Alien invaders are overwhelming competitors from an apparently unrelated market that break the rules, blindside competitors, and suck the profit out of the marketplace. EkaLore regularly writes about this sort of enterprise, but occasionally, the invasion fails. In this release, EkaLore looks at Shopify’s failure to invade and what didn’t work.
Shopify commands a significant share of small, medium, and large retail concerns’ online web presence and eCommerce features. Its business expanded during the Covid-19 era as online shopping and backend fulfillment became profitable businesses. Shopify sought to be an Alien Invader, taking inspiration from Amazon’s strategy, which vertically integrated fulfillment and additional service functions as an adjunct to its core website eCommerce business.
In the spring of 2022, Shopify retreated from the Alien Invasion.
· The Deliverr acquisition for USD$2.1B was sold to business partner Flexport in a complex deal.
· The 6 River Systems fulfillment software and automation bound for USD$450M were sold to Ocado.
· Shopify announced an additional 20% staff reduction after an earlier 20% reduction.
Against the criteria for an Alien Invasion used by EkaLore, these failures are now evident:
1) The depth of capital to construct a warehouse/fulfillment capability and large transaction volume capacity exceeded Shopify’s funding capacity.
2) The difficulties of expertise to support the complex business models ranging from 3PL to logistics chains and physical warehouse construction to warehouse operations exceeded Shopify’s skill sets originally available.
3) The technology enabling (automation, logistics management, eCommerce) proved more expensive, and long-term costs incurred were also large.
4) In each of these areas, Shopify didn’t have all the advantages when the Alien Invasion attempt was run.
EkaLore has written extensively about Alien Invasions by companies such as Amazon and Tesla that did succeed. You can find these posts at www.ekalore.com/alien-invaders
If you’d like to schedule some time with one of our senior analysts to see if you can be Alien or how to defend against one, send us an email at sales@ekalore.com
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