What’s going on with the Shopify Fulfillment Network?

Photo by Roberto Cortese on Unsplash

With some of Shopify’s recent moves regarding the Shopify Fulfillment Network, questions started popping up. We finally got some clarity this past week during their Q4 earnings call.

Before we jump in let’s start with a brief history. The Shopify Fulfillment Network (SFN) was announced in 2019. It was introduced as a network of fulfillment centers for merchants to ensure faster deliveries and lower delivery costs.

Shopify said that they would be investing $1 billion over the next five years into the network. Analysts and industry experts suggested that this would allow Shopify to eventually become more competitive towards Amazon and Walmart.

A few months later they announced the acquisition of 6 River Systems, a warehouse robotics company, for $450 million. Their collaborative mobile robots would be used in the Shopify Fulfillment Network.

On January 21st, Business Insider released an article stating that Shopify had terminated or reduced the scope of work with several small, independent eCommerce fulfillment centers that it had partnered with.

Some of their fulfillment and warehouse partners offered below-market rates or made other concessions believing that Shopify’s SFN would be a success.

Shopify’s pitch to their fulfillment partners: “They were going to make a fortune on fulfillment. It was going to be all these things that fulfillment has never been.”

Partners said that Shopify demanded steep discounts, signed on complex clients that the partners struggled to service, and in one case asked a partner to increase capacity at their own expense with heavy Shopify supervision.

After all this, Shopify was pulling the plug.

After the Business Insider article was published Shopify released a statement saying that they were not reducing capacity and that the changes being made were to better compete with the big retailers. Specifically, they called out two-day shipping and easy returns.

Critics have also called out their areas of concern with the SFN:

1. They don’t have a Chief Supply Chain Officer to lead the program
2. They don’t have a dedicated supply chain section on their career page
3. They have been unclear on how they are putting 6 River Systems to use

They’ve also lost key SFN employees:

1. Thomas Epting, Director of SFN
2. Mat Paciga, Head of Sales for Shipping Services
3. Maia Benson, Global Head of Shipping and Fulfillment
4. Gary Mirsky, Global Commercial Lead for SFN

So the question going into their Q4 earnings call this past Wednesday (February 16th) was what was next for the Shopify Fulfillment Network. There appeared to be three possible ways it could play out:

1. Shopify acquires a 3PL(s)
2. Shopify buys and operates their own warehouses
3. Shopify shuts down SFN

Fast forward to their earnings call we got more answers surrounding SFN.

The Shopify Fulfillment Network would continue on and they were going with door number two — buying and operating their own warehouses.

What they are currently working on:

1. They opened a self-operated leased warehouse in Atlanta last fall
2. They have begun fulfilling a small number of merchant orders out of the warehouse
3. They were also using the facility to test their fulfillment software

Their plans for SFN in 2022:

1. Consolidate their network into larger facilities
2. Shifting to operate their own warehouses for better control and quality
3. Unifying their network by operationalizing their WMS to integrate with Shopify’s back office and checkout

For further reading check out these articles:

• Shopify Fulfillment Network Struggles With Software — Business Insider
• Shopify’s Clicks Need More Bricks — WSJ

Key Points:

• Shopify’s ultimate goal is to offer two-day delivery to 90% of the U.S. population
• Starting in 2023, Shopify will invest about $1 billion in capital expenditures over a two-year period into SFN
• Building a warehouse management system(WMS) is hard
• Supply chain in general is hard
• Investors are worried — moving away from asset-light model, high spending required, lack of trust in initiative

Interested in jumping on the SFN train, here are roles they are currently filling:

• Operations Manager, Shopify Fulfillment Network — Carlisle, PA
• Senior Product Lead, Shopify Fulfillment Network — Remote
• Technical Program Manager, Shopify Fulfilment Network — Americas

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