Shopify’s decision to sell Deliverr is a well-planned and thoughtful move

Shopify recently announced its decision to divest its logistics business (including Deliverr) to Flexport, a leading logistics platform with a vision to make global trade easy for everyone. Following the divestment, Shopify will be smaller by 20% and own around 20% of Flexport.  

It makes perfect sense for Shopify to divest its logistics footprint considering the numerous opportunities available and the substantial time required to achieve significant scale in logistics. We outline below the strategic reasoning behind the decision and the advantages it brings Shopify.  

Focus on core competencies

Shopify’s primary strength is providing merchants with a comprehensive commerce operating system. This includes a robust platform for e-commerce websites, sales channels, payment processing and various tools to help businesses grow. Divesting Deliverr allows Shopify to allocate more resources and management attention to enhance its core offerings further and stay ahead of its competitors in a rapidly evolving e-commerce landscape. By concentrating on its key strengths, Shopify can continue to innovate and develop new features that cater to the ever-changing needs of merchants. 

Leverage strategic partnership

The divestiture of Deliverr to Flexport enables Shopify to maintain a strong relationship with a trusted partner in the logistics space. By deepening its partnership with Flexport, Shopify can continue to offer merchants access to reliable and efficient logistics solutions without the need to manage these operations in-house. This allows both companies to benefit from each other’s expertise, creating a synergistic relationship that should lead to better service offerings for Shopify’s merchants. 

Financial considerations 

Divesting Deliverr improves Shopify’s financial performance by reducing the impact of a lower-margin business on its overall gross margins. Deliverr’s logistics operations have a lower gross margin than Shopify’s core offerings, like Merchant Solutions and Subscription Solutions. By divesting Deliverr, Shopify can focus on higher-margin business segments, leading to better financial growth and a more attractive financial profile for investors. 

Streamlining operations 

Managing a complex logistics business like Deliverr requires significant resources and expertise. By divesting Deliverr, Shopify can streamline its operations, reduce organisational complexity, and better allocate resources to areas with higher growth potential and strategic importance. This can lead to increased efficiency within the company, allowing it to scale more effectively and make better-informed strategic decisions in the future. 

Ownership stake in Flexport 

Shopify’s equity interest in Flexport, a growing logistics company, could create long-term value for Shopify’s shareholders as Flexport expands its presence in the logistics market. Additionally, owning a substantial stake in Flexport allows Shopify to influence the strategic direction of the logistics partner and ensure the partnership continues to align with the needs of its merchant base. 

This move positions Shopify for continued growth and success in the competitive e-commerce landscape while providing merchants access to reliable logistics solutions through a trusted partner. The divestment is consistent with Shopify’s vision to make “commerce simpler, easier, more democratized, more participatory”. We look forward to sharing more details in coming quarters.