Shopify Rivals Amazon with New $1 Billion Fulfillment Network

Shopify is investing $1 billion to build the new Shopify Fulfillment Network, a system of fulfillment warehouses and shipping options they say will offer 2-day shipping across the United States by the end of the year.

The Canadian online retail marketplace and e-commerce service says their hundreds of thousands of American customers will be happy to see their shipping costs drop due to the network’s new machine-learning technology. Shopify says their new tech will be able to decide which shipping locations are closest to customers and have the quantity of stock needed to ensure the quickest and lowest cost delivery options available.

The company’s target merchants—small to medium-size business owners—will also benefit from having their products become more accessible, making them competitive with larger organizations.

However, even though people say this news is evidence of Shopify trying to compete with Amazon, Shopify maintains they are not.

The Financial Post quoted the company’s chief product officer Craig Miller as saying, “I think we actually are inspired by Amazon. They offer two-day delivery for a lot of products, and we said, how can out merchants actually offer the same thing?”

However, at their annual Unite developer conference, Miller pointed out that “some of these large marketplaces”—presumably Amazon—are using customer data in ways that harm retailers. He said that they use data that details order volumes to make cheaper, lower-quality knockoffs that harm sellers. He also pointed out that it does not make sense for the shipping box to have the logo of the online marketplace on it instead of the retailer’s logo.

About the fulfillment network, he said, “this is another example of how Shopify is democratizing commerce by taking the warehouse systems, machine learning and other technologies that used to be reserved for only the largest companies in the world, and making them accessible and affordable to all merchants including those that are just starting to take off.”

Miller told the Financial Post that Shopify will operate warehouses privately as well as through third-party companies who they also want to do the deliveries.

At the Unite Conference, Shopify analyst Ygal Arounian reminded the audience that while the fulfillment network is the most influential development for Shopify, there are more product announcements that will also play a large role in innovating the company. These include:

  • Checkout customizations
  • Single admin management of multiple sites and brands on Shopify Plus
  • Improved point-of-sale software and online store integration
  • Order editing

He also pointed to the fact that Shopify is becoming a “fully-fledged global retail solution” for the merchants they work with by expanding their services beyond e-commerce. Integrating POS and online stores is something unique to Shopify while creating a logistics operation is unique to Shopify and Amazon.

Shopify’s marketplace is currently made up of 820,000 retailers, 100,000 of whom operate from brick-and-mortar stores.  Early access to the new fulfillment network will be offered to retailers who ship from 10-10,000 products a day.