Shopify
SHOP
recently announced that it has completed the acquisition of Deliverr. The total purchase price for the buyout amounted to $2.1 billion, including $1.7 billion paid in net cash and $0.4 billion in Shopify Class A Subordinate Voting Shares.
Deliverr’s key management decided to take a significant portion of their stockholder consideration as Shopify Class A Subordinate Voting Shares, which will be subject to certain conditions.
Deliverr, which was founded in 2017, offers a hassle-free logistics network that currently delivers more than a million orders per month for thousands of merchants across the United States.
The recent acquisition of Deliver is in sync with Shopify’s strategy to allocate investments toward simplifying fulfillment for merchants and solving supply chain issues faced worldwide.
Will the Acquisition Aid Shopify’s Growth?
Shopify’s e-commerce business boomed during the COVID-19-induced pandemic as global brands and small stores set up online platforms to sell products due to retail markets closing down.
However, once the economy opened and retail stores started winning back their lost customers, Shopify lost its momentum. Inflation and possible signs of recession have aggravated the current market scenario, which in turn slowed down growth in the e-commerce market.
As a result, investors are currently wary of the future growth of the company. Shopify’s stock plunged 78.1% compared with the Zacks
Internet Services
industry’s decline of 18.4% in the year-to-date period.
To counter this, Shopify has been investing heavily in mergers and acquisitions and building strategic integrations with major tech companies to provide new services, like the
Twitter
TWTR
sales channel,
Apple’
s
AAPL
iPhone tap-to-pay feature and
Alphabet
’s
GOOGL
local inventory integration with Google.
The Twitter sales channel allows merchants to connect with consumers directly from their Twitter profiles. Shopify noted that it is the first time a commerce platform has partnered with a social media company.
The recent integration with Apple enables shoppers to use Apple smartphones against the terminal to pay for goods. While this may not be a new feature in retail but Apple’s recent Pay Later installments added a whole new dimension to retail marketing.
Shopify’s Google feature syncs local inventory data with the Shopify platform to let customers know when a particular product is in stock.
However, these efforts are not enough to attract new customers to the platform. Due to the current tense geopolitical situation and macro-economic environment, there have been shipping delays globally and increased supply chain constraints, which have been hampering merchants’ capabilities to fulfill orders.
The recent acquisition of Deliverr is the largest in Shopify’s history and will help the company address the supply chain constraint by creating an end-to-end logistics platform to fulfill supply requirements as per demand for millions of merchants.
Deliverr will help Shopify’s logistics and fulfillment capabilities to level up. By combining Deliverr with Shopify Fulfillment Network (SFN), the company will power its newest offering Shop Promise, where consumers can enjoy two-day or next-day delivery options with their choice of merchants.
Although the short-term growth prospects look bleak for the company under the current market scenario, the recent acquisition will help it generate new revenue sources in the long haul, thus impacting revenue growth positively. This will impact shareholders’ wealth positively.
Shopify currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
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