The Bear Case for the Shopify Deliverr Acquisition

In the long-run, supply chain is about low margin economics of scale. The good thing about the Deliverr acquisition is it gives Shopify optionality. They can turn a 4PL operation into its own 3PL as they identify scale opportunities.

This was likely the cheapest way for them to build a pluggable shipping network, in the fastest time. They could have created this on their own but it would have taken 3-4 years minimum with at least $500M-$700M investment. By paying 3x that number, they saved themselves about 4-5 years in a more realistic scenario.

The bad thing about the Deliverr acquisition isn't really something bad about Deliverr itself, it's more about the volume profile of the typical Shopify business -- i.e. quite small and lots of churn. Almost the opposite of the type of customer you need to run a successful 3PL.

There is a solid case to be made that this will simply fail due to the number of accounts that sign up that Deliverr simply can't help because they aren't high-volume enough to turn a profit on.

If I'm an existing 3PL business, I love the Deliverr acquisition to be honest with you, because I can sit right above the target market of the post-Shopify Deliverr and say "when you do scale, we are here for you, and we are optimized for it."

There is a secondary case to be made that ecommerce is changing and Deliverr acquisition is solving the last generation problem. It's harder to make money shipping off-the-shelf product than it ever has been.

The up-and-coming winning formula in a lot of eCommerce categories is taking the techniques of semi-finished goods from fast fashion and applying that across every category. This requires customized supply chains, not off the shelf ones.

Mass customization is now a reality in all sorts of categories and allows you to do deliver true personalized assortments that match the customer's needs in a very short amount of time -- and with much less inventory risk.

Shopify's acquisition does not help in any of these scenarios. But if you want to ship a t-shirt in a short amount of time, a typical 3PL or 4PL can help you very well.