This supply chain technology analyst recently had the opportunity to interview Thomas Epting, Director, Shopify Fulfillment Network on this provider’s ongoing mission to be a B2C customer fulfillment alternative for small and medium businesses.
Business media such as The Wall Street Journal have recently profiled Shopify as likely one of the pandemic’s significant winners as many small and medium businesses were suddenly forced to establish an online B2C fulfillment presence.
Indeed, in our conversation, Epting indicated that the Ottawa based provider has suddenly experienced five years of growth in five months as a result of the COVID-19 restrictions on businesses, requiring an all-out effort to support new customer needs. When the pandemic first hit, the company’s CEO literally shelved all of existing 2020 plans and focused full resources on helping small businesses navigate to an online presence.
Second-quarter revenues nearly doubled while the number of new storefronts have increased exponentially. The provider charges a monthly fee as well as a percentage of each online transaction conducted on the Shopify platform. Estimates are that this provider now hosts in excess of one million merchants while total sales conducted on the provider’s platform are indicated as exceeding $200 billion.
Shopify Fulfillment Network
In addition to supporting needs for an online web site storefront presence, the Shopify Fulfillment Network provides customer turnkey support for inventory storage, management and actual online fulfillment. Epting describes such services as: “democratizing fulfillment globally.”
He further emphasizes that Shopify does not compete with its merchants but rather seeks to be a ”one-stop” platform technology provider for businesses including availability of customer buying intelligence tools that can identify what customers tend to buy and when.
Through a partnership among customer fulfillment centers across the United States, online orders are routed to respective white label customer fulfillment centers for pick, pack and shipping. Two tiers of service levels are provided, depending on the size and volume needs of the customer. High tier customers are provided additional fulfillment services including order allocation management tools for products that might be in high demand. Epting hinted that larger consumer product companies have been migrating to the network, again as a business alternative for being an independent fulfillment presence. This is the notion for B2B companies now having to have a B2C presence as part of their business strategy.
He further observed that merchants can be amazingly creative in developing of innovative products, especially during a pandemic, and that Shopify’s mission is to allow such producers to be able to focus on that core mission.
The longer-term horizon calls for broader physical deployment of the fulfillment network across broader geographic regions. According to published reports, this provider intends to invest in excess of one billion over the coming five years on building out its online and physical customer fulfillment capabilities, including the speed and reliability of fulfillment centers.
In September of last year, the provider acquired autonomous mobile robot (AMR) provider 6 River Systems for a reported $450 million with the aim of adding augmented talent and advanced technology in customer fulfillment software and fulfillment center robotics, including experienced executive leaders from the former Kiva Systems (now Amazon Robotics). Rather than full automation, 6 Rivers technology focuses on added agility and flexibility of customer fulfillment with the assistance of worker guided robotics.
This author had the opportunity to tune into 6 Rivers recent annual customer gathering that featured Shopify’s CTO Jean Michel Lemieux as a keynote presenter. In his remarks, Lemieux outlined three strategic reasons attributed to the 6 Rivers acquisition:
- Helping to support democratizing of fulfillment globally.
- Assisting with the global buildout of the Shopify Fulfillment Network.
- Maintain the existing level of independence of 6 Rivers technology being available for use by other customers including Shopify.
Our research arm recently published a Research Advisory, in collaboration with 6 River Systems, titled: The Future of Online Customer Fulfillment- More Flexible and Digital Based Warehouse Automation. In this report, we outline the future of warehouse automation and agile fulfillment.
Our interview reinforced that there are platform providers aiming to provide up and coming as well as established businesses an alternative to the growing dominance of mega online retail platforms such as Amazon and others. The ongoing pandemic has provide an added boost to the consumer movement toward online and Omni-channel fulfillment needs and providers like Shopify seek to be a viable alternative for manufacturers and businesses.
© Copyright 2020, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.