Shop Stock: Shopify-backed Toronto startup Swyft raises $17.5-million to roll out same-day delivery of online orders for smaller retailers

After joining Amazon.com Inc. as an engagement manager in 2019, Aadil Kazmi was inundated with calls from independent merchants he knew. They all wanted to know how they could get faster, affordable shipping for their online orders, just like the e-commerce goliath offered – and had conditioned online shoppers to expect.

So he quit his $200,000-a-year job, abandoned his stock options and co-founded a company to provide the same level of speedy shipping to merchants in Amazon’s shadow. That was one year ago.

On Wednesday, Mr. Kazmi’s Swyft Technologies Inc. announced it had raised US$17.5-million, led by Inovia Capital and San Francisco’s Forerunner Ventures, after quickly establishing itself as a provider of previously unattainable Amazon-level delivery service at affordable prices to merchants in Toronto, Vancouver and Ottawa.

Swyft has enabled fast delivery of more than 180,000 packages, serving brands such as Knix, Kotn, Jenny Bird and Pilot Coffee, plus bigger merchants including Lush Cosmetics and Yeti. Revenues have grown 30 per cent month to month and now run at an annualized rate of $5-million, a fast start for a young, 14-person company.

Now Swyft, which raised $3-million last June in seed financing co-led by Golden Ventures and Trucks Venture Capital, plans to expand aggressively across North America, starting with Calgary and Los Angeles. “They’re hungry, they’re determined, they’re going after a massive market and they seem to have built the right product at the right time,” said Inovia partner Karamdeep Nijjar.

One of the key beneficiaries is Shopify Inc. , which helps small merchants compete against Amazon using its online commerce platform. Many Shopify customers use Swyft, which says same-day delivery offerings increase shoppers’ completion of online orders by 21 per cent, and Shopify is also investing in the startup’s financing round.

Swyft’s approach isn’t to hire drivers, buy trucks or open warehouses like other e-commerce logistics companies. Instead, it functions as a business-to-business marketplace, providing software that plugs into courier companies on one side and merchants on the other, promising benefits to both. With no hard assets to manage, it boasts 80-per-cent-plus gross margins, like other software companies.

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For couriers – typically small operators that lack digital savvy and wherewithal to plug into third-party shipping apps – Swyft offers workflow automation, including optimized routing, label generation and dispatching. “I like to think of it as dispatcher-in-a-box,” Mr. Nijjar said.

The software was built by co-founder Zeeshan Hamid, another former Amazon employee who previously led its last-mile delivery technology teams in Canada. Third co-founder Maraz Rahman is a sales veteran and entrepreneur.

Twenty couriers have signed on. The software is free to install, but there are payment options and pricing “is still an evolving strategy,” said Eurie Kim, general partner with Forerunner. Swyft earns revenue primarily by charging a cut of each delivery fee.

On the other side, Swyft has signed up 120-plus retailers at $19.99 a month who have installed its user-friendly plug-in, allowing them to quickly add same- or next-day shipping in regions served by Swyft’s couriers. Consumers can track their packages and get text updates.

Swyft is not the only startup trying to offer Amazon Prime-level service to smaller merchants; others include Argentina’s Moova and Austin, Tex.-based Shipsi. The company will “have competition in every geography they go into, from the old-school courier companies, DoorDash and Uber and technology-enabled courier companies,” Mr. Nijjar said. “Inevitably all the companies we saw that were trying to take on Amazon required a ton of capital” to build infrastructure. “This was the first one that basically uses software to get around that problem.”

“Same-day delivery isn’t new, but no one has been able to lower the cost structure so it can work for the average small merchant,” said Mr. Kazmi, who added that merchants are paying 20 per cent to 40 per cent less for same-day shipping than with existing options such as UPS.

Joanna Griffths, the chief executive officer and founder of online undergarments merchant Knix Wear Inc., said, “Offering guaranteed next-day delivery service across the [Greater Toronto Area] was something that we simply were not able to achieve through our conventional carriers. We can confidently say [using Swyft] has positively benefited the user experience. Swyft allows us to offer faster delivery than ever before with SMS tracking capabilities for the customer at a fair price.”

With more couriers and merchants, Swyft can generate network effect benefits: More customers can get quick delivery more affordably, driving up merchants’ sales while reducing their delivery costs; couriers get higher revenues and margins from greater volumes, denser routes and automated workflows. “I’m doing two to three times the amount of deliveries I was before” since adopting Swyft last December, said Osman Kagdi, the founder of Toronto delivery service Shark Logistics. “I’m going to need to hire more drivers.”

Jewellery e-commerce company Jenny Bird Holdings Inc. drew 56 per cent of its 2020 holiday season business in the GTA from a same-day-shipping marketing campaign enabled by its addition of Swyft, said Laura Carinci, the Toronto merchant’s director of digital marketing and content. And because Swyft could deliver before Christmas for orders received before 12:30 p.m. on Dec. 24, sales in the five days before the holiday were 84 per cent higher year over year. “That is a game changer,” she said. “It really levelled up our customer care experience … to compete with Amazon, where expectations [of same-day shipping] have arisen overnight.”

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