Ecommerce is a multibillion-dollar business sector. It’s projected to account for nearly 25% of all global retail sales by 2025, and the competition keeps intensifying.
Shopify, a major player in ecommerce solutions, recently acquired Deliverr. This acquisition should make Shopify more competitive with other major fulfillment solutions like Amazon—at least, that’s the bet.
To better understand how the acquisition of Deliverr strengthens Shopify’s fulfillment capabilities, we have to take into consideration what each brings to the table and how their new unity improves the merchant experience.
Key Ingredients of Order Fulfillment
Order fulfillment is the process by which buyers receive the items they’ve purchased. This may seem simple on the surface, but it takes some coordination.
Receiving and Storing Inventory
Successful order fulfillment through Shopify or any other platform starts with where products are stored and how that inventory is managed. Any location from an eBay seller’s garage to an Amazon regional distribution center needs to be secure, organized, and well staffed. Inventory management is often the single biggest efficiency driver. Each item in inventory must be counted, verified for accuracy, labeled, and stored logically.
Picking and Packing Orders
After an item is ordered, it has to be located and packaged for delivery. Shipping hubs can be large complexes with intricate inventory systems. A human, machine, or a combination of the two must locate items promptly and package them. The quicker these phases can be accomplished, the more likely a delivery fulfillment will run smoothly.
Without the shipping process, order fulfillment wouldn’t be complete. Shopify and other ecommerce platforms typically rely on carriers like FedEx, UPS, and USPS.
Whether by air, land, or sea, the costs of shipping are based on weight—the greater of actual or dimensional weight. Costs can also vary based on variables such as distance and method.
While most consumers take these steps for granted, understanding all of the moving parts for what a platform like Shopify wants in a deal with Deliverr. There’s a lot that can go wrong with order fulfillment logistics, and a strong acquisition can alleviate some of these pain points.
Challenges Involved in Fulfilling Orders
Shopify is well versed in what constitutes an effective fulfillment process. Orders must be handled with accuracy to maintain customer satisfaction. Costs must be kept down through deals with major carriers. The system that controls this process must be able to scale with the business. Speed and precision are everything to compete in a crowded market.
Major platforms like Shopify face challenges in creating a stellar fulfillment solution, especially as they scale. Between 2020 and 2021, Shopify nearly tripled its revenue, largely driven by enterprise merchants needing efficient direct-to-consumer sales channels. But with more merchants coming online at such a fast pace, fulfillment can’t always keep up.
Cost of Shipping
A full 62% of online shoppers expect their shipments to arrive within 3 business days. And paying for expedited shipping isn’t an option for many consumers—another statistic worth noting is that 73% of those who started the purchasing process have changed their minds (cart abandonment) due to the shipping price.
Shopify fulfillment faces rising costs but risks impacting their business model if they’re too quick in passing those costs to consumers.
Need for Advanced Technology
There are other pain points to consider as well. Meeting customer expectations around the cost of shipping can attract new buyers. Maintaining the business of these customers requires a system that fulfills orders in a timely manner, avoids sending the wrong product, and allows the tracking of orders. This requires a modern approach to delivery for Shopify and its competitors.
Then there is the actual moving of the products. Global shipping delays have become a common pain point. In fact, 43% of businesses modify their strategies to offset the impact of shipping delays.
Common ecommerce challenges in this area can include weather, warehouse location, distance to travel, and other route-related issues. The Shopify fulfillment experience must continue to address many of these issues in order to effectively compete.
Benefits of the Shopify-Deliverr Deal
Enter Deliverr. The Shopify-Deliverr deal allows one of the market’s biggest platforms to leverage the logistical expertise of one of the nation’s standout fulfillment startups.
How Shopify works is one of the keys to its success. Unlike Fulfillment by Amazon (FBA), which effectively strips a merchant of their unique identity and branding, Shopify allows vendors to use their own digital storefronts and sell across multiple channels. Shopify Markets makes it possible for merchants to sell anywhere in the world with language translation, currency conversion, and region-specific SEO.
Since 2017, Deliverr’s 2-day shipping has made their services competitive—and complementary—to other big brands. Their fast delivery was made possible through the combination of an advanced software system and distributed warehouse hubs.
Deliverr’s state-of-the-art technology, with its predictive analytics, can assist in the forecasting of demand for products within a particular region. This can be used to position its inventory within an expansive network of warehouses to be available where there is demand for it. The net effect amounts to there being less distance to move products from storage to customer.
The Potential Impact of the Shopify-Deliverr Acquisition
From looking at Shopify and Deliverr’s fulfillment solutions, it’s easy to see how the acquisition benefits their delivery service.
Deliverr’s technology, with its machine learning and analytics, improves the fulfillment capabilities of Shopify. One of these areas is inventory management. It gives merchants a central place to go and ship products across multiple channels.
The technology also positions inventory to be close to demand, thus providing a shorter distance to travel to its destination. Businesses can also mix and match services around storage, freight, and so on for a more customized and scalable solution.
This completed deal allows the integration of the Shopify Fulfillment Network (SFN) and Deliverr’s logistics software. The new feature, called Shop Promise, will be backed by this analytical and adaptive system.
Shop Promise is essentially a badge for merchants to display that reflects this commitment to fast shipping, simple pricing, and an easy return policy. For customers, this badge is meant to instill confidence. For merchants, it should serve as a means to boost sales. And for Shopify, it advertises the ability to compete with Amazon’s two-day and next-day shipping.
Increased Competitive Capability
Shopify’s ability in fulfillment is enhanced by giving merchants an end-to-end logistics solution. Typically, such a complete solution would require the services of more than a single company—as it was before the acquisition. The expanded capabilities from acquiring these solutions certainly give an edge over some platforms while closing the gap with others.
Competition Requires Strategy
The Deliverr acquisition does provide some firepower in a competitive market. To what extent this boosts Shopify’s ability in its delivery, only time will tell. We’ll certainly be watching.
The ecommerce business is booming. With that growth, it’s more important than ever to have clear strategies and the ability to adapt to a rapidly changing market. Choosing the right ecommerce platform is a big part of that strategy.
If Shopify’s storefront and fulfillment solution seem the right choice, then Coalition Technologies can assist. We’ve partnered with multiple brands to provide services that work.
Contact us today and experience our expertise in ecommerce.