Shopify is planning to acquire e-commerce fulfillment startup Deliverr for between $2.3 billion and $2.7 billion, according to a source with knowledge of the deal. If the deal goes through, it is expected to be finalized in the next two weeks, according to the same source.
Bloomberg was first to report the potential deal April 20. Representatives for Shopify and Deliverr did not immediately return Insider's request for comment.
Deliverr knits together disparate, independent warehouses with a common software layer. The startup allows relatively small sellers to leverage a nationwide warehouse network and facilitate faster shipping. It caters to marketplace sellers across platforms like Walmart, eBay, Google Shopping, and Shopify. It was most recently valued at $2 billion after raising a $250 million Series E in November.
Shopify sought to build a similar software network, but the task proved more difficult and time-consuming than the company originally planned, one former Shopify Fulfillment Network executive and one former executive from its 2019 acquisition 6 River Systems previously told Insider.
Shopify cut loose several independent warehouses within its fledgling network in January and announced changes to the original plan in February. Those changes include a push to operate its own buildings using software built in-house "while still using partner software in some cases," Shopify's CFO, Amy Shapero, said in a February earnings call.
On the call, company leaders said its ultimate goal is to allow merchants to offer two-day delivery to more than 90% of the US. They also said the company would invest $2 billion through 2024, an increase over the $1 billion it had initially pledged when it first launched the network. Shopify had spent $117 million of that initial investment as of February, Shapero said in the earnings call.
According to Matthew Hertz, cofounder of e-commerce consultancy Second Marathon, the acquisition would help the company offer two-day shipping, something it has long promised to do.
"Deliverr's network can help Shopify achieve and accelerate these goals," Hertz said.
Without Deliverr, Shopify has years of work ahead to get anywhere near competing with Amazon's Fulfillment By Amazon Service, according to former Shopify employees and others in the fulfillment space. Though Deliverr's service is structured very differently, Hertz said it could bring Shopify much closer to that goal than the company has been able to get on its own.
"I've always thought of Deliverr as replicating what FBA does for Amazon merchants, but for everyone else," Hertz said. Like Shopify's current fulfillment offering, Deliverr allows retailers to ship their inventory to a single location for Deliverr to distribute among the warehouse network.
Angelo Zino, a senior investment strategist at CFRA Research, told Insider the deal would be a positive addition to Shopify's fulfillment effort, albeit at a "hefty cost."
"We think investors remain skittish of SHOP's aggressive investment plans this year, coupled with its hefty valuation," he said. Shopify's stock continued to drop Thursday morning after a more than 10% drop on Wednesday.
The Deliverr deal would be Shopify's largest acquisition to date. In 2019 it acquired 6 River Systems, a company that builds fulfillment software and warehouse robotics, for $450 million. That company was intended as key to Shopify's plans for its fulfillment network, and its team has been involved in Shopify's efforts to develop fulfillment software internally.
But aside from the purchase of 6 River Systems, Shopify's acquisitions have largely taken the form of acqui-hires, meaning they typically acquire smaller startups with the intention of recruiting their employees. Its 2018 acquisition of social-shopping startup, Tictail, and its 2021 purchase of AR startup, Primer, are examples of that trend.
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