Shopify has decided to work on logistics to tackle the online e-commerce slowdown and help its merchants meet customers’ demand with much ease. CEO Tobias Lütke hinted at “the vertical integration of logistics” at the time of Q2 earnings in July.
The fulfilment initiative will help the Canada-based platform compete with e-commerce giant Amazon. The announcement came after Shopify recorded losses of $1.2 billion in Q2 and laying off 10 percent of its workforce.
Orders with predicted delivery of 2 days or less have now increased from less than 2% prior to software updates to over 70% after the updates, and we are just getting started.
Harley Finkelstein, President, Shopify
Layoffs
Earlier, Shopify had placed a “wrong” bet on the e-commerce growth following the coronavirus pandemic. While announcing the massive layoffs, CEO Lutke admitted that the “bet didn’t pay off”.
“What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead. Our market share in ecommerce is a lot higher than it is in retail, so this matters. Ultimately, placing this bet was my call to make and I got this wrong,” he had explained.
What’s Ahead?
Shopify believes that the time ahead may not be pleasing. “We are keenly aware of what’s happening around us. We anticipate that inflation and the continued softness in consumer spending on goods will persist through the remainder of the year,” CFO Amy Shapero said.
Fulfilment Process
Supply Chain Drive quoted Shopify President Harley Finkelstein explaining the entire process of the company’s fulfilment network. First arrived at hubs, the product will be unpacked, scanned and inspected for quality check using a range of software and machine learning. The quality of the product will be compared to the inventory registered in metadata of Shopify’s back office.
Shopify will then work on buyer’s demand and expectation of delivery to ship the product to the distribution channels operated by merchants. Only then, merchants will be able to deliver the product directly to the shopper.
“Orders with predicted delivery of 2 days or less have now increased from less than 2% prior to software updates to over 70% after the updates, and we are just getting started,” Finkelstein said.
The fulfilment network will operate on Deliverr’s software and technology developed by 6 River Systems. According to Finkelstein, Shopify’s aim is to “forward-position merchants’ inventory to support timely fulfillment with a minimal inventory commitment”.
