The Supply Chain Matters blog reflects and provides added context to the announcement that Shopify and Amazon will collaborate on merchant parcel shipping options.
Now that online retail shopping volumes have stabilized to a relatively new level of 15 percent of total retail sales, online merchants and platform providers are deploying new means for capturing added efficiencies or enhanced benefits for online merchants and respective consumers.
Announced Shopify and Amazon Collaboration
Last week, online retail platform provider Shopify announced a collaboration with Amazon that allows Shopify merchants who also use Amazon’s fulfillment execution network to have the added option to add the Buy with Prime app directly into Shopify Checkout, processed by Shopify Payments.
This new app will reportedly enable Shopify merchants, typically small to medium sized retailers, wholesalers or product producers to offer Amazon Prime members free delivery and easy returns outside of Amazon for the first time ever.
According to reporting from business broadcasting network CNBC, the feature is initially available by invitation only to some Shopify merchants, to be opened up to all Shopify sellers who elect to use Amazon’s logistics services by the end of this month.
Both of these online platform providers were arch-rivals and Shopify had previously warned its hosted merchants that utilization of the Amazon fulfillment services would risk violating terms of services with Shopify.
During this same time, the online platform provider was relying on contracted logistics or warehousing providers to support hosted merchant last mile delivery needs while assessing as to whether to invest in and deploy a rather expensive last mile delivery capability that would equate to the capabilities of existing online retail providers such as Walmart or Amazon.
In May of 2022, Shopify announced its acquisition of end-to-end online logistics San Francisco based fulfillment provider Deliverr for a reported $2.1 billion. This deal was billed as the largest acquisition for Shopify at the time and an indication that it was aiming to support merchant fulfillment and delivery needs.
All of that changed as online orders began to contract later in 2022.
In July, Shopify announced an overall 10 percent reduction in headcount, amounting to upwards of 1,000 workers, with the company’s CEO admitting that the tech provider’s bet on explosive online commerce growth did not pan out as initially planned.
In February of this year, Shopify announced a strategic partnership with San Francisco based global transportation and logistics Cloud platform provider Flexport. The announcement included the launch of the Flexport App on Shopify – a described one-stop, integrated solution designed for small-and-medium-sized businesses (SMBs) to meet their global trade and shipping needs.
Then in May, Flexport announced that it will be acquiring all of the logistics operations assets of Shopify, with the exception of warehouse robotics provider 6 River Systems which was a part of the Shopify portfolio. The deal included the online shipping platform technology of Deliverr. It was communicated that the acquisition would facilitate the ability of Flexport to become the de-facto primary services provider of Shop Promise for Shopify merchants with logistics and last mile customer fulfillment powered by Flexport in the merchant-facing Shopify Fulfillment Network.
The Amazon focused announcement adds a new twist, not only in the augmented services for merchants but in the backdrop that Fexport’s CEO Dave Clark was the former worldwide senior executive leading Amazon’s retail business explosive growth leading up to and during the global pandemic period.
This news of these two arch-rivals collaborating together in last mile fulfilment prompted a run-up for both of these provider’s stock. Shopify’s stock price surged 10 percent on the news while Amazon’s stock popped 2 percent.
More to the point, we believe that such developments are the new realties and actions that will motivate major online retailers in the coming months. Clearly one of such actions is providing online merchants and online consumers with more cost effective, efficient and sometimes more responsive fulfillment and last mile delivery service options. Amazon additionally has the opportunity to leverage its fulfillment logistics capabilities as an alternative to FedEx or UPS.
Whereas companies compete on the basis of their supply chain capabilities, enhanced customer intelligence and timely decision making, online retail and business services providers are upping their game to similar dimensions, regardless of past rivalries.
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