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Shopify is setting up fulfilment network in U.S., just like Amazon

Shopify is setting up fulfilment network in U.S., just like Amazon
Business
Shopify Inc. plans to spend $1 billion (U.S.) to set up a network of fulfilment centres in the U.S. to help merchants using its e-commerce platform deliver products more quickly and cheaply, much the way Amazon.com Inc. does.

“A large number of orders are lost in the final stages due to complex shipping costs,” Craig Miller, Shopify’s chief product officer, said at the company’s annual developer conference in Toronto. The service will use machine learning to predict demand and suggest closest fulfilment centres to merchants.

The Ottawa-based company unveiled the plan, along with new features such as video and 3D modelling for products, the ability edit orders and a better user interface. It also added 11 new language capabilities and rolled out a multi currency payments system to all merchants. It’s planning a new point of sale system for later this year.

Its shares jumped 4% to a record $316.22 at 12:25 p.m. in New York.

Shopify processes millions of individual sales by hundreds of thousands of merchants every year. The company could potentially pool shipments from different online stores together, making shipping cheaper and more efficient. Storing products from different merchants in centralized warehouses would also bring down costs for sellers and buyers alike, and net Shopify another revenue stream.

That could help the company mount a defence against Amazon, which ruthlessly lowers prices and encourages merchants to use its own warehouses and shipping tools.

The online platform, which celebrity Kylie Jenner uses to sell cosmetics, is the top-performing stock in Canada this year. It’s also outperformed any stock in the S&P 500 over that time, other software services companies such as Square Inc. and Amazon.com Inc.

The company has been rallying after reporting strong first quarter earnings, forecasts for second quarter revenue that were above expectations and pushing plans to expand internationally. Shopify posted its first annual revenue above $1 billion in 2018. The company is rated a buy by 18 analysts, a hold by 8 and a sell by two, according to ratings compiled by Bloomberg.
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