Shopify Sells Logistics Arm To Flexport, Lays Off 20% Of Workforce
Shopify is tapping out of its fight for market share in the third-party logistics industry.
The digital retail platform agreed to sell off the two component businesses that made up Shopify Logistics, Shopify CEO Tobias Lütke announced in a blog post Thursday. Though some employees will remain under the new ownership, Shopify laid off 20% of its global workforce as it plans to refocus on managing online storefronts for merchants.
Shopify will sell Deliverr, the startup it acquired for over $2B almost exactly one year ago, to 3PL upstart Flexport in an all-stock transaction, the Associated Press reports. The deal gives Shopify shares in Flexport amounting to 13% ownership, bringing its total ownership stake into the high teens. Deliverr contains the bulk of Shopify Logistics' assets, including the fulfillment network it began building in 2021.
Shopify also agreed to sell autonomous warehouse technology brand 6 River Systems, a startup it acquired for $450M in 2019, to UK-based logistics automation company Ocado Group for an undisclosed figure, The Wall Street Journal reports. 6RS and its automation tech comprised the remainder of Shopify Logistics' assets.
The news of Shopify's strategy shift, combined with a first quarter that beat profit projections, sent the company's stock price soaring. By 12:30 P.M. ET, shares in Shopify had risen 26% from the beginning of trading on Thursday.
When Shopify announced its intent to build out its own fulfillment network in 2019, it was with the express intent to compete with Amazon in handling the logistics needs of smaller retailers and entrepreneurs. After over a year of Amazon pulling back on its own logistics investments, Shopify signaled in March that it wanted to de-emphasize its own distribution footprint and instead use partnerships to create more "elastic warehouse capacity."
Selling Deliverr to Flexport is an extension of that strategy and makes Flexport the "preferred logistics partner for Shopify," Lütke said in his blog post. Flexport CEO Dave Clark joined the startup last year after decades at Amazon, where he was in charge of building out the same fulfillment network that Amazon is now working to shrink.
Months after Clark's departure, Amazon launched its Buy With Prime service to compete directly with Shopify's core business of online sales management — only by using its own extra warehouse capacity, rather than a partner's.