Shopify offloads logistics business to Flexport

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Harley Finkelstein, COO, Shopify

Scott Mlyn | CNBC

Shopify is selling its logistics unit to supply chain technology company Flexport, the companies announced Thursday.

The sale marks a reversal for Shopify, which had spent years building out its own logistics and order-fulfillment operations. The unit includes last-mile delivery startup Deliverr, which Shopify purchased last May for $2.1 billion, its largest acquisition ever.

As part of the agreement, Shopify will receive stock that represents a roughly 13% equity interest in Flexport, “bringing us to a high-teens ownership,” the company said in a statement.

Shopify and Flexport are deepening their alliance as Shopify seeks to compete with e-commerce rivals such as Amazon and Walmart. The companies announced a partnership in February that gives Shopify merchants access to Flexport’s freight services, including booking international shipments from suppliers to their warehouses. Flexport also counts Shopify as an investor.

Shopify president Harley Finkelstein said in an interview that after going on a “side quest” to develop the company’s own fulfillment and logistics businesses, it became clear that it could offer those services more effectively by integrating with Flexport.

“This allows Flexport to do what they do best, and allows Shopify to go back to doing what we do best, which is building incredible software for e-commerce,” Finkelstein said.

Flexport, which topped last year’s CNBC Disruptor 50 list, has become one of the most valuable logistics startups after raising roughly $2.3 billion to date. Flexport’s ocean, air, truck and rail-freight forwarding and brokerage services became critical tools as supply chain bottlenecks roiled the global economy last year.

Flexport has been bulking up its roster of ex-Amazon executives, including hiring away its CEO Dave Clark from the e-retailer last June, where he spent nearly two decades and built out Amazon’s transportation and logistics unit.

Clark said in an interview that the acquisition will allow Flexport to scale the shipping capabilities it can offer for Shopify merchants, and other online businesses.

“The big difference between what we’re going to offer, and an Amazon or maybe a Walmart logistics or some of the other places offer, is this isn’t just for one system or store or platform,” Clark said. “We have very much the same vision that Shopify has. We’re just about the success of the merchant and our customers, and we don’t care if they sell in their stores or on Amazon or on Walmart.”

Flexport will be Shopify’s official logistics provider, and a preferred partner for its “Shop Promise,” a badge displayed on Shopify merchants’ listings that guarantees next- and two-day delivery, similar to Amazon’s Prime delivery promise.

Shopify will also retain its Shopify Fulfillment Network app where merchants manage their logistics process.

The company is scheduled to report first-quarter earnings before the bell Thursday.

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