delivery options. It can further be extended across all commerce platforms. Now Flexport offers its customers customs and trades finance, freight forwarding, middle mile, fulfillment and last mile services along with drayage, deconsolidation and consolidation.
Flexport aims to empower businesses across the globe by streamlining their supply chain operations. It assists merchants in planning, visualising and implementing their strategy for the supply chain straight from the manufacturer to the customer.
While Jones Shah is not confident regarding the peak season in 2023, however, he does see the recovery signs. “Inventory levels depend on the vertical, but we are seeing more shippers beginning to prime the pump, and more bookings. People were nervous, but I don’t think we are going to go into recession. The global economy is in better shape than was thought. Inventory will continue to come down and we anticipating a bit of acceleration after that. I think 2024, 2025 and 2026 will be good for air freight, I am bullish on the long-term. All shippers are trying to get a good balance of modes,” he said.
Shopify Logistics Sold to Flexport
In a blog published on May 4, Shopify CEO Tobi Lutke announced the termination of 20 percent of staff and selling out Shopify Logistics to San Francisco-based supply chain management company Flexport.
“There are a number of consequences to this, and I don’t want to bury the lede: after today Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today. I recognize the crushing impact this decision has on some of you, and did not make this decision lightly,” he wrote in the memo, addressing the team members.
“For the past year we’ve been subtracting everything that’s in the way of making the best possible product. This is extremely important, because we are heading into a decade of high velocity and massive change. We will require speed, agility, and a great deal of innovation,” the CEO added.
Challenges in Logistics
Shopify handled logistics on behalf of its merchant partners with its fulfillment network powered by Deliverr’s software and technology developed by 6 River Systems. “We set to work building software addressable logistics that didn’t exist before,” Lutke said.
He was quick to add that the logistics job involves careful designing of software to run an online store. “To run logistics, you will use pen, paper, and phone calls a lot. And most of the time your service providers don’t talk to each other. Coordinating them to act together is your burden,” Lutke said, mentioning the common challenges.
Dave Clark, CEO of Flexport, in a statement, said, “Following in the spirit of our partners at Shopify, Flexport has built technology solutions on top of a global, diverse network of logistics partners to make the world simpler for merchants and enterprises selling across all their channels around the world. With this acquisition, we will deepen and expand these partnerships, providing all merchants and businesses more opportunities to grow and succeed because their success is our success”.
“For Flexport, this acquisition enables our vision for a full digital transformation of the global supply chain that we will bring to all customers. This democratization and pooling of scale will level the playing field for cost and speed of delivery for all businesses, not just the largest corporations in the world,” he added.
About Flexport
Flexport was established in 2013 by Ryan Petersen. It has headquarters in San Francisco, CA, United States. In a Series E investment round held in February 2022, Flexport raised $935 million. The round was led by MSD Partners and Andreessen Horowitz along with a strategic investment from Shopify. Existing partners like DST Global, and Founders Fund also participated in the same bringing its post-money valuation to over $8 billion.
“Companies of all sizes—from emerging brands to Fortune 500s—used Flexport technology to move nearly $19B of merchandise across 112 countries in 2021,” Flexport claims on its website.
