As e-commerce giants invest billions to expand options for faster delivery, pressure is mounting on smaller merchants to keep pace. Now, e-commerce fulfillment has become an M&A hotbed as vendors bring together technology and logistics power to add speed and flexibility for merchants.
The e-commerce fulfillment sector has boomed in recent years as many fast-growing direct-to-consumer businesses – underserved by traditional logistics services and too small to invest in their own infrastructure – outsource to third-party providers. Deliverr Inc., for instance, is estimated to have generated 600% revenue growth in fiscal 2021.
To deliver against rising consumer expectations, players are starting to mimic the Amazon.com Inc. model – bringing together fulfillment planning (advanced technologies like inventory tracking and demand sensing) with logistics execution.
One example is e-commerce platform developer Shopify Inc.’s $2.1 billion pickup of fulfillment firm Deliverr in May – a deal that valued the target at over 40x fiscal 2021 revenue. The purchase brings Shopify a network of leased warehouses and delivery partners, as well as a machine-learning platform for predictive inventory placement. Notably, Shopify can now offer its merchants one- or two-day delivery options – a direct challenge to Amazon’s Fulfillment by Amazon offering.
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Shopify is not alone. According to 451 Research, acquisitions of fulfillment tech or logistics vendors more than doubled from 2020-2021. This year is on pace to climb even higher. Notable transactions include:
- E-commerce SaaS specialist ShipMonk’s reach for tech-enabled third-party logistics firm RubyHas in January.
- Ryder System Inc.’s $480 million takeout of e-commerce and omnichannel fulfillment provider Whiplash in December 2021.
Many of these deals are not small. In some cases, adding these competencies means adopting full-fledged warehousing operations (e.g., Ryder-Whiplash). Growing topline revenue and competitive pressure should, in the medium to long term, keep investors investing and strategic buyers buying. Especially with Amazon setting the pace.
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