System updates, click-and-collect and fulfilment from store were some of the big talking points at Drapers’ latest roundtable.
The continual increase of online shopping, combined with the more recent growth in click-and-collect, is putting logistics providers in the spotlight. Throw international sales into the mix and the supply chain becomes even more complex.
Drapers invited logistics and operations specialists from the likes of Arcadia, Clarks and Debenhams to the Grange St Paul’s Hotel in central London to debate the major issues at a roundtable organised in association with logistics specialist DHL and clothing fit services firm Alvanon.
Dean Wyatt, parcel carrier DHL’s vice president of business development retail UK, kicked things off by asking attendees where is the tipping point that would persuade a retailer to invest in improving their logistics systems.
Michael George, director of logistics at Debenhams, said his is determined by the profitability of multichannel and international expansion. “Five years ago the more forward-thinking companies recognised that online was here to stay and that they needed to compete on the international scene. Early movers like John Lewis understood the need for serious investment and I think the rest of us are catching up.”
Clarks supply chain director Nick Cullen identified two drivers for change - international trade and consumer demand for freshness and agility. “Before the supply chain was one pipe and we tried forcing all sorts of things down it, but over the past three years we’ve had to take a step back.
“We now have four different pipelines – a standard season pipeline, close to market pipeline, a continuity pipeline and a replenishment solution. For us it’s about getting the process right first, then fitting the technology.”
Paul Wheeler, senior logistics and distribution manager at Topman, said the retailer’s owner Arcadia Group is investing in system updates, so it can evolve from a UK-centred business to an international, online operation.
“Currently everything Arcadia does comes out of the UK, but there are lots of things we can’t do here because we don’t have the space and structure. Therefore we are opening a hub in Singapore this year and will be moving into the US in 2016,” he explained.
“The biggest challenge for us is online-only businesses that offer everything in terms of delivery because the overheads aren’t there. It’s a question of how far we compete with that proposition.”
Consumer expectations and Black Friday were the next topics up for discussion. According to Cullen, consumers in 2014 demanded more agility from the supply chain. “You can have a five-year plan, but we need to build in agility. I don’t think many of us anticipated Black Friday and its implications. But what’s next? We’ve got to be able to futureproof in a way we don’t yet understand.”
As soon as a consumer is offered a service like free next-day delivery it becomes the norm, argued George. “Except for retailers like Next, which doesn’t offer free delivery and is one of the most successful players in the courier to home market,” he acknowledged.
“From the outset Next’s proposition has been ‘you pay for your parcel’, and customers have shopped loyally for generations because it ensures the service you get is the best in the market, with the latest cut-off point.”
Wheeler agreed that Next does a good job of fulfilling from stores by offering click-and-collect and then absorbing any returned product straight back into the store stock pool. While Arcadia does not offer collections from third-party stores, customer deliveries can be sent to any of the group’s stores. Topshop logistics manager Julie Reynolds sees the importance of click-and-collect in encouraging shoppers back into store: “We have fresh lines arriving every 24 hours, so we must utilise this opportunity to get our customer in store and engage with her.”
Fulfilment from store means retailers need instantaneous stockroom knowledge, said Cullen, a reason why Clarks is thinking differently about its inventory and supply chain.
The option to send orders for collection at convenience stores was seen by some retailers as compromising the customer’s brand experience. “An etailer like Asos sells so many different brands, so someone picking up an Asos parcel from a convenience store is not expecting a brand experience. With us they have a picture in their heads of what a Topman experience is like, which is the biggest barrier.”
A reserve or shop-and-collect model is being used in airport retail, according to Alison Loughran, supply chain manager at World Duty Free, which has stores in most UK airports. “We try to engage with shoppers online before they arrive at the airport. The concierge looks after your bags while you shop or you can fly off to America and pick up your goods on your return. We do, however, have to deal with the question of cut-off point so they have their goods in time for the flight.”
The debate then moved on to home delivery and the issue of returns. “The subject of returns has us scratching our heads,” said Cullen. “You want the consumer to have the right product but you don’t want to spend more servicing returns than it cost outbound.”
To reduce returns and build better brand loyalty, Alvanon president Ed Gribbin believes a consistent fit standard is critical. “Approximately 85% of consumers return to a brand specifically because of the fit. However, 60% of shoppers still struggle to find the right size.
“Whereas some retailers have fit models and apply linear grade rules, we’ve developed a theory of non-linear grading which recognises the body shape of a woman who is 12 or 20 is different. Retailers using this non-linear grading report increases in full-price sell-through and fewer markdowns at the ends of the spectrum when the product is designed to fit those people better,” Gribbin said.
Jane Coppen, quality control and supply chain manager at M&Co, agreed it is not a case of a straight up and down grade, as shapes change at either end of the sizing range. “We see fewer returns on our mid-range sizes in our Core collection (sizes 12 to 16), while in our Plus range there are fewer returns from sizes 22 to 24. When you rise to sizes 26 to 28 the number of returns increases as there is a variance in body shape.”
The issue of fit consistency is complicated when you add an international element. Alvanon has scanned more than 40,000 people in China to track body shape diversity, research which enabled the fit specialist to help Prada with the launch of womenswear in the country eight years ago. “Prada had to throw out its womenswear patterns and start over. Within three months it was testing new product in stores,” said Gribbin.
“On the other hand, with a retailer like Zara fit has not been its number one priority or value proposition in the past. As it pushes online, however, fit consistency will become a bigger issue.”
Ultimately, real progress in returns and logistics will be driven by putting supply chain at the heart of the organisation, said George. “There is an increasing recognition that logistics needs to be one of the first things we think about, but the challenge is that many boards have grown from the heartland of buying and merchandising when the only way to differentiate yourself was through the product. Now service and proposition is a bigger part of the experience.”
Jonathan Pilbro, vice-president of fashion at DHL Supply Chain, argued that as logistics moves to front of house, the industry must make itself attractive to young talent. “Our sector has to be multi-skilled and international, so it is a great place for young people to make a career, but they don’t know it yet.”
All parties agreed on the importance of investing in the next wave of talent and pushing logistics further up the retail agenda, as consumers will only continue to demand a better, quicker delivery service.
Clarks: Nick Cullen, group supply chain director
Debenhams: Michael George, director of logistics
Liberty Retail: Daniella Kok, head of operations
M&Co: Jane Coppen, quality control and supply chain manager
Sweaty Betty: Christina Rasmussen, operations manager
Topman: Paul Wheeler, senior logistics and distribution manager
Topshop: Julie Reynolds, logisitics manager
World Duty Free: Alison Loughran, supply chain manager
Alvanon: Ed Gribbin, president
DHL: Dean Wyatt, vice-president of business development retail UK, and Jonathan Pilbro, vice president of fashion
James Knowles, features and special reports editor
Charlotte Rogers, features and special reports writer
Michael Richardson, senior account manager