eCommerce Strategy Consultant - Rick Watson - RMW Commerce Consulting

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Is Shop Promise a Broken Promise Based on a Flawed Premise?

What is Shop Promise and how does it relate to Shopify?

It's been a minute since I've talked about logistics and Shopify in the same sentence. For good reason. Last June, Shopify sold its previous acquisition Deliverr to Flexport. The consideration for this purchase was 13% ownership in Flexport, some paper dunnage, and a bag of packing peanuts. Time will tell which parts of this consideration are worth more.

At the time, Flexport took on a new responsibility: be the primary provider of what is called Shop Promise. Shop Promise was intended ultimately to be part of Shopify's answer to Prime, but in particular what's called EDD: estimated delivery date calculations for Shopify sellers. Shoppers know when products will arrive, raising conversion rate.

Why did Shopify invest in Flexport, and what is its impact on Shop Promise?

In January of this year, rather than see their investment go to zero, Shopify chose to invest another $260M in Flexport, at which time the CEO Ryan Petersen cited their "fortress balance sheet." Luckily (for Flexport), Shopify did not seem to force Flexport to revalue the company.

Meanwhile, at this time it's my contention that the next time Flexport is revalued by the market, it will become a wholly owned subsidiary of Shopify. Which will essentially put Shopify back in the freight forwarding business, at least until it writes down the value of its investment to zero, and sells whatever remains to a real freight forwarder with physical assets.

How do recent layoffs at Flexport affect Shopify's fulfillment services?

Here we are in October, and another round of layoffs hit Flexport. This time, the company has exited the fulfillment business for small and medium businesses—in other words, Shopify's traditional core market.

This means there is almost zero value to Shopify's current relationship with Flexport. And it almost certainly means that Flexport is no longer providing any "Promise" to Shopify sellers regarding estimated delivery dates.

Can Shopify effectively calculate estimated delivery dates without Flexport?

Let's be clear: Shopify itself has no business calculating estimated delivery dates for anyone. The function requires deep integration with carriers, of which Shopify is only integrated with a few. It has no data advantage over dedicated providers.

Should Shopify outsource its Shop Promise service to third parties?

In short, Shopify should outsource Shop Promise to others—allowing third parties like ShipperHQ, Shipium, Narvar, ShipBob, (the list goes on) to provide data back to Shopify to appear in their customer experience flows. Not only is this just smart from a business point of view, from a technical point of view it's the only way it will actually work and be improved over time. As it is not a marketplace, Shopify has no skin in the game here.

Shopify either needs to reboot its Shop Promise strategy. "Shop Promise" falls under the consumer-facing "Shop" brand, which has recently seen some engineering reorganization mentioned in my LinkedIn feed.

While it seems like a needed function which Shopify does like to own at the entry level, it seems better outsourced due to the reasons stated above. If that's the case, I expect an EDD RFP could be on the docket soon.


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