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Shopify Is Setting Up Fulfillment Network in U.S., Just Like Amazon

Shopify Is Setting Up Fulfillment Network in U.S., Just Like Amazon

(Bloomberg) -- Shopify Inc. plans to spend $1 billion to set up a network of fulfillment centers in the U.S. to help merchants using its e-commerce platform deliver products more quickly and cheaply, much the way Amazon.com Inc. does.

“A large number of orders are lost in the final stages due to complex shipping costs,” Craig Miller, Shopify’s chief product officer, said at the company’s annual developer conference in Toronto. The service will use machine learning to predict demand and suggest closest fulfillment centers to merchants.

The Ottawa-based company unveiled the plan, along with new features such as video and 3D modeling for products, the ability to edit orders and a better user interface. It also added 11 new language capabilities and rolled out a multi-currency payments system to all merchants. It’s planning a new point of sale system for later this year.

Shopify Is Setting Up Fulfillment Network in U.S., Just Like Amazon

Its shares jumped 5.1% to a record $319.83 at 2:38 p.m. in New York. It’s the top-performing stock in Canada this year after more than doubling. Shopify has also outperformed any stock in the S&P 500 over that time.

Shopify, which processes millions of individual sales by hundreds of thousands of merchants every year, is joining the delivery race. Amazon took the lead in e-commerce by building its own delivery infrastructure with warehouses close to big cities across the U.S.

As big retailers like Walmart Inc. and Target Corp. jumped into the game, Amazon responded with a next-day delivery pledge of millions of products.

Shopify could potentially pool shipments from different online stores together, making shipping cheaper and more efficient. Storing products from different merchants in centralized warehouses would also bring down costs for sellers and buyers alike, and net Shopify another revenue stream.

That could help the company mount a defense against Amazon, which lowers prices and encourages merchants to use its own warehouses and shipping tools.

Shares in the online platform, which celebrity Kylie Jenner uses to sell cosmetics, have been rallying after reporting strong first quarter earnings, forecasts for second-quarter revenue that was above expectations and its first annual revenue above $1 billion in 2018.

--With assistance from Gerrit De Vynck.

To contact the reporters on this story: Simran Jagdev in Toronto at sjagdev1@bloomberg.net;Paula Sambo in Toronto at psambo@bloomberg.net

To contact the editors responsible for this story: Jacqueline Thorpe at jthorpe23@bloomberg.net;Jillian Ward at jward56@bloomberg.net

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