Flexport acquired the logistics business Deliverr from Shopify on May 4 as the Canadian company announced important team and business changes. Apart from the shocking news of terminating 20 percent of its workforce, Shopify dissected its logistics arm — selling Deliverr to San Francisco-based supply chain management company Flexport and the warehouse automation firm 6 River Systems to Ocado Group.
Speaking at the Transport Logistic in Munich last week, the Flexport chief made it clear that the deal with Shopify doesn’t mean that they are leaving the original strategy. “The number-one thing is that our customers want this,” Sanne Manders, president of Air & Ocean, said as quoted by theloadstar.com.
“Especially when you look at the fast-growing e-commerce business. About 20% of retail is e-commerce, but the potential is much bigger. There is now the potential for companies to streamline factory-to-consumer [delivery],” Manders added.
[The idea] has always been there, it’s not a distraction, or a departure. Customers don’t want to build out their own logistics, they want to feed into a platform. They won’t get the scale by themselves.
Dave Clark, CEO, Flexport
Leaving Logistics
Shopify CEO Tobi Lutke emphasized the company’s mission while addressing his team. “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 said.
Lutke didn’t talk about the sale of 6 River Systems in his memo. It makes fulfillment workflow effortless for the logistics and non-grocery retail sectors across Massachusetts, USA. 6 River Systems is known for its impressive combination of collaborative robots, artificial intelligence and operational expertise.
6 River Systems developed Chuck, an Autonomous Mobile Robot product that gives automated assistance to pickers in a warehouse, meanwhile working in collaboration with human operators. In September 2019, Shopify purchased 6 River Systems for $450 million, paying 60 percent in cash and 40 percent.
At the time of acquisition, Shopify termed it as a “critical step to accelerate its growth.”
“This acquisition is a critical step to accelerate its growth, while 6 River Systems will also continue to build and sell their solution for warehouses. With the acquisition of 6 River Systems, Shopify will add a team with decades of experience in fulfillment software and robotics, including experienced leaders from Kiva Systems (now Amazon Robotics),” Shopify said in a statement.
Not Only For SMEs
According to Manders, Flexport’s deal with Shopify will not only benefit small merchants but also “large companies”.
“If we create an end-to-end chain, they will use it. We could take out multiple points, reducing labour,” he explained how Flexport aims to bypass distribution centres.
Flexport is planning to partner with a local delivery company or companies to fulfill logistics demand. The aim is to provide Deliverr to global merchants, moving on from the idea of final mile.
“Final-mile economics are about route density and stops, and delivering multiple packages. You need a lot of scale, but you don’t need your own vans. There are a lot of local skilled delivery companies and solutions already. You just feed into it and keep asset-light,” Manders said.
He goes on to explain logistics as “a natural extension to what we were already doing”. “It’s different economics, yes, but we can take out inefficiencies,” Manders added.
Distraction For Shopify
For Shopify, logistics had become a “distraction” from its primary quests. “Shopify finds it useful to talk about the difference between main quests and side quests internally. The main quest of the company is its mission, the reason for the company to exist. Side quests are everything else. Side quests are always distracting because the company has to split focus. Sometimes this can be worth it, especially when engaging the side quest creates the conditions by which the main quest can become more successful,” Lutke said.
“Shopify’s main quest is to make commerce simpler, easier, more democratized, more participatory, and more common. I think that we have built the best commerce platform in the world for that. Technological progress always arcs towards simplicity, and entrepreneurs succeed more when we simplify. But now we are at the dawn of the AI era and the new capabilities that are unlocked by that are unprecedented. Shopify has the privilege of being amongst the companies with the best chances of using AI to help our customers. A copilot for entrepreneurship is now possible. Our main quest demands from us to build the best thing that is now possible, and that has just changed entirely,” the CEO added.
Flexport CEO Dave Clark doesn’t agree on this with Lutke. “[The idea] has always been there, it’s not a distraction, or a departure. Customers don’t want to build out their own logistics, they want to feed into a platform. They won’t get the scale by themselves,” he said.
Global Expansion
When powered by Shopify, Deliverr was limited to US merchants. Flexport is planning its global merchants. “The mission has always been to make global trade easy for everyone,” Clark added.
“Everything we do is global. The software of Deliverr will work very well in Europe too, although short-term integration will be North America. It’ll be easier and quicker in North America, but it is coming to Europe. Lots of European brands also have entities in the US,” Manders said.
