Shopify Inc. (NYSE: SHOP) jumps around 17% in pre session on Thursday after the Canadian e-commerce platform said on Thursday that it has unloaded the logistics business it has established over the last few years, reversing its strategy of aggressively investing in fulfillment networks. It has sold its logistics operation, which includes Deliverr Inc., which it purchased for $2.1 billion less than a year ago, to freight forwarder Flexport in an all-stock transaction in return for a 13% ownership in the startup in which it previously invested.
In February 2022, Flexport was valued at $8 billion in a $935 million fundraising round headed by Andreessen Horowitz and MSD Partners.
Shopify also announced the sale of 6 River Systems, a retail fulfillment automation firm it spent $450 million for in 2019, to British online supermarket technology provider Ocado for an unknown sum. The decision to expand into logistics services was part of Shopify’s goal of providing one-stop solution to merchants selling on its platform.
As the worldwide pandemic’s e-commerce boom fades and Shopify’s sales growth slows, its investment in the fulfillment network is being keenly examined by investors, who are concerned that the capital-intensive initiative would drag on profitability. Shopify President Harley Finkelstein explained the strategic adjustment as a result of a focus on product acceleration. “We can provide excellent value to our merchants.” “We get a lot of new customers using Flexport’s incredible product, and we can get back to doing what we do best,” he said in an interview.
Flexport, located in San Francisco, will expand into fulfillment and last-mile delivery as the official logistics partner for Shopify merchants. Following the acquisition, Flexport, led by former Amazon executive Dave Clark, will provide fulfillment services to stores and homes through over 50 fulfillment sites across the country, competing directly with Amazon.com Inc. “We want to move toward an end-to-end solution under one technology stack, from the manufacturer to the store door, and this really accelerates our journey there,” Clark said. “We expect to use this as a real catalyst for growth.”
