Dive Brief:

• Shopify will spend $1 billion over the next five years to build out its new fulfillment offering, COO Harley Finkelstein said on the company's second-quarter earnings call Thursday. 
• "By leveraging our scale with machine learning, demand forecasting, smart inventory allocation across warehouses and intelligent order routing, we expect merchants will be able to get their goods to buyers faster and cheaper than any other option they have today, while keeping their own brand front and center," the COO told analysts and investors. 
• CFO Amy Shapero said the response from shippers and potential partners since the June 19 announcement has been "much stronger than anticipated." She added it's too early to say how the $1 billion will be allocated. The company plans to bring seven warehouses online this year. 

Dive Insight:

According to Shopify executives, shippers are clamoring to integrate their order fulfillment with point-of-sale operations despite the plethora of e-commerce fulfillment options on the market today. 

"Thousands of merchants have expressed their desire to be a part of our early access program. And dozens of partners are eager to join us and being a part of this solution," CFO Amy Shapero said on the call.

Finkelstein said the fulfillment network is about removing barriers to entry for new businesses — an attempt to "level the playing field" for small and medium businesses in the e-commerce space.  

He added that the fulfillment network, combined with other services like Shopify Capital financing tools are intended to create a complete toolbox for entrepreneurs to get started, but also to retain them longer as they grow — what Finkelstein called a "global retail operating system."

The goal is to make sure shippers don't feel they need to graduate from Shopify to a larger partner, like Amazon for example, as sales grow. 

"We're really interested in full lifecycles capabilities so that Shopify can stay with you from that first day all way to running tens, maybe $100 million, maybe billions of dollars businesses," said CEO Tobi Lutke.

If Shopify can achieve a network that is indeed "faster and cheaper" than existing options, it may succeed. The "cheaper" element of that formula, however, will require parcel volume to justify the $1 billion spend. In other words, the thousands of shippers expressing interest in the service will need to put their money where their mouth is.