Shopify Makes a $450 Million Move to Take On Amazon

After its recent foray into fulfillment services, the company makes a big acquisition.

potted green plant grows up in arrow shape

Image source: Getty Images

After going public about four years ago, Shopify (NYSE: SHOP) became something of a market darling, gaining more than 1,200% and becoming one of the best-performing technology stocks over the past several years. The company provides tools that help merchants to set up and run an e-commerce website, allowing them to focus less on the technology and more on running a business.

At its Unite Conference in June, Shopify announced a number of initiatives and products designed to make the lives of vendors even easier. These included next-generation point of sale software, more cross-border and foreign currency tools, and a makeover for Shopify Plus — its platform for larger businesses. One of the biggest developments was the introduction of the Shopify Fulfillment Network, in a clear challenge to (NASDAQ: AMZN).

Now the company has gone even further.

A big investment in fulfillment

Shopify announced late Monday that it had reached an agreement to acquire privately held 6 River Systems, a leading provider of collaborative warehouse fulfillment solutions, for about $450 million, consisting of 60% cash and 40% in Shopify Class A stock. The deal is expected to have no material impact on Shopify’s revenue in 2019, but is projected to increase expenses by about $25 million for the year. Shopify estimates that the business will generate annual revenue of about $30 million by 2020.

6 River Systems describes itself as a “flexible and scalable warehouse automation powered by collaborative robots and artificial intelligence. The solution engages associates, keeps them on task and boosts productivity by two to three times.” The company has some big customers on its books, including Lockheed Martin, CSAT Solutions, ACT Fulfillment, DHL, XPO Logistics, and Office Depot.

“Shopify is taking on fulfillment the same way we’ve approached other commerce challenges, by bringing together the best technology to help everyone compete,” said Shopify CEO Tobi Lutke. “With 6 River Systems, we will bring technology and operational efficiencies to companies of all sizes around the world,” he added.

Why this is a big deal

While investors may not be familiar with 6 River Systems, two of the founders of the company — Jerome Dubois and Rylan Hamilton — were previously executives with Kiva Systems, the robotics company that was acquired by Amazon in 2012 for $775 million. Kiva now goes by Amazon Robotics and is a central component of the company’s warehouse and logistics operations.

This gives Shopify immediate access to the same level of robotics expertise as Amazon, providing a big boost to the company’s ambitions in the area of logistics and fulfillment.

Shopify Fulfillment Network

In mid-June, Shopify announced the debut of the Shopify Fulfillment Network, a new way for qualified merchants to get orders to customers more quickly and easily, while also reducing shipping costs. The company is employing “smart allocation technology” powered by artificial intelligence to predict the closest fulfillment center and determine optimum inventory levels at each location, which will help ensure fast, low-cost delivery.

At the time, Shopify said that it was bringing advanced fulfillment systems and technology that was previously “reserved for the largest companies in the world,” and making it accessible and affordable for every merchant — a clear shot at the e-commerce leader.

Shopify is taking a page right out of the Amazon playbook in a move to challenge the company’s online supremacy, luring more merchants to its merchant-friendly platform.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena owns shares of Amazon and Shopify. The Motley Fool owns shares of and recommends Amazon and Shopify. The Motley Fool recommends XPO Logistics. The Motley Fool has a disclosure policy.

More on Tech Stocks

A colourful firework display
Tech Stocks

Nuvei Stock is on Fire This Year: Is it a Good Buy Today?

Nuvei stock (TSX:NVEI) is down about 85% since pandemic highs, falling 39% after earnings. So, what now?

Read more »

A bull outlined against a field
Tech Stocks

Prediction: These 2 Stocks Could Skyrocket in the Next Bull Market

Are you looking for stocks that could skyrocket in the next bull market? Here are two top picks!

Read more »

Volatile market, stock volatility
Tech Stocks

2 Tech Stocks On Sale in This Latest Tech Sell-off

Constellation Software (TSX:CSU) and Lightspeed Commerce (TSX:LSPD) went on sale in the latest tech sell-off.

Read more »

Dividend Stocks

3 No-Brainer Stocks to Buy With $200 Right Now

Are you looking to invest $200 in stocks right now? Here are three no-brainer stocks to invest your money in…

Read more »

analyze data
Tech Stocks

3 Top TSX Stocks to Buy in October 2023

Here's why undervalued TSX stocks such as goeasy and Dollarama should be on your shopping list in October 2023.

Read more »

Dollar symbol and Canadian flag on keyboard
Tech Stocks

Stock Market SellOff: 2 Canadian Growth Stocks to Buy Hand Over Fist

Here are two of the best Canadian growth stocks you can buy at a big bargain amid the market selloff.

Read more »

Businessman holding AI cloud
Tech Stocks

Investing in AI Stocks: 3 Companies Poised to Dominate the AI-Powered Economy!

NVIDIA, Alphabet, and Microsoft are 3 AI stocks offering investors exposure to different aspects of the AI opportunity.

Read more »

man sitting in front of 3 screens programming
Tech Stocks

2 Growth Stocks to Hold for the Next 10 Years

Are you interested in growth stocks? Here are two picks to hold for the next 10 years!

Read more »