Shopify Fulfillment Network May Out-Amazon Amazon for Online Merchants

Technology

Published: June 19, 2019 5:20 pm

Last Updated: January 30, 2020 7:28 pm

If one company can please investors and customers alike, it seems to be Shopify Inc. (NYSE: SHOP). The company saw its shares hit new all-time highs on Wednesday after making several new product and service announcements at its Shopify Unite developer presentations. The one which stands is that Shopify now plans to open a network fulfillment centers. If this sounds a lot like being “the mini-Amazon,” there is a reason. It’s hard to say that this will be a better offering than Amazon offers with certainty, but the reaction is strongly favorable for Shopify.

Shopify will open a new fulfillment network for its merchant customers, big and small. It is also offering a new platform for enterprise brands and offering additional capabilities for merchant clients to sell internationally.

The company’s fulfillment network shows a map with 4 major hubs and 5 regional centers. A response from Shopify’s media relations indicated that Shopify is currently working with a number of vetted fulfillment and software partners in Nevada, California, Texas, Georgia, New Jersey, Ohio and Pennsylvania.

With platform enhancements and updates to help direct-to-consumer brands build and manage their business, Shopify also brings an updated Shopify Plus platform for enterprise brands together with its fulfillment network to allow small and large merchants alike deliver their products fast and at a low cost.

U.S. merchants will get access to distributed fulfillment centers that will be aided by machine learning to help with timely deliveries and lower shipping costs. The new Shopify Plus also allows merchant to see their entire business at once, while the new Shopify point of sale (POS) is said to be faster, more intuitive, and more scalable.

As far as reaching more international customers, Shopify introduced 11 new language capabilities in the Shopify Admin globally. Those languages were shown to include Traditional Chinese, Simplified Chinese, Danish, Dutch, Finnish, Hindi, Malay, Norwegian, Swedish, Korean and Thai. This also comes with a translations API to store translated buyer-facing content so that businesses can offer the same shopping experience to shoppers who speak different languages. Shopify Payments will also allow merchants to conduct sales in multiple currencies, but then get paid in their local currency.

Additional items featured are a new online store design, displaying products in video and 3D models, mimicking the in-store experience online, and even to integrate subscription payments solutions directly into the checkout process.

What matters here is that this comes at a time when Amazon.com inc. (NASDAQ: AMZN) has been reported to be cutting off some of the smaller mom-and-pop sellers. That may still be up for debate, but Shopify has been growing rapidly. Its market cap of $36.7 billion may only be 4% of the market cap of Amazon, but Shopify is growing faster Amazon at this stage.

The Refinitiv consensus analyst target already has Shopify making a small gross profit from operations, but revenues of $1.07 billion in 2018 are projected to grow by 41% to $1.51 billion in 2019 and then to grow by one-third more to $2.0 billion in 2020. These new offerings are not likely factored into those ambitious growth numbers, or at least that’s what a big gain on the developer and merchant news would indicate.

This company has massive amounts of growth ahead of it. Trying to use a P/E ratio (close to a 600 P/E) here might make a traditional investor’s head explode, but the same was said about Amazon.

After closing up 7.7% at $327.02 on Wednesday, Shopify hit an all-time high of $327.69 on the day. That makes for a gain of 136% so far in 2019.