Getswift and Amazon

Topical subject. Getswift Ltd (ASX: GSW) put out a barebones release announcing a deal with Amazon ($AMZN) on Friday morning, before being suspended by the ASX and instructed to prepare a more informative update – probably because shares were up over 100% at one point. The subsequent more informative update was emphatically not more informative, but I’ll get to that.

The market is divided into two camps on Getswift. One camp thinks that VC missed the greatest investment since Facebook, and the other camp thinks that Getswift investors are going to get stiffed one way or another. It is a known fact that opposition only strengthens strong beliefs, so I do not see people revising their position in a hurry.

Some have suggested similarities between Getswift and 1-Page, a previously hot software company that also struck a much-touted deal with Amazon.

In the original version of this post I wrote that I thought that Aesir Capital may have also advised 1-Page. That was incorrect, it was Cygnet Capital that was involved with both Getswift and 1-Page, not Aesir. I apologise for the honest mistake.

So far it has been difficult to get a purchase on the Getswift business model as it works in practice. If Getswift gets anything like the number of transactions it is predicting, and at the prices it says it charges, then it will still do well from here. Now, there are a large number of yellow flags in my opinion including low R&D spend, director departures, low staff costs, limited tech support + sales staff infrastructure, and so on. Getswift is totally unsuitable for the 10foot portfolio because of these things.

If you don’t get the business model, how can you value Getswift?

Even putting those concerns aside, in my opinion, there are so many questions regarding these forecast transactions that I think Getswift watchers currently do not have any way of proving if the company is capable of doing what it says.  Despite signing many deals, it is unarguable that the company has not yet demonstrated that deals lead to revenues. The next few quarters will be critical here I would think.

Additionally, with such limited disclosure – the company announces a huge-sounding deal with Amazon but doesn’t disclose the slightest information about it – mug punters like myself must resort to rampant speculation. And, since there are no details being released about the deals, in my opinion it is impossible to determine what they are worth with any accuracy. Which of course makes it very difficult to value Getswift.

I can’t tell you what the company is worth, because I don’t know. But to justify today’s market capitalisation, I think Getswift needs to hit $75m in revenue within the next 3 years, at high gross margins, and with further rapid growth still occurring. The company has a fully diluted market capitalisation of ~$765m including shares on issue, shares in escrow, in-the-money options (no OOTM options as far as I could see) and performance rights. $75m in revenue would price the company at ~10x sales, which is ‘fair’ for a software company with high margins (and strong customer retention and switching costs) that is growing rapidly. I’m not certain Getswift fits that criteria but I’ll get to that.

How do you determine the lifetime value of a Getswift deal?

Here are a few things I’ve been thinking about:

For example, is the contract ‘binding’ in any way? Are customers legally bound to use Getswift, are there switching costs, are there penalties if the customer chooses not to use Getswift? Is there anything to prevent clients shopping around for a better deal? Why don’t customers develop their own solution if they’re going to be spending $100m plus on deliveries? Can Getswift generate a lifetime value from customers greater than the cost of acquiring the customer? For that matter, what is the cost of acquiring and onboarding a customer? How much investment will be required in sales, support, + R&D infrastructure in the future and what will margins look like after that? In software especially, I think the ‘stay-in-business’ expenditure is much higher than you might think, because if a company is not developing rapidly, it’s actually going backwards.

Getswift’s deals so far mostly seem to be struck with customers on a more individual basis, not a whole-of-organisation deal. This may prove more attractive, for example as individual customers (e.g. franchise owners) lack the ability to develop and maintain their own delivery software. This could see GSW maintain higher margins and build some sort of switching costs in, if it becomes essential to the customers’s business. It does however suggest more difficult growth (time consuming to convince 10m individual businesses to sign up with you) and a more fragmented customer base, which could be good or bad. It’s also important to question how much Getswift is giving away to its enablers like NA Williams who is introducing GSW software to its customers. How much does NA Williams get paid and how much % of the value in these future GSW customers does NA Williams capture for itself?

On the other hand, Getswift has also been striking deals with big companies like Yum! Brands and Amazon, and shareholders are about to find out if GSW has pricing power. For example, Yum!’s competitive position depends at least partly on its cost-competitiveness vs McDonalds and so on. If you think that an average takeaway restaurant might have around 8% NPAT margins, that is $4 profit on a $50 order (excluding delivery costs). If 25.5 cents of this goes to Getswift for the delivery, that’s something like a ~4% reduction in pre-tax profit. Amazon’s margins are much lower. It is hard to see Yum or Amazon giving over a huge share of its profits to their delivery software provider. Customers also hate delivery fees so I do not see those making a comeback to cover the cost.

The Facebook of Logistics

It’s difficult to get a grip on all of these questions and that’s why I think so many people are responding harshly to Getswift, at worst suggesting it is a scam. Some of the comments on the company in the market are not helping, for example calling it the ‘Facebook of Logistics’, a ridiculous title as there are not many similarities between the two in my opinion. Facebook provides a highly functional, multipurpose platform which leeches off user activity and has extraordinary network effects and switching costs. Getswift is a discrete, single-purpose piece of software and, as I just said, it is difficult to determine if it has any of those features.

Be that as it may, the company’s been in my too-hard basket until yesterday when the Amazon announcement came out. And I now think Getswift could be about to run headlong into a brick wall. It’s the classic an irresistible force meets an immovable object parable, only in reality there are no irresistibles, and we will see if it’s Amazon or Getswift that gets moved.

Getswift meets Amazon

I have no idea what Getswift’s deal with Amazon is. It’s a ‘Master Services Agreement’ so Getswift provides a service of some sort and in return Amazon (or someone) pays Getswift. Since we are rampantly speculating, I’d say the deal is perhaps offering Getswift software to Amazon 3rd-party resellers in order to let them do their own deliveries if they choose. If I’m right, this may let Getswift retain acceptable margins and $ per delivery, for the reasons I highlighted above (lack of customer ability to develop own solution, possibly hard to switch etc).

Course, maybe Getswift just provides the software for the food truck that sells smoko to Amazon warehouse workers. I wouldn’t get out of bed for a deal like that, but how would you know?

Still, unlike previous deals including the NA Williams deal, a Master Services Agreement (MSA) with Amazon implies a pricing contract as well as limited pricing power for Getswift. Getswift renders a service to Amazon and Amazon decides if it is worthwhile on an ongoing basis (every couple of years, or whatever, but of course the terms of the contract are not disclosed). Getswift would not appear to have much pricing power under this arrangement – just look at Vita Group (ASX: VTG)’s MSA with Telstra (ASX: TLS). Telstra keeps walking back Vita’s remuneration and Vita says ‘thank you sir’.

If however I’m wrong and the deal is with Amazon itself, providing software for last-mile delivery, which is what the market currently seems to think, then I have appropriated a few thoughts from the Twitterati:


For this kind of deal, in my opinion you can draw a lot of assumptions even without having the first skerrick of information about the contract:

  1. Getswift needs Amazon a lot more than Amazon needs Getswift.
  2. Getswift is replaceable. Amazon has logistics expertise, tech expertise, a massive budget, and can build whatever it wants:
  3. As a result, Getswift (like all of Amazon’s suppliers) likely has minimal pricing or negotiating power.
  4. Amazon is ruthless with its suppliers, grinding their margins down to zero. Do you want to sell serious volumes? You need to be on Amazon. Amazon is going to make you pay for the privilege, capturing most of your historical margins for itself.
  5. Amazon is ruthless with 3rd party operators on its platform. It actively bids its products a few cents cheaper than competitors, for example. If Getswift supplies 3rd party operators with its software via Amazon, it may actually find Amazon competing with it to sell delivery software in the future.


Getswift’s payments per delivery have been around 25.5 cents as of the most recent quarter on a reported revenue basis ($255k revenue, $175k in cash receipts, 1m deliveries). The NA Williams deal implies around 13 cents ($138m revenue divided by ‘over 1bn deliveries’). With Amazon, in my opinion, I would not be surprised to see Getswift getting as little as 5 cents per delivery or less, and that declining over time as Amazon renegotiates. That’s if Amazon is the end customer and not 3rd party resellers.

You do not know which is the case, and neither do I. I quote:

“Due to the terms and conditions of the agreement and the highly sensitive nature, no further information will be provided by the company other than to comply with regulatory requirements for disclosure.”

Highly sensitive for who?

“Due to the terms of the agreement (with Amazon) the number of deliveries this agreement may generate is currently not determinable.”

So ultimately there is a significant degree of uncertainty regarding Getswift’s value and I think it is near enough impossible (for me, at least) to determine the company’s intrinsic value with any accuracy. I could forecast x transactions at this price or that price, but I don’t know how much tech support staff, sales staff, R&D, marketing, and so on will be required to build and maintain Getswift’s position. This is a not a value investment. The only way Getswift actually makes any serious money for investors – And we’re talking about a 10x sales multiple being ‘fair value'(GSW currently priced at ~750x annualised sales) – is if it builds a system from which it can grow rapidly and persistently extract returns well above the cost of capital over the next decade or more.

I labour over this point because it is very easy to forecast revenues to the sky based on the numbers that Getswift has put in its recent presentations. However GSW’s ability to a) deliver on its promises and b) maintain its margins in the face of customers with much greater pricing power are great unknowns.

Getswift needs to suck value out of other players’ pockets, but it does not look like it is currently in a position to do that. I also don’t think the information publicly exists yet that would let an investor determine that unequivocally either way, but the company’s market capitalisation is seemingly already pricing it in.

But hey at least they love their work. Look at how enthusiastic they are to be returning to trade on Monday:

source: LinkedIn

You can’t put a price on passion.

I have no financial interest in any company mentioned (including the US-listed and unlisted ones). This is a disclosure and not a recommendation.

11 Replies to “Getswift and Amazon”

  1. Firstly, I’d like to congratulate you on this commentary and laying some platform for discussion around GSW. A lot more of this type of conversation on $GSW is conducted offshore, which is why I hold the belief $GSW should be listed on the NASDAQ.

    I am long on GetSwift.

    There seems to be a lot of commentary around the SP, but scant discussion on the actual product. I’ve taken the time to download the product, and use it. I’ve also referred some of my restaurant industry colleagues in multiple countries to try it. The take up rate has been 100%. The product is superb and I think the AFR misses when it compares to Sendle and Shippit. These companies are geo-locked by the nature of their business model and can really occupy only one vertical. Getswift is completely vertical and brand agnostic. A customer will have the premium experience of GetSwift and it’ll be always branded to whichever company it is licensed to.

    I am 99% satisfied about the value the product brings.

    Investors can do more research on the company than you may think. In the digital space, there are always fingerprints and sophisticated investors can get software to track app usage across any geography – namely the GetSwift app. This may allow investors to verify take up rates ahead of the market and give some assurance on implementation.

    In relation to the NA Williams announcement, the associated companies are all listed on the NA Williams website (which is in itself an underwhelming website). A phone call to their seperate logistics team would be enlightening to those interested. $GSW has stated that they will do a implementation report in January….. I share the same belief as you that the next few quarters are critical.

    On to Amazon. I must admit I was floored by the announcement yesterday, following the AGM the day before in Sydney. Especially considering $GSW used to market the threat of Amazon to elevate their Australian proposition.

    There are many claims about this contract. No doubt, as you have mentioned, Amazon is one tough customer and are focussed on being ruthlessly efficient and drive customer experience. Last mile logistics is a massive cost and a core competency in their value chain.

    But here’s the kicker…… I was equally floored to learn that the majority of AMZN’s last mile logistics is done by third parties such as FedEX and UPS. There are numerous articles and spend projections around this arrangement, running into the $B. There are also numerous articles and speculation Amazon is looking to insource this, and we may see that play out in our own backyard. I can think of 3 scenarios in the near future.

    * Amazon maintains status quo and use the Getswift app for their staff food truck.
    * Amazon increasingly insources its last mile delivery network with the white labelled GSW product embedded in their own chain.
    * Amazon forces margin decreases in existing suppliers for the foreseeable future.

    2 and 3 is where it gets interesting. Did you know that not one major courier company has a automated last mile dispatch and customer visibility system, such as what GetSwift provides? (FedEX even has trouble classifying delivery drivers as their own employees) – Which means the Amazon core competency and customer experience can be vastly improved. So if they do go with option 2 – customer experience becomes better, and costs become more efficient. However, there now is duality in customer experience with dispatch through FedEX/UPS, compared to their own, which would be found to be unacceptable to Bezos.

    They can also use their internal cost modelling (more efficient) to put pressure during third party contracts.

    No doubt, what I am about to say is conjecture, but this is my investment thesis. The deal with AMZN may actually put GetSwift into a pricing power position. FedEX and UPS are going to have to make a play – develop their own last mile logistics software, or buy some time and assurance with Amazon and sign with GetSwift.

    Last mile logistics is notoriously bad to manage, and is antiquated. Due to current arrangements, it is also why the Amazon deal is so highly sensitive. It seems everyone has missed the above points.

    I’d lastly say that there seems to be envy of the networks Joel and Bane can leverage off. They have seats at tables that no one could dream of, due to the team they have put around them. The Amazon contract, whatever it’s worth, has done much to add credibility to the company.

    In summary, I would advise a lot more research into the business model and offering, and a bit more of a sniff test on the ground. It seems you are one of the closest to the action – again, you should be congratulated on this – you are streets ahead of your peers in the Australian financial space, including some of your mates, so I respect either way you go. Best of luck to you. And me, I suppose.

  2. Interesting article and a great comment.

    Let me first disclose I own GSW.

    From what I have read Amazon wants to move away using companies such as FedEx and UPS and run their own deliveries. They also want to be able to deliver for other vendors as well as ramping up capacity as needed during peak periods.

    So this is where I believe GSW comes in. It is my guess Amazon will use GSW to not only make their delivery chain more efficient but also provide an uber type courier platform. These “uber couriers” being used by other vendors and Amazon in peak periods or areas where it is not viable for Amazon’s own fleet to service.

    So the question and it is a fair one is why use GSW when they could build it themselves? which no doubt they could. The only real idea I have come up with is that they want to grab this market before anyone else does and believe it would take them considerable time to do it themselves.

    We see by the rise of various last mile software companies such as GSW, if Amazon waited to build and perfect their own someone may have already “stolen a march” on their desire to rule the world in the last mile space. I say rule the world because everything market they enter they do so to dominate.

    I bought GSW originally because I thought it would give smaller retailers a chance to compete with Amazon on delivery times but it appears that Amazon was aware of this possibility and decided to take advantage of it themselves.

    I agree with both of you the next few quarters will be very telling. Bane indicated at the AGM there would be an update on the NA Williams contract in January so we should get some indication if the billion transactions is a possibility or fantasy.

    Thanks again to both of you. I enjoy reading other peoples opinions on GSW so can test my own theories.

    1. Hi guys, thanks for your great comments. I don’t want to respond to each of them individually or we’d end up with another post the size of the original. I’ll just cherry pick a few things where I think our perspectives differ, as a discussion here might be more productive.

      “2 and 3 is where it gets interesting. Did you know that not one major courier company has a automated last mile dispatch and customer visibility system, such as what GetSwift provides? “ I’d find that very interesting, are you sure? I have a friend that works as a senior coder for a large Australian/possibly global parcel delivery company (I forget which one, I will have to chase him up) and I believe that they have such a fully automated system which they design + maintain in-house. I was operating on the assumption that if an Oz company has it, surely Fedex/UPS would have their own.

      “On companies making their own software, it’s not a case of going under the stairs and telling the guy with coke bottle glasses to hash something together.” This is why I’m sceptical of Getswift. They have minimal R&D development expense and no chief technology officer + limited development staff. What makes you think that their technology is world class relative to UPS or Fedex? What does UPS/Fedex spend each year on software? (tbh I have not looked at that). Equally given their limited development expense, what makes you think that Amazon can’t replace them quickly?

      “So this is where I believe GSW comes in. It is my guess Amazon will use GSW to not only make their delivery chain more efficient but also provide an uber type courier platform. These “uber couriers” being used by other vendors and Amazon in peak periods or areas where it is not viable for Amazon’s own fleet to service.” I had not considered that, although similar to my ‘3rd party seller’ suggestion it would suggest less price pressure on GSW because it’s not directly in Amazon’s value chain. That could be and it would be a valuable capability for Amazon to have (the ability to flex delivery capacity according to demand).

      In my opinion however, there is absolutely no way Amazon will build its logistics system around a white-label GSW even if they dump UPS/Fedex. There’s no way they’ll let something like GSW sit in their logistics chain clipping the ticket on every transaction (AMZN would do better to buy GSW in that case). If Amazon is bringing its deliveries in house, also it makes no sense to continue relying on a 3rd party delivery software system while controlling everything else. That’s because any 3rd party software failures/hacks etc could bork Amazon’s entire system – far too risky from AMZN perspective.

      There is a huge amount of uncertainty. I accept things could go either way (I’m bearish on getswift if it wasn’t obvious, but not fully convinced of my view) but one thing I would be very wary of is believing that Getswift should be worth more than Xero. Getswift would have to 6-bag again from here ($24 a share?) in order to be worth more than Xero. Maybe in 5-10 years, sure, who knows, but not any time soon. In my opinion there are too many unknowns and too much water to pass under the bridge to have any idea of whether getswift can be worth more than Xero at this point.

      *edit*: One other thing I thought of, how long + how difficult is it for Getswift to put in place the infrastructure to support its growth? Aesir’s estimates (probably optimistic ones, as the corp advisor) suggest Getswift will have a cost base of ~$18m by CY2018, 6x its current level. That’s a big step change, with possible complications for corporate culture, difficulty finding skilled staff etc.

  3. Hi Iain

    You are completely right. Each company I have worked for that has tried to build their own company wide software has ended up in a mess. Many people commenting on GSW have obviously never had involvement in such projects.

    Thanks again for the link perhaps their own attempt amazon flex? (forgot its name) was not performing as they had hoped? anyway all will be revealed as they say over time.

  4. G’day again,

    Great comments. Here’s my view – all in my opinion but I’ll start with what I feel is the non-debatable’s and move forward.

    Amazon has never had core competency in last mile delivery. This is absolute fact, and something a lot of people need to accept. They have always outsourced most of it to FedEX and UPS. These companies often further outsource Last Mile to another company – USPS. FedEX doesn’t have software apart from tracking, UPS doesn’t, DHL has one clunky (installed haphazardly and low functionality). The 2 tweets featured in your article are totally wrong.

    GetSwift has a mush longer software development timeline than IPO inception. It was years in development, and unlike peers (who I personally am bearish on, such as $YOJ) is not using SH capital to create or bake a product on a vision. Yay for shareholders. Their product is vertical and brand agnostic. To many this means boring and generic, I believe this means frictionless and focussed, accomplished in the few things it is meant to do.

    GetSwift will never be a household name. In current strategy, it will never be B2C facing, so think of marketing and sales efficiency against more visible competitors that play along a further spectrum of the value chain and require audience recall, more manpower and more marketing $$.

    Speculation. I don’t think Jamilla Gordon as CIO worked out. Also, $GSW is effectively a US company. If there isn’t an announcement for a CTO/CIO in January, I will be worried. January makes sense – if you get a big hitter, then they’d want their STI’s to vest on December 31 in current role. I expect a senior executive from the FANG group. If this happens, this could be a point of entry.

    Where my view differs from yours is that I do think there is something about GSW’s software that got them over the line in Amazon’s A/B testing in Minnesota. I share your view that no way will Amazon build around a white label, but I do think there are specific things GSW won out on. I’m still processing this but am guessing 2: Dynamic dispatching and route optimisation. Whatever it is, these parts are to be built into the Amazon software and value chain, so its the code and not the window. Revert to point 1 – Amazon has never had core competency in last mile.

    I don’t know where GSW will assist in AMZN’s last mile. It could be in the “FLEX” force or their permanent fleet, or both. However, looking at all their onboarding material with Amazon Flex, it seems they don’t have dynamic dispatch capability (where a new event happens and the route or job transfer to a new driver happens). In fact, the driver gets a notification over an hour before their block to arrive to a particular dispatch point and all their orders are pre-processed. That’s not dynamic at all.

    In their Flex driver onboarding video, they mention that the driver can follow a suggested route, or choose their own. That doesn’t sound very AMZN to me.

    Speculation. About the barebones AMZN announcement…..ASX rule 17.3 was invoked and shares suspended. For ASX to reinstate GSW must have had some discussion with ASX for 17.7 to happen. The ASX would have had to weigh up the SP movement against the knowledge they gained in discussion with GSW following suspension. IMHO, GSW didn’t give a rats to talk the announcement up, unlike competitors that have announced the same agreement 4 times through the negotiation period.

    Let’s see how this all plays out!

  5. Great discussion guys. It is obvious that Amazon sees value somewhere just where I guess we will find out soon enough.

    I have no problem with such little detail in the Amazon announcement if it is going to be as disruptive to UPS and FedEx as I believe. It would be in Amazon’s interest to keep these details private without alerting these two companies of the impact of GSW application until it is in Amazon’s interest to do so. FedEx and UPS could easily guess what is going to happen if GSW released an exact number of transactions.

    Just on the CIO I attended the AGM and Iian it appears you are right they seemed to suggest a FANG exec would be announced. It would be interesting if an Amazon exec moved across. 🙂

    IMO the management has done a great job getting GSW in front of some great companies, its success now rests on the quality of GSW’s application. I can only assume Yum and Amazon have done their due diligence.

    Interesting times ahead.

  6. There is another option that no-one seems to have thought of – Getswift could have signed with Amazon Web Services to offer their software to AWS customers through the AWS cloud platform. This explains why the number of deliveries or revenues cannot be determined, as it depends on how many AWS customers choose to buy the software. If so, wording an announcement to suggest that the deal is with Amazon Retail is disingenuous at best.

    1. Karyn, that seems an excellent comment, and something I had not thought of. What sort of implications do you think this has for the uptake and possible success of Getswift’s solution? Larger or smaller target market, likely to lead to higher or lower fees per delivery, etc…?

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