The race for fast fulfillment

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 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.

Cloud Maturity Brings Organizational IT Change

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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