Deals of the Year – Tech: Shopify feeling fulfilled with $450M acquisition

shopify
Shopify CEO Tobi Lutke. File photo

Any doubts that e-commerce giant Shopify was going all in on its commitment to building its U.S. fulfilment network were silenced on a Monday morning in early September.

On Sept. 9, the Ottawa-based company said it had agreed to buy 6 River Systems, a Massachusetts-based fulfilment solutions company, in a cash-and-share deal worth US$450 million. The agreement, finalized in October, gives Shopify ownership of fulfilment software and technology such as mobile robots that allow goods to be shipped more quickly and efficiently from warehouses.

Shopify, which makes software that helps merchants set up online stores and process payments, said in June it planned to spend up to $1 billion over the next several years to set up a network of third-party warehouses across the United States in an effort to help its partners lower their shipping costs and speed up delivery times to customers.

And just last month, OBJ broke the news that Shopify was looking to operate a warehouse of its own in Ottawa to test its techand build best practices for the rest of its network.

The 6 River deal will help “accelerate the growth” of that network, Shopify chief technology officer Jean-Michel Lemieux told OBJ in an email. Shopify will also continue to sell 6 River’s technology to other providers, “which opens up a new market of customers for us,” he added.

Lemieux said the two firms initially met through a “mutual contact” and quickly hit it off, adding 6 River will be a “strong fit” with Shopify’s vision.

“With consumer expectations rising for fast and free shipping, we know that direct-to-consumer brands, especially growing businesses, need to offer experiences that are competitive with larger retailers and marketplaces,” he said. “That’s exactly what our Shopify fulfillment network will provide.”

Amazon rivalry?

Analysts were generally bullish on the deal as well. Wedbush Capital Partners analyst Ygal Arounian wrote that it “proves Shopify’s full-fledged intention to be a disruptive force in fulfilment services.”

Though many observers saw the acquisition as a bid to compete with U.S. e-commerce behemoth Amazon, Shopify officials have downplayed talk of a rivalry. The two companies are partners in some areas, with Shopify offering Amazon Pay and some Amazon transactions being processed through Shopify storefronts.

Still, Lemieux said 6 River’s technology will help “level the playing field” for independent merchants.

“By allowing business owners to have a clear view of their inventory, shipping and operations in the Shopify platform, while maintaining their brand identity through custom packaging and quality unboxing experiences, they will be able to compete with larger, more established brands,” he said.

​– With files from Leo Valiquette