August 2, 2019
The New Shopify Fulfillment Network
Last month, Shopify introduced its new fulfillment network – a new option that aims to provide its merchants with FBA/MCF-like logistics capabilities.
According to Bloomberg, Shopify plans to invest $1 billion in their new fulfillment network and has already partnered with logistics firms to offer warehousing in several states. This logistics service is an interesting option for smaller merchants who don’t meet the shipping minimums of larger 3PLs or for those who simply want an alternative to marketplace options like Amazon.
While Shopify’s fulfillment network isn’t likely to match the distribution capabilities of Amazon MCF or even some other 3PLs, it nonetheless carries a few advantages that are particularly interesting for small online retailers who want to lower shipping costs, streamline operations, and better manage the customer experience.
In 2018, consumers cited shipping costs as the reason for 63% of all cart abandonments. This new Shopify fulfillment option promises negotiated rates with both warehousing providers and couriers, which might mean lower and more predictable shipping costs for both merchants and their customers – especially for low-volume merchants with less leverage over couriers.
Many retailers find it worthwhile to outsource back office operations to fulfillment providers or 3PLs so they can focus on other aspects of the value chain. To that end, Shopify’s fulfillment network has many of the same advantages (including a claimed 99.5% accuracy rate). However, the Shopify Fulfillment Network takes some of the integration guesswork out of the equation by providing a native Shopify app. Presumably, this means that there won’t be an off-platform dashboard to log in to, nor any complex systems integration involved.
Although FBA is a great choice for retailers who use Amazon as both a referral source and fulfillment provider, it generally requires that the customer transaction takes place on Amazon, which means that shipments are sent in Amazon-branded boxes and delivered by Amazon’s couriers or partners.
Merchants who would rather that customer transactions take place on their website but still want Amazon to fulfill the order can use Amazon MCF, but as of September 1 2016, Amazon no longer offers brand-neutral packaging for MCF orders sent from Amazon. Shopify’s fulfillment option is still in early access, but it appears to offer a white label packaging solution that brands might find more appealing.
The new Shopify Fulfillment Network is one of the more interesting Shopify fulfillment options for small and medium-sized online retail brands looking for alternatives to leading 3PL and back office solutions. The service isn’t very likely to unseat Amazon any time soon, but in a market full of other complex and expensive logistics solutions, Shopify’s new offering holds promise.