Photo: 6 River Systems
Is Shopify serious about fulfillment?
Shopify Fulfillment Network has never gained serious traction since its launch in 2019 and it appears to me that the company is at a crossroads with its approach.
There have been reports of management and strategic turnover at the company, leading to confusion by merchants and partners trying to make sense of what Shopify is doing. One year in, the acquisition of 6 River Systems, provider of robotic warehouse fulfillment solutions, was touted by Thomas Epting, director of Shopify Fulfillment Network, as being central to its strategy, but now he is no longer with the company. While there have been reports Shopify is reducing its reliance on third-party facilities, Shopify has also said it wants to focus on “two-day delivery.” It’s not clear which of these strategies is the new priority.
Shopify is unique in the e-commerce platform space compared with its competitors like WooCommerce, Magento, BigCommerce, etc., which do not have formal fulfillment offerings. Unfortunately, unique doesn’t always mean great. The service has not scaled, and stakeholders deserve an explanation.
Over the past few years, observers have noticed a few things:
- Shopify does not have a chief supply chain officer to guide the program at the senior level. Given that supply chain investments usually measure in the billions of dollars, Shopify needs a senior leader on the program, and the lack of it is not a great sign for the initiative. What’s more, Shopify does not even have a “supply chain” category on its jobs site. To a casual observer, this could indicate the company is not taking the project seriously enough.
- Shopify bought a robotics firm, 6 River Systems, but it’s unclear how this asset has been uniquely put to good use. It’s expensive to buy another company and not leverage it properly, particularly after it was launched with a lot of fanfare. It’s not clear what part of 6 River Systems Shopify valued most: the AI-based approach, its robots or its warehouse facilities.
These are just some of the questions and issues with Shopify’s approach. Of course, Shopify should be commended for thinking outside of the box, but after two years and multiple shifts, industry observers start to wonder — is there a clear strategic plan in place?
- Shopify to Acquire 6 River Systems – Shopify
- Shopify Enjoying Early Success With Its Fulfillment Business – The Motley Fool
- Shopify is cutting contracts with warehouses across the US, marking a shift in its push to challenge Amazon’s massive fulfillment machine – Business Insider
- Shopify Fulfillment Network to Cut Number of Locations – Cahoot
Discussion Questions
DISCUSSION QUESTIONS: Do you agree with Shopify’s strategy to offer its customers fulfillment services? What do you think Shopify needs to do to be successful?
Poll
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Fulfillment is a critical part of a successful online ecosystem, especially for marketplaces. It does not necessarily need to be internally managed, but there needs to be a clear plan in place to ensure operations are smooth and effective. Of course, as Amazon has shown, an internal system is another source of revenue as it boosts the service fees third parties pay. Given Shopify’s scale and growth, it should have a more disciplined approach to further developing its own fulfillment capabilities.
Shopify’s fulfillment is useful to the small fish in the market. Otherwise, there’s no reason to expect it will be any more useful than any of the thousands of fulfillment centers around the country. Sound to me like expectations were overblown.
If Shopify can effectively and profitably execute fulfillment services, it would be likely valued by many of its customers. However developing a fulfillment network is a monumental and extremely expensive investment. It would be essentially competing with Amazon and Walmart, which is a not something I envy.
When Amazon bought Kiva Systems it was a smart move. At the time (2012) they had over 34 distribution centers in the U.S. and shipped more than 2 million packages a week. And could use their massive site to drive awareness of their fulfillment services. Robots helped them scale efficiently.
Shopify has seven DCs and doesn’t have the brand presence of Amazon to drive awareness of its fulfillment services. It feels like they made the move into robots too early without having a clear fulfillment strategy.
The concept of Shopify fulfillment could be a game changer for the small-midsize retailer/brand. But they need to get their strategy straight and have/bring the right experts on board to help them compete with AWS and 3PLs in the market.
Shopify needs the right people in place to execute a forward thinking fulfillment strategy. They also need to retain their senior leaders – they have been moving on and turnover at the highest level has been on the rise.
This is the challenge that many retailers face today – their fulfillment strategies are archaic and inflexible to react to disruptors in the market. The right leaders are critical.
Whether Shopify should offer the service is one question. Whether they are equipped to manage the logistics is another question. Offering the service could be reasonable but only if a commitment is made to have state of the art processes at all levels of fulfillment. Certainly not having a senior supply chain officer is a big problem. To do this well Shopify needs qualified, stable leadership, necessary technology, and inventory transparency throughout the whole process. Are they ready?
Shopify needs to clarify its purpose. The company is dabbling in lots of areas, but that only wastes resources and causes confusion. Unless a clear strategy is defined it will continue to flounder until the money runs out.
YES. I started my own digitally native brand a year ago and am on the Shopify platform. I did not realize at the time that they offered a fulfillment component and did my own due diligence to locate one in California. A one-stop platform for start-ups makes complete sense, but needs to be better advertised to its site users. Fulfillment is critical to the future of retail and it makes complete sense for Shopify to figure this out without going bankrupt. There are three options: build, buy or partner. I see partnering with an already established fulfillment service as a potential solution.
Shopify needs to pause, take a deep breath and try to figure out what it wants to be if it lives long enough to grow up. Somebody once said you can do anything you want with a bayonet except sit on it. Time for Spotify to step up.
I feel Shopify is not wrong to offer fulfillment services to the merchants. Like Amazon, Shopify has end-to-end knowledge of both retailers and customers and got a pretty good understanding of exactly what Shopify merchants need. Shopify has proved during the pandemic that they know the art of identifying and prioritizing the short-term needs of the merchants and enabled them to create a deeper engagement with their customers. Since we are gradually entering the new normal, I guess this would be the right time to ask Shopify about how they will deliver new solutions like fulfillment to their customers and alter their ecosystem to meet those needs.
To ensure the success of the fulfillment services, Shopify would need to hire good leaders who have expertise, experience, and clarity. Without a strong team, it would be harder for Shopify to execute an ideal plan like this from scratch.