Shopify Aims To Avoid Pitfalls Of Amazon As It Rolls Out 'Elastic Warehouse Capacity'

E-commerce platform Shopify is attempting to expand its logistics network without falling victim to the real estate excesses of its giant rival Amazon.

After purchasing fulfillment and order storage provider Deliverr last year for $2.1B, the company is building out a distribution network that offers fast, flexible delivery without the fixed costs of the industrial real estate portfolio Amazon is now attempting to unwind, Chief Financial Officer Jeff Hoffmeister said during a March 8 Morgan Stanley Technology, Media and Telecom conference, as reported by the publication Supply Chain Dive.

As part of what the company has dubbed “elastic warehouse capacity,” Hoffmeister said Deliverr will offer Shopify merchants fast fulfillment via software and network partners, including warehouses, carriers and last-mile delivery providers —all while keeping Shopify’s own real estate assets on the lighter side.

"Some of the technology we got from Deliverr allows us to do this in a distributed way, and then tackle some of the things which Amazon and others have in terms of problems we don't have,” Hoffmeister said during the conference, according to Seeking Alpha.

Following rampant warehouse leasing and acquisition during the pandemic, Amazon has spent the past year backpedaling, backing out of new leases and subleasing various facilities as consumer demand dropped. Amazon has delayed, canceled or closed almost 100 warehouses, encompassing more than 30M SF in 30 states as of this year, according to recent data from MWPVL International.

In 2019, Shopify announced that it planned to spend $1B to own and operate its own logistics network in the U.S., with providers in six states. In 2021, Shopify made its U.S. logistics debut in Georgia, leasing a 563K SF distribution facility in Newnan.

Shopify is attempting to offer fast delivery and easy returns with Deliverr through multichannel inventory management, placing products in warehouses closest to demand centers and offering two-day and next-day delivery options, according to a press release at the time of the Deliverr acquisition. 

Hoffmeister said Deliverr users currently make up “a very, very small percentage” of its overall customer base, though Shopify hopes to boost those numbers once the integration is completed, per Supply Chain Dive.

“With Deliverr, what they’re bringing is a network and fulfillment management software layer, which helps to predict demand and place inventory at a point that is closest to that demand," said Ana Raman, senior manager of Shopify investor relations, during Raymond James’ 44th Annual Institutional Investors Conference March 7. "And by doing that, we believe that we can decrease the time to which we can get a product to the end customer, and thereby reduce cost as well.”