The future for Shopify’s (NYSE:SHOP) fulfillment business could involve a network of highly automated warehouses that lean on technology including robots, CEO Tobi Lutke told financial analysts on Friday after the Canada-based e-commerce company reported third-quarter financial results.
“We can have tens, hundreds, potentially thousands [with] partners and some homegrown ones around the world and balance the products where they need to be stored,” Lutke said.
Lutke made the comments as Shopify posted record third-quarter financial results as the COVID-19 pandemic drove more brick-and-mortar retailers and their customers online. Its revenue of $767.4 million was nearly double from the third quarter of 2019.
That vision is still in the early stages as the Shopify Fulfillment Network slowly ramps up. It consists of nine warehouses in the United States and one in Canada, which is used for research and development.
Fulfillment remains a small part of Shopify’s business as the company takes a slow, careful approach to developing it before scaling it.
Lutke: Vision for Shopify Fulfillment Network started with teleportation
In wide-ranging comments to financial analysts, Lutke discussed the Shopify’s Fulfillment Network in the context of wanting to make logistics a more painless process for its customers.
“The ideal way for us to do the Shopify Fulfillment Network is employ teleportation,” Lutke said, laughing. “Like if we can figure out the physics related to that and just make things appear on a desk right when you want them, that would be awesome. This is actually the starting point in the memo I wrote for SFN and then we worked backwards.”
Instead of teleportation, Shopify has 6 River Systems. It acquired the company in 2019, and its robot-enabled platform for warehousing is a cornerstone in Shopify’s plans to scale its fulfillment network via third-party warehouses.
The work on the fulfillment network at its core is ultimately about making logistics a more seamless experience for Shopify’s customers.
“Logistics is hard,” Lutke said. “It’s really harder than people think.”
Among the many challenges with logistics: “A lot of friction exists in different systems not talking to each other,” Lutke said. “A lot of our work goes in bridging legacy systems.”