Shopify announced on Thursday it will sell its shipping and fulfillment department to Flexport, laying off 20% of its staff in the process.
The move would allow Flexport, which partners with Shopify, to advertise the last-mile delivery services Amazon is known for. Shopify’s e-commerce customers will have access to the full range of Flexport’s freight services that can ship internationally as well as domestic home delivery.
The announcement is another example of how tech’s attempt to latch onto e-commerce during the pandemic was a huge swing and a miss.
The broken promises of e-commerce
During the pandemic, tech companies thought they could tap into a brand-new, long-lasting consumer behavior that was ripe for disruption. That hasn’t been the case.
Funding to logistics startups — from everything to delivery to freight — dipped dramatically in 2022. You could blame, in part, the economic downturn that hurt every corner of the private market, but 2022 saw about half the money the logistics sector garnered the year prior, in part due to changing consumer behaviors.
Shopify spent years cultivating its in-house logistics firm, which included the $2.1 billion acquisition of last-mile delivery startup Deliverr last year. At the time, it seemed like a smart move — the pandemic accelerated e-commerce and delivery needs as people warmed up to having their groceries and home goods delivered to their door. Like working from home, the tech industry thought that level of online shopping activity would stick, and quickly hired warehouse workers and customer service representatives, and built new fulfillment centers.
Well, it didn’t stick, and what followed was a slew of layoffs and mea culpas. During a call with around 11,000 workers Meta laid off back in November, Mark Zuckerberg said his investment in e-commerce didn’t play out the way he thought it would. Shopify, which previously laid off 1,000 employees (10% of its staff) in November, said layoffs were driven by consumers returning to in-person shopping. Amazon abandoned plans to open several new warehouses and laid off hundreds of warehouse employees in the process. Same goes for online furniture retailer Wayfair, which reportedly laid off around 2,600 people in the span of four months, according to the Crunchbase Layoffs Tracker.
For what it’s worth, this is a big win for Flexport, which bills itself as a one-stop logistics platform for businesses to organize delivery across multiple in-person and online retailers — something Amazon hasn’t been able to promise. Yet.
Illustration: Dom Guzman
Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.