Deliverr, a San Francisco, California-based e-commerce fulfillment firm, has been acquired by Shopify for $2.1 billion in cash and equity.

The agreement, which was first reported by Bloomberg in April, is Shopify’s largest acquisition to date, and founder and CEO Tobi Lütke says it would allow the business to build an “end-to-end logistics” system for millions of merchants. Deliverr will be integrated with Shopify Fulfillment Network (SFN), Shopify’s fulfillment service that merchants may use to store inventory and fulfill orders, to improve SFN’s merchant inventory management capabilities, according to Shopify. Shop Promise, a new service powered by Deliverr, will provide clients with two-day and next-day delivery as well as increased choices for storing, freight, inventory preparation, and returns.

Prior to the Shopify acquisition, Deliverr was co-founded by former Symphony Commerce teammates Abbott and Michael Krakaris in 2017 and had raised $490.9 million in funding. The company was valued at $2 billion post-money in its most recent investment deal, a $240 million Series F headed by Tiger Global.

Deliverr, which rents out storage space and hires fulfillment teams to select and pack e-commerce orders, forecasts product demand based on location and other criteria using predicting analytics and machine learning. The software then uses the data to “pre-position” things near high-demand locations, stocking goods across its chain of warehouses and sort centers, and identifying the optimum shipping option for customers. Shopify will pay around 80% of the purchase cost in cash ($1.68 billion) and 20% in Shopify Class A shares ($420 million) under the terms of the agreement. Shopify, like many other digital companies, has Class A shares, including one vote per share plus Class B shares with multiple votes per share, with Class B owners owning the company.

Is that on the mild side of M&A, given Deliverr’s financials? Well, experts do have a disagreement on this. The startup market valuation cycles were approaching an all-time high last November, implying that Deliverr funded at or near a peak and was able to maintain this price in mid-early 2022. Of course, if the company’s last round included terms ensuring final investors received a defined minimum return, the agreement could squeeze early investors, but that remains to be seen.

The $450 million acquisition of 6 River Systems, which created cloud-based software and robotic devices specially developed for shipping and fulfillment, preceded Shopify’s acquisition of Deliverr. Under Shopify’s newly appointed CEO, Aaron Brown, who now has led SFN since 2020, SFN, 6 River Systems, and Deliverr will form a wider logistics business.

As the pandemic affects practically every element of the supply chain — and as more businesses relocate online as a result of pandemic-related limitations — merchants have become increasingly interested in fast shipment. Automation is seen as a solution to this objective by sellers. According to a poll conducted by Symphony RetailAI, one-third of respondents claim to have incorporated services like Deliverr’s into existing supply chain management procedures, while one-fourth claim to be working toward that goal.

According to PwC research from 2021, 41% of buyers are willing to pay more for same-day delivery. In 2021, however, only 20% of customers were ready to forgive shops for delivery delays owing to supply chain concerns, underscoring the strain on merchants to deliver. The supply chain management industry, according to Statista, could be valued at $30.91 billion by 2026, up from $19.58 billion in 2022. According to Crunchbase data, investment firms invested more than $11 billion in the area last year. 

Shopify’s latest fiscal quarter fell short of analysts’ expectations, earning $1.2 billion instead of the $1.25 billion projected. Evidently, the corporation sees logistics as a significant profit generator in its struggle against Amazon, which recently established a program called Buy with Prime that lets Amazon Prime members browse from merchants’ stores and take advantage of free shipping and returns.

So, yes, the war is on as Shopify is armed with the logistic giant Deliverr!

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