Flexport is Missing the Infrastructure to Compete with Large Players
Yes, this extends Flexport's TAM, but is it healthy? How is this anything but shuffling a few deck chairs around? The day after the deal is done, a few questions remain.
Where is the Infrastructure?
The simple reality is that Deliverr does not operate its own facilities, and does not control its own volume, so where will the volume come from? The biggest logistics players are investing in fixed assets.
Dave Clark's assertion that shipping will happen for your eCommerce site, and your stores -- I can't think of any math here that makes this equation work. Do you think eCommerce is a tough market to crack? Try store distribution. It's a 50+ year entrenched business with even slimmer margins.
What is the prize? Forget the technology -- if a VC were pitched on disrupting how people ship to a store, you would get laughed out of the room if they could even get in it.
The only people who have innovated in the market in the past 10 years is Target, and it's because they control all sides of the network: the distribution center, the store, and the downstream sort facility.
The only way this works economically in the long-term is if Flexport can aggregate enough volume to afford to vertically integrate logistics, rather than push work to partners -- otherwise you are simply just another middleman: what are you operating?
At some point, I expect an asset merger to pair with Flexport's technology. Perhaps private equity will make the tie-up.
More must be coming.
What are the terms of the Shopify deal?
I am expecting other 3PLs can still connect to Shopify, so this doesn't limit existing players.
Re-reading Tobi's note, he referred to Flexport as the preferred provider of logistics for Shopify. Preferred does not mean exclusive in my mind.
Wouldn't it be in Shopify's best interest to shop this capability around to the best provider for consumers, rather than simply the company that took Deliverr off its hands?
Perhaps they still have this flexibility. It's possible that Shopify now views Flexport in a similar way for logistics that it views Stripe for payments.
Where does that leave the future merchant experience for brands that don't use the preferred provider?
Does Flexport or Shopify own the underlying prediction technology for Shop Promise?
In the last 6 months, it became clear that Shopify was not selling fulfillment excellence. It was selling a badge to achieve a multiplier on its GMV so that it can boost its attach rate.
It's a solid strategy in the short-term, but in the long-term it falls flat if a fulfillment promise is not backed by superior performance.
In the past few months, Shopify made it clear that Shopify Logistics was not a requirement for Shop Promise -- will that still be the case going forward now that Flexport is the preferred provider?
