When going international, should your ecommerce fulfillment strategy prioritize cost containment -or- sustainable options? Can you have both?
A survey by Unilever revealed that 33% of consumers were actively choosing to buy from brands they believed were doing environmental or social good, while 21% said they would be more likely to pick brands that made sustainability credentials clear on packaging and in marketing.
Thirst for sustainability
Offering a true commitment to sustainability is a key strategy for taking your ecommerce business international. There are key differences between Europe and North America that require keen attention in ecommerce fulfillment, supply chain planning, and execution.
But how do companies do this in a world where costs, labor constraints, and inflexible legacy technologies make these offerings brutally painful – if not impossible – financially?
Ecommerce fulfillment: safe and simple
Modern ecommerce order fulfillment software has proven highly effective in helping ecommerce companies unlock time and cost savings, seamless returns processing, best-in-class customer service, and fast, and consistent shipping.
The problem comes in when ecommerce fulfillment teams put too much trust in their legacy software. Legacy enterprise supply chain software suites have undergone multiple rounds of acquisition or extensions. Their inability to be updated quickly or easily does not fit in our consumer-centric world.
We now need to serve pop-up demand when and where the consumer wants it. It’s up to ecommerce businesses to operate as an order fulfillment network to satisfy that demand in a cost-effective and high-service way.
The cost vs. sustainability dilemma gets even more complex when you introduce different geographies that have completely different considerations and preferences. The not-so-simple challenges of all of this call for fast, strategic WMS software and order management solutions to lessen the load of:
- Ecommerce fulfillment costs, inflation, and economic pressure
- International shipping and tax jurisdictions
- Solutions that can’t integrate easily or be supported properly
- Highly sought-after options like sustainable logistics without the infrastructure to do so
Global podcast link and highlights
Will Lovatt, General Manager and Vice President of Deposco Europe discussed these barriers in a recent podcast with Ecom Logistics Nation:
“What Brands Need To Know To Go International”
In this podcast, Will, along with FulfillmentIQ’s Ninaad Acharya and Dan Coll, deliver inside perspectives on how successful supply chain companies and ecommerce fulfillment providers win in today’s competitive global landscape. “The key is to choose a purpose-built platform to connect the forecasting and replenishment system to the ERP system to the ecommerce OMS system and multiple warehouses. With no breaks in visibility or data lag,” Will explains.
Show highlights:
- The nature of domestic ecommerce is organically expanding the global footprint
- This provides an opportunity for the true ecommerce guys to step in and set up a thriving market
- There are key differences between Europe and North America, including the focus on cost containment and sustainable options
- You need a supply chain infrastructure to support that, and legacy supply chain fulfillment software won’t cut it
- Modern ecommerce fulfillment software provides fast cost relief and the ability to offer sustainable options to penetrate new international markets – but also provides a high degree of adaptability as supply chains evolve and create uncertainty
Improve ecommerce order fulfillment
Deliver a positive experience alongside optimized supply chain fulfillment and shipping efficiencies:
- Save on costs and time
- Seamlessly process returns
- Ship as fast as customers need it
- Provide best-in-class experiences including international ecommerce shipping
Total Life Changes sees outstanding results shipping to 140 countries with Deposco
2X faster picking, 50% decrease in time to fulfill orders, and 3X increase in volume with same-sized staff.
[demo_form title=”Meet Deposco” lead=”Grab a demo of our ecommerce order fulfillment applications.”]
Episode notes
[00:00:00] Dan Coll: Welcome Ecom Logistics Nation. Thank you for joining today’s episode. We’re on a mission to share ecommerce logistics insights, trends, successes, and challenges from the leaders and innovators in our space.
[00:00:16] Will Lovatt: If we’re talking about the challenges and the landscape that our omnichannel operators are dealing with.
[00:00:22] Then the granularity of that, and there’s 27 or 26 different languages across the EU, across the Eurozone with different legal jurisdictions and tax regimes and so on. We can’t just expand state by state in the unified way that the U. S. operators can. So yes, there are complexities and you don’t see many true multinational retailers across Europe.
[00:00:47] Yes, Amazon and so on, and some of the ecommerce fulfillment operators span across boundaries, but the domestic do a great job of expanding across those boundaries. So there is an opportunity for the true ecommerce guys to step in and set up a market. They need supply chain infrastructure to support that. So a huge opportunity, but in a very much more fragmented market.
[00:01:11] Dan Coll: Welcome, Ecom Logistics Nation. In this episode, Nenad and I welcome Will Lovatt, General Manager and Vice President of Deposco Europe. Will started his impressive 30-year career with IBM, where he spent over 8 years in roles including engineering, pre-sales, and specialist sales, With his last 5 years focused on building IBM supply chain business.
[00:01:34] Post-IBM, Will had leadership roles with companies including JDA and LLamasoft, and now leads to Deposco’s efforts over the Atlantic Pond in the UK where he works with some of the world’s most demanding, innovative, and fast-growing direct-to-consumer (DTC) supply chains. These include consumer package goods (CPG), 3PLs, and a wide spectrum of ecommerce fulfillment operations.
[00:01:58] Will is based in England, and we’re looking forward to this conversation, exploring the similarities and differences between North American and European supply chain needs. Will, it’s an absolute pleasure to have you join us, and welcome to the show.
[00:02:13] Will Lovatt: Dan, thank you, and thanks for the intro there.
[00:02:15] Fabulous. Dan and Ninaad, great to meet you both.
[00:02:19] Ninaad Acharya: Thank you for being on the podcast because as Dan mentioned, we don’t understand as much on the other side of the pond, right?
[00:02:34] Talk very confidently about the consumer expectations, the 3PL nuances, and the supply chain differences within the United Kingdom in relation or comparison to the North American market, specifically the U.S.
[00:02:48] Will Lovatt: Sure. Let’s work it out together. Yes.
[00:02:50] Dan Coll: Awesome. It’s going to be fun. And Will, as mentioned in your intro, you have a really impressive background and you’ve seen a lot in our space over the past 30 years.
[00:03:00] So we’d love to start with you sharing your journey highlights reel. What is it about logistics that has kept you in the game for the majority of your professional career?
[00:03:10] Will Lovatt: That’s a really good question, so it’s knocking on 40 years now, which I find hard to believe, but I guess it’s just a fascinating area to be in, and it keeps changing.
[00:03:20] It’s a journey of acronyms, so I grew up with IBM in the late 80s and dealing with forecasting systems, and it was the early days of VRS (variable response smoothing), very much in the weeds of algorithms, which as a mathematician, superb fun; applying it to the real world.
[00:03:39] Real challenge. So I worked with the likes of Tesco. They were growing very fast at the time. So a great place to go and engage and work on some really exciting and engaging and difficult projects. They were great to work with. I left IBM, after 8 years to go off to work with E3, which later became part of JDA.
[00:04:02] JDA (later Blue Yonder), and at that time hoovered up a number of the other supply chain software vendors. So Manugistics we had just combined with as I joined JDA. We acquired i2, and then we backed into Red Prairie. So, as I say quite a few of those technologies came home in a single solution.
[00:04:22] And I guess that also talked to what was going on at the time with joining up a supply chain, vendor-managed inventory, CPFR, ECI, and official consumer response. Then we tried to pull it all together under a single banner with integrated planning and execution. Great gig for a software company, including different components. An even better gig for some of our best friends at the consulting shops. Superb projects.
[00:04:46] Over the years with some demanding customers. I think integrated planning and execution is probably one that we’ll talk about as we go through this. I think the concept of what is planning and what is execution, and is there a blurred boundary. Now, are they, what technologies do we need to cover all of that?
[00:05:02] I moved on to Llamasoft and supply chain design, which let’s assign an acronym to that. It’s (MEIO) Multi-Echelon Inventory Management. It’s using AI to think about how best to answer some of the difficult questions. It’s a huge monkeying of Big data sets to answer ostensibly simple questions, but then do that more operationally.
[00:05:25] I had some real fun with Llamasoft and then most recently here at Deposco, where we’re serving a market that is a different kind of supply chain. It talks to the evolution of the supply chain over time. So as I said, I grew up in a world where we were making more efficient, the bulk movement of inventory to known locations, and that was retail.
[00:05:45] And now we’re in a world which I’d characterize as consumer-centric, where demand pops up when and where the consumer wants it to. And it’s up to us as a fulfillment network to satisfy that demand in a cost-effective and high-service way. I think that would probably form a pretty strong core of the conversation we have today.
[00:06:03] Ninaad Acharya: Yeah, and you know what? What’s interesting about that? I have to say, as I’ve spent my career in the past working on large enterprise solutions: how does our forecasting and replenishment system connect to the ERP system that connects to the order management system and multiple warehouses?
With a supply chain team that’s executing, what’s interesting that has ended up happening with the market with folks like you – and you know a lot of good people working on this – is bringing it together and making it available in a simpler package. Because if you thought about each one of those systems that I spoke about at a company like Tesco, each of those systems for each of those instances was a two-year project right and running in parallel, if not longer. And running in parallel if not longer vs. now, the ability for a brand that’s doing $100, $200, $400, $500 million in revenues now being able to say: “I can get a package that does 80% of what enterprises get out of the box and be able to do it within a 6-month timeframe”.
[00:07:12] And I think that’s where it’s been really interesting, the accessibility of these applications. And folks don’t understand, you would think about a tier-one solution and go, “Yeah, what’s in there can’t be available down here in this other market space”. What you realize is, yeah, there are some things to be desired.
[00:07:33] But most of what’s there is also in this new and shiny object now, right? You have to be able to give, but it is available now within the packet. I’m guessing that’s how your journeys evolved… Taking all of that knowledge and making it simple. In this fast-paced, brand-based ecommerce market segment. Because the enterprise game is still the enterprise game.
[00:07:56] The JDA is out there, Manhattan’s out there and they got their place where they need to play. But then there is this other segment that has evolved quite a bit.
[00:08:03] Will Lovatt: I couldn’t agree more. So if I look at the market, not just our world, but the technology stack, and if you look kind of customer-facing, or at least the customer focus CRM systems, there were the likes of Siebel.
[00:08:16] Who has made way for Salesforce and what they did was package up something that was highly complex, very much enterprise, and easy to install. So I’m I’m echoing your thoughts down at the bottom level. The ERP was monopolized by the big legacy players. Along came the next week and took something that was a couple of years of effort, packaged it up into a solution that was 80% if not better, and probably a much better fit and better solution.[demo_form title=”Who is Deposco?” lead=”Schedule time with us to learn why companies trust our platform when It’s Grow Time.”]
[00:08:43] Get up and going in a matter of weeks and months. And I see the same thing in the supply chain we’re here to deal with the market, which is complex and changing. And so the legacy solutions, which took a couple of years to implement are now out of date by that time. We’ve got to be dynamic to serve a market that is changing very rapidly.
[00:09:09] It’s going to change again soon. So whatever is not going to be good enough in a year or 18 months, you better build it in a flexible, dynamic way.
[00:09:17] Ninaad Acharya: And how cyclical is that entire process if you come to think about it, right? So you just mentioned the ERPs, right? Like the SAPs and the Oracles. They still exist.
[00:09:26] They still do in the business. NetSuite comes in and makes life easier. These guys come and bring in their product to make stuff easier. But guess what? All of those products now feel like enterprise [solutions], including NetSuite. And it’s making way for this new breed of solutions. And that’s just the nature of technology, right?
[00:09:42] There is always going to be innovation. People are always going to do something that’s going to be smarter and the next step. And as a company (I’ll stop talking about technology at some point), you have to constantly keep looking at how you evolve your tech stack. One of the perfect examples, we spoke about JDA and all these acquisitions.
[00:10:05] It sounds good. You got all of this stuff under one umbrella, but guess what? It all runs on different stacks; you have to bring it all together and make it happen. It’s a much harder task than most people imagine.
[00:10:18] Will Lovatt: It is, and I’m not going to diss the good work that has been going on. I’m a few years out of JDA, but I think if I characterize now, what does the market need now?
[00:10:28] It needs to be able to mash up a set of solutions into something that is going to change over time and also be able to swap out components of that. So open standards and open interfaces to allow us to interoperate with the whole set of other functions is critically important. So yes, those legacy stacks.
[00:10:47] Ninaad Acharya: Absolutely. And to be very honest, JDA, now Blue Yonder, is a few years behind on that, right? Like when it comes to having a complete open-standard API-based kind of solution. So it’s like keeping an eye on what’s next and ensuring that you evolve within this space. But the threat from new entrants is always going to be there.
[00:11:07] And it’s, I find it interesting how the space has played out over the last few decades. And I completely expect that same thing to continue happening over the next couple of decades.
[00:11:17] Will Lovatt: So if I just reflect for a moment to the planning and execution divide, I see some fantastic work going on across the planning side.
[00:11:25] The O9s, the Canaxis of the world are building out some pretty impressive platforms. I think supply chain design. And yes, I’ve got it. The vested history in this, but I think that’s got a role to play in terms of mapping out an overall supply chain and having a look at how, in an optimum world, we would operate the network.
[00:11:44] The reality, though, is when demand hits, we need to serve it here and now. So the execution piece is, I was at a conference recently. I went. Name who it was, but there was some talk about that. We’ve gone from SNOP being monthly cycles now down to hourly, sorry to weekly, even hourly hang on with sub-second in the world that we’re living in the commerce.
[00:12:07] We need to be making intelligent decisions and satisfying customer demand in sub-seconds. Where’s that breakpoint from? Planning, and getting the inventory in the optimum place that it should be to satisfy what we believe demand is going to be. But then in the moment to be able to execute in the most effective way possible.
[00:12:24] So that’s the conversations between us and planning vendors about how we can interoperate and how we can serve each other.
[00:12:30] Ninaad Acharya: We are going to touch on that a little bit coming soon as we talk about the customer expectations between the United Kingdom and the US, right? That type of planning where the urban demand happens to be that quick.
[00:12:42] How do you achieve that? Because that expectation is moving, right?
[00:12:45] Dan Coll: So I think maybe on, on what we were just talking about, where the need to have to go fast and give the mid-market or enterprise organizations, the ability to go from two years to six months and implementing a lot of that has to do with the fact that these brands and retailers and three PLS are facing a lot of macro challenges, specifically as it relates to the direct to consumer model.
[00:13:12] which is shifting logistics and supply chain landscape, and will you have a lot of interactions with a lot of brands and retailers and three PLS and CPG organizations, and they’re facing a lot of different challenges from market saturation to differentiating their brand to dealing with and managing.
[00:13:33] Really complex fulfillment networks. So would love to hear what your experience is, and what you’re hearing are some of the biggest macro challenges that these businesses have been facing and dealing with.
[00:13:46] Will Lovatt: Yeah, good question. So, there are a couple of things that we’ve done as a business to try and understand the market.
[00:13:51] I think that we’re all aware of some of the huge changes that have been going on and I look at national data so that the British ONS, the Office for National Statistics records. Share of ecommerce versus retail in amongst everything else. And if you look at the underlying trend, it’s been steadily increasing.
[00:14:10] There was a huge increase during COVID. I think we can’t have this conversation without talking about the impact of COVID. I think what I see, though, is the underlying trend. We’ve pretty much settled back onto what would have been the underlying trend in the meantime. So, yes. Sales post-COVID and direct-to-consumer specifically have dropped back to a level that was on the trend line.
[00:14:31] So it’s greater than it ever was, and it’s greater than it was before COVID, but we’re pretty much coming to the peak of where we are in COVID because the growth line is now getting us back up there. So penetration, we see, I think the UK was proudly Touting itself as the most penetrated e-commerce market with 82% of the population having bought online.
[00:14:51] I’m struggling with 82%, given that there’s a bunch of kids that maybe they do, maybe they have devices and they’re buying online knowingly or unknowingly, and as I say that perhaps Fortnite and so on means that we’ve got kids making transactions. Exactly. 82% is real.
[00:15:07] Dan Coll: They’re just sitting on credit card.
[00:15:10] They’re just sitting on their parents’ credit card. That’s all.
[00:15:13] Will Lovatt: Absolutely. Yes. Knowingly or unknowingly us about 10 percentage points behind that. As far as I can see in the underlying data in terms of the volume of population, which is buying online. The overall volumes are hugely larger in the US and if I compare on contrast US markets, the UK, and Europe, I was pulling some stats just the other day.
[00:15:33] The Gross Domestic Product: we use that just as a proxy for the overall size of the market. The biggest single total addressable market or GDP in Europe is Germany, and it’s one-sixth the size of the US, the UK’s one-eighth, the size of the US, the complete Eurozone, and yeah, the Brits shot ourselves in the foot, not Eurozone.
[00:15:54] But half the size of the US, so if we’re talking about the challenges and the landscape that our omnichannel operators deal with, then the granularity of that, and there’s 27 or 26 different languages across the EU, across the Eurozone with different legal jurisdictions and tax regimes and so on.
[00:16:15] We can’t just expand state by state in the unified way that the US operators can. So yes, there are complexities, and you don’t see many true multinational retailers across Europe. Yes, Amazon and so on, and some of the ecommerce operators span across boundaries, but the domestic retailers haven’t done a great job of expanding across those boundaries.
[00:16:36] So there is an opportunity for the true ecommerce guys to step in and both set up a market, then you’ve got a supply chain infrastructure to support that. So a huge opportunity, but in a very much more fragmented market. I’m pulling my breath at that point, but in terms of landscape, it’s quite a different one.
[00:16:57] Ninaad Acharya: And out of curiosity, let’s say I’m a brand in the US doing well. My first target is, I’m going to move to Canada, right? Just to explain some nuances, right? From a US perspective, let’s just say all things being equal, you are a general brand. You’re looking at one location for your warehouse setup, right?
[00:17:16] You’re going to end up in the Midwest somewhere. And then you’ve got your West Coast DC; that should be your second one. Now you grow it, and that’s based on the transportation footprint. Yeah, spoke about that quite a bit. The Canadian market’s very different, right? So when you expand into Canada, something like 80% of the Canadian population lives 150 miles or under the US border.
[00:17:39] So you have this thin line of spread population. Your distribution strategy and the geography being so large, you usually start with the greater Toronto area market. That’s where you’re going to have one warehouse. And then you will start thinking about the second one, either West Coast completely in Vancouver or in Calgary.
[00:17:57] That’s how you set up your network. How should a brand think about entering the European market or the UK market? So you see the N number, right? What are the brands’ options? They are picking up the phone. They are having a conversation with a bunch of 3PLs out in the European or UK market. Everyone’s trying to sell their services.
[00:18:17] Your vantage point is that you see the networks of multiple 3PLs and multiple brands. What should be the strategy that a brand should be pursuing? Like, okay, I wanna move to Europe. Where do I go? Where do I want my warehouse to be…
[00:18:34] Will Lovatt: before I get to network and warehouse? See, there’s a kind of geopolitical comfort with the language angle to this as well.
[00:18:41] So it’s not untypical for a US company to touch down in the UK. Because we should mostly share a language and share some common principles. Our law is not so massively different. If I start to step into German statute law, I’ve got quite a different context, for example. But let’s park those issues for a moment.
[00:19:00] If we think about supply chain and supply chain topography within the country, those are well-rehearsed changes. So in France, Paris is the massive, focused, centralized conurbation. Likewise, you’ve got a bit of a regional thing going on down in the south, but it’s a well-rehearsed shed outside of Paris, and then something in the south if I’m going regional.
[00:19:20] The UK likewise. Park in the middle. There is a distribution center right in the middle of the UK, which is a national distribution center. Then again, it’s a pretty well-rehearsed regional set of locations, which the government has done a reasonably good job of supporting with tax breaks, with space made available for companies moving both for the brands themselves and also 3PL.
[00:19:40] So pretty good networks and availability space. The change and balance, on a slight tangent, of who’s buying that space has been changing a lot over the last couple of years. So, Amazon coming out of 11, 12, or 14 locations across the UK – which is a pretty substantial bit of space that’s come back onto the market.
[00:19:59] There is a real imbalance between the long-term investment that space requires and the fast-changing ecommerce world. So a temptation to buy into a footprint, but then use 3PL for uncertain space. 3PL doesn’t necessarily lend itself well to highly seasonal, and unpredictable without a modern warehouse management system in place. So there are some face-offs and some balances there.
[00:20:23] This conversation wouldn’t be complete without a self-harm Brexit conversation. I apologize to the rest of the world for the nonsense we’ve caused. But for supply chain operators, for a while, it was uncertain about how this was going to land. Hang on, how difficult is the red tape?
[00:20:45] And I see some quite different answers to this. I see those who are going ahead with a long-term strategy, which is, we’ll do center of gravity, we’ll park a distribution center in the optimum place for the overall market that we want to serve. Those who are in a good, steady state of business with reliable histories can do.
[00:21:00] They can model effectively. Then I see a next tier down who are hedging their bets. They’ve got space on both sides of the, UK to European market. They’re uncertain of how far east they want to go. So the strongest GDPs – Germany, the UK, France, in that order – Holland has set itself up in a really fantastic way.
[00:21:21] (Holland) has been a trading nation for years. So Amsterdam and near Amsterdam have been fantastic. However, The planning laws have changed pretty dramatically in Amsterdam. There’s no new planning for large-volume distribution centers. So that throws that into the mix. That’s an unfortunate circumstance for an operator that’s looking to dynamically take space.
[00:21:43] So a long answer with all sorts of facets, I guess the summary of all of that is there are a whole lot of different considerations. It’s no one, clear, trodden path.
[00:21:53] Ninaad Acharya: That’s really interesting. The last part is about Amsterdam, right? Because historically, as I’ve seen, it’s the warehouses in the UK, right?
[00:22:01] And then the next one would usually be Amsterdam. Anyone you have a conversation with would be like, yeah, our European warehouses in Amsterdam. What’s that region called, Dusseldorf?
[00:22:10] Will Lovatt: It’s just across into Germany, but just over the border.
[00:22:13] Ninaad Acharya: And that’s the region that I’ve always heard about supply chain companies centering themselves out there.
[00:22:19] But that’s interesting that the planning laws are changing and you know what? Consider me educated on this one.
[00:22:25] Will Lovatt: The point is that the country governments have a role to play in either being attractive to ecommerce operators or not. Whether they realize that or not, they’re making some small decisions that are pushing boundaries one way or the other, and all the preferences for one side of the boundary or the other.
[00:22:44] Ninaad Acharya: And specifically speaking, so we spoke about the brands, right? What should these brands be aware of from a consumer expectation perspective, right? The nuance difference. I’m in the US, trying to move into the European market. Sounds like I should land in the UK first. It’s really comfortable to be able to play that out.
[00:23:02] And if you are going there, of course, the first market you are trying to target is definitely the UK. What is the consumer expectation that you are trying to meet? If I’m operating one warehouse, what is the user base used over there, or the consumer base, used to from a speed service capability, returns capability, etc.?
[00:23:24] Will Lovatt: There are a few different facets of that. First, what was the expectation? What’s selling? What and where is the market? Where is the public already buying? As I said before, something like 82% of the population has bought online in the last couple of years; COVID was an accelerator there. Most popular brands believe that – or sorry, not brand sectors segments… clothing and footwear. The obvious ones, something like 55% of the population, buy online for those areas.
[00:23:53] That falls away to 20% for health and beauty. Groceries, some currently running in the teens. So 13, 14, or 15% of folks are buying their groceries online; some fairly advanced operators. One of the benefits we have of being a relatively small geography is that there’s nationwide delivery and has been for quite some time.
[00:24:14] So that’s one of the points of differentiation. Competition has been time to deliver. So in the US, I see aspirations to get to 48-hour, 2-day delivery across the nation where we have retailers offering 4-hour delivery was involved in a project with a catalog operator… Now part of the Sainsbury’s group company called Argos.
[00:24:35] So I think Service Merchandise as was in the US. They decided that if they were going to maintain a valid offer and compete with Amazon, then they had to offer instant gratification; so 4-hour delivery windows. I can order now for delivery this evening, so when I get home from work, it’ll be there on my doorstep.
[00:24:52] That’s a pretty massive implication for operating a fulfillment network. Four hours doesn’t give me too long to pull inventory from a national distribution center and get it shipped. I’m having to deploy a lot of my inventory down in more local operations. We’re seeing Amazon do that, and I think on a global basis, they’re moving more toward the consumer to do exactly that. To be able to satisfy shorter and shorter leave times.
[00:25:20] Customer expectation is high. The interesting thing on the back of it, though, because we’ve been working down this path for some time, is that as we’ve gotten used to faster and faster deliveries. So it becomes more and more obvious when those (deliveries) are unreliable. We’re seeing consumers ordering products with fast delivery times but waiting; some of the survey data says that 85% of those who have ordered on a minimum delivery time are waiting 2 or 3 days before they open the package after it has arrived.
[00:25:49] So they don’t necessarily need a 4-hour window. You know, within-day delivery, but they want the product to be there reliably for a particular point in time. That then ushers us into a secondary piece, which is, if I’m going to do that, how about I go pick it up from the train station or on my way home from work?
[00:26:09] We use public transport more than the US. So there are some great pickup locations, lockers, and so on, which get a good level of use. Several players are competing to get those properties, and those facilities available.
[00:26:24] Ninaad Acharya: But again, it opens up more questions for me, right?
[00:26:28] So there, there is this side of, okay, the 4-hour delivery expectation. Of course, anyone who’s trying to compete with Amazon in the US or the Canadian market is also trying to achieve a delivery service level of a similar type of time window. But when you start looking at brands in the US, you see that 2-day as the baseline expectation. Or I would say 2 days like more on the premium side, and then you trail off to 5 days.
[00:26:56] Do you see a difference between categories in the UK where it’s okay if it’s general merchandise grocery? Of course, I want it in a few hours, but what about other things like brands like apparel? Is ASOS really trying to get you that 30-pound t-shirt in 2 hours or 4 hours?
[00:27:16] Will Lovatt: So, let’s pick each of those off individually because I think different strategies are emerging.
[00:27:21] Grocery isn’t immediate gratification. Let’s say I’ve got a shopping trip. I want it delivered every Thursday afternoon because that’s when I get home from work. Reliability is most important there, a narrow delivery window. So, if you can give me a 30-minute window, that’s great. I don’t have to disrupt my whole day or my half-day by being at home, waiting for this thing to make it up or not.
[00:27:40] Narrow delivery windows are part of the service offer to folks looking at very short delivery. Yeah, but they’re talking about ordering 7 p.m. to take it out this evening within certain cities. So, absolute immediate gratification. Search online for the new great dress that I’m going to wear tonight.
[00:27:57] Yeah, immediate gratification. Now, is that a cost of the board? No, of course. And there are plenty of categories with DIY, for example, where I’ve got a project on board. I’m building myself a new garden shed. I’m not going to do that this evening, maybe I’ll get some time this weekend, it may be a week or two after because it’s raining as it does in the UK. But have it reliably delivered with the kind of things that need to be around it so I can do (it when I am ready).
[00:28:20] I guess the takeaway from those is differential offers depending on the product, the circumstance, and the customer requirement. I can’t leave this conversation without talking about sustainability, though. It’s substantially different for the European market. We are seeing a real rise in requirements from consumers for better quality packaging, no single-use plastics, and ideally combining multiple orders.
[00:28:45] I’ll come and pick them up when I get off my train – opens a whole series of demands and offerings to pay more for those services. So speaking to the UPS guys the other day, they’re talking about electric final mile delivery. Which is more expensive than the traditional transport. And consumers are prepared to pay a premium for that.
[00:29:04] So, I think we will see it happen in the U. S. and rapidly. I’ve been talking to colleagues, and the kids need it or want it, but it hasn’t swept through to being mass market. I think Europe is over that switching point. And now, brands will be measured on their capability to be sustainable, as well as provide immediacy and reliability.
[00:29:22] You asked the US brand to consider. There’s a lot to take on board there.
[00:29:28] Ninaad Acharya: That makes a lot of sense. One thing I specifically notice on the European side or the UK specifically is the adoption of what you just mentioned: the pickup spots or those lockers. Both for returns from a drop-off and pickup.
[00:29:46] And we have seen a lot of European brands, or I should say, startups that have been successful in that arena, enter the US market. I see the Amazon lockers once in a while, somewhere in the neighborhood, but I haven’t seen that level of adoption. Having that part of your strategy from a delivery standpoint, what makes it so critical or so successful in the UK market?
[00:30:15] Maybe it’s not successful. It’s my perception, right? But I would want to hear from you.
[00:30:18] Will Lovatt: So we quite rightly hang on to the romantic notion that retail is in the high street. Then that’s all about community. Towns where people don’t move as often as they do. I talked to colleagues here who have moved multiple times in their careers, chasing jobs around the country; that is less common in the UK.
[00:30:40] So there is that fundamental of my town, my high street, and we’ve seen a lot of exits from the high street. It has been difficult for retailers. So here we have an opportunity for those providers to reinvigorate the high street. We’ve seen some unusual relationships pop up with some of the, for example, convenience store brands that have hundreds if not thousands of stores around being used as pickup and return locations.
[00:31:04] The post office, for example – I can walk in with a returns label or QR code. They’ll print your return label for you. So reusing some of the existing infrastructure to shore up the high street, to make sure it’s maintained. And again, consumer demand and that sense of community wanting my local high street to survive through what has been a really difficult period.
[00:31:25] It’s a strong underlying driver. I guess there’s also some geography to this, which is why I picked it up. If I’m traveling anyway. Then I can readily go to a location. I’m prepared to do that rather than having it sent to my house time away from home. Frankly, it’s an interesting question to ask: Do we work at home more?
[00:31:44] Certainly recently, the theme is Tuesday, Wednesday, and Thursday in the office, if need be, with Monday and Friday at home. So there’s a combination. I talked anecdotally to ecommerce operators then. Buyers and individuals who are considering different deliveries depending on their routines.
[00:32:00] So it is very much personal. That’s awesome.
[00:32:02] Ninaad Acharya: Thank you. That’s awesome. Again, consider me educated.
[00:32:05] Dan Coll: I want to go back to you. You said the word reliability quite a few times. If you’re a US brand and you’re working with a 3PL, the expectation is that an order that comes in is going to be fulfilled that same day and your SLA is like 99%.
[00:32:23] 99%. Because you just said reliability a few times, I’m wondering how advanced is the UK or European Fulfillment Network. If I buy something and I expect to get it in 4 hours, is that actually happening 99.99% of the time? Or am I requesting that because I don’t feel very confident it will be there in 4 hours if I need it in 2 days?
[00:32:50] Will Lovatt: That’s a good question. We publish some pretty open stats on who’s performing and who’s not. There are some favored providers and there are some that get kicked while they’re down. I won’t name them here, but you can Google it. So are they achieving? Yeah, at the top end of the market, they certainly are.
[00:33:04] The quality providers and the globals are doing a pretty solid job. Against those expectations within our geography, yeah, they’re hitting those large cities within the M25 for London very reliably because it is a differentiator. Customers are openly comparing. If you have a look at the forums, they’re talking about the courier…
[00:33:27] either failed them or satisfied their order openly. Those are known performances. So to answer your question directly, “Are people hitting their service levels?” Yes, consistently. Are there failures? Yeah, completely. There were some meltdowns over peak season, sure. Fantastic for us, because we can talk about the challenges of direct-to-consumer fulfillment through peak season. But yes, there are some failures; overall pretty good performance.
[00:33:52] Amazing.
[00:33:54] Ninaad Acharya: And how much of that plays into the US market specifically? And the Canadian market, the adoption of automation within the warehousing space has been, through the pandemic and post-pandemic, for various reasons now it’s inflation and cost increases. Then on the other side, the consumer expectation is still the same.
[00:34:19] On the other side, you have labor pressures that are starting to build up; they were built up quite high during the pandemic. They released, but on the other side, the cost of labor ended up going up. Now you want to bring your unit economics under control. And while all of this is happening, technology on the hardware side for robotics has evolved quite a bit.
[00:34:43] Perfect mixture to bring automation into the warehouse. You can’t get away (from it). It could be someone who runs a warehouse that does 3,000 orders a day or 3 million orders a day. The conversation of automation is happening in some room somewhere right now in the US and Canada. I do notice a lot of automation companies coming out of the UK.
[00:35:04] The question is, how’s the adoption out there, and if it is or is not there, what are the reasons driving that?
[00:35:12] Will Lovatt: I sat in on a conference recently where there was a discussion on the ground exactly at this point. There were some quite different views across the room. There were those automating everything as the way to go, unreliable labor, and the UK, meaning that the business case is absolutely strong.
[00:35:29] Just automate everything you can. And the other end of the spectrum, which was, “I need the flexibility. I don’t know where it can be next. I can’t afford to fix a facility and automate it because that might not be the right location or size of the facility going forward”.
[00:35:48] It’s automation where it fits. So if I look at our customer base, we’ve got those sort of automated areas of the business. Our power tool business has some large, difficult-to-handle products in one area of the business – but then the consumables, the cutting edge, the drill bit, which is fantastic stuff for automating.
[00:36:06] They’re using the tools that are appropriate and fit for purpose in an individual area. So what are the overall drivers and are we different? I think it’s the same business problem. We have the same labor challenges and issues. Again, I’m going to mention (that) Brexit chased away a whole bunch of low-cost labor.
[00:36:25] Now we’re reaping the rewards of that, which is a great opportunity for automation. Perhaps not the strategy the government thought they were going for, but it has been a good shot in the arm for the automation folks. Because of the minimum wage, there aren’t enough players or workers around to satisfy the demands of growing businesses.
[00:36:43] I was out with an operator just recently. He’s in quite a remote location. He grew a single-store power tools business and has subsequently grown quite a substantial ecommerce operation. He closed down the store and he’s ecommerce only. But he’s in the middle of nowhere. So, for him, automation is unnecessary because he can’t harness the right workforce, keep them in place, and reliably do so from a community.
[00:37:09] Yeah. Non-existent in his geography, a great case.
[00:37:11] Ninaad Acharya: That is super interesting. And by the way, while we talk about Brexit and all the challenges, I recently read a report about countries with the highest likelihood of a recession, and the UK was ranked number one. That’s a little scary.
[00:37:27] Will Lovatt: Yes.
[00:37:29] Thank you for digging that hole deep.
[00:37:32] Dan Coll: On that note. I wanted to ask you: obviously, you can’t avoid the COVID-19 impact conversation. We had a lot of brick and mortar that were forced to go ecommerce and we had a lot of pure-play digital native ecommerce brands that eventually were brought in to do retail.
[00:37:51] Distribution and drop shipping have more opportunities on the retail front. There aren’t many conversations today where brands aren’t having a holistic omnichannel strategy, whether that’s retail or marketplace. Just curious from your perspective, are you seeing the same thing over in Europe or are there any variances to that strategy a brand should consider if they’re coming into that market?
[00:38:21] Will Lovatt: I think there’s a lot of commonality. Certainly, I’m sure there are differences as well. But what are we seeing? The store is still critically important for experience and relationships. It’s very difficult to build a relationship with a digital-only customer. If I can offer the store as a returns location, or try-before-you-buy, I can embrace the balance of those omnichannels, rather than going one or other.
[00:38:46] There’s a fantastic overlap of trying the product in-store. You might try a different colour, but you try your size on and order it while you’re there. Whether that’s supported by the retail staff or whether it’s self-serve, or some combination – there are some great overlap technologies.
[00:39:05] In omnichannel and in the surveys we’ve done, we’re seeing that in the landed (omnichannel) retailers that landed retail. Store sales are the most important and the largest proportion of their sales, but they’re absolutely embracing those other channels and also looking at others.
[00:39:21] Roots to market. So dropship marketplaces… There’s something like 500 marketplaces across Europe now. They’re retailers that are embracing other people’s products to augment their own specialists. (We) see fulfillment operators of all flavors, but that’s a pretty hefty network and opportunity for, as you say, an arriving brand.
[00:39:43] What do I pick out of all of that? How do I go to market? Who do I partner with? Who’s friend and foe through all of this? Some of those discussions are really fascinating. We’ll be seeing some quite unusual relationships which, perhaps, you wouldn’t have expected a few years back of collaboration.
[00:40:00] So lots of changes.
[00:40:03] Dan Coll: Yeah, that’s fascinating. I appreciate your sharing. Our time has flown by, my friend. In just a blink of an eye, we’re there. First I want to thank you certainly for joining us. Great conversation and want to allow you to share with our listeners how they can learn more about you, where they can follow you on social, and where they can go to learn more about what you guys are offering at Deposco.
[00:40:31] Will Lovatt: Thanks for the invitation. On our website at Deposco.com, we publish quite a lot of thought leadership material across all sorts of different places. So look out for Deposco on LinkedIn. We’ve got white papers and thought leadership pieces. I like to think that we think outside the box. We’re not just about peddling our technology, which, by the way, we’ve done!
[00:40:49] But we do think about the context in which we engage with our customers that they’re grappling with some pretty challenging business scenarios. We’re a partner for change. We’re a partner for growth. We’re a partner to allow them to take advantage of new-age technology to open up new opportunities for their businesses.
[00:41:08] So reach out to us. I’m always prepared to take an email and have a chat.
[00:41:17] Dan Coll: Amazing. Thank you so much.
[00:41:19] Ninaad Acharya: Well, thank you very much. Will, really good talking to you. Thank you. Hi, I’m Nenad Acharya, CEO and co-founder of FulfillmentIQ, and I’m here with Dan Coll,
[00:41:31] Dan Coll: CRO and partner at FulfillmentIQ.
[00:41:33] We’re the team behind the Ecom Logistics Podcast. Our mission is to provide you with genuine insights from our work alongside logistics leaders to help you improve your supply chain.
[00:41:43] Ninaad Acharya: In the Ecom Logistics Podcast, we share the knowledge and insights we’ve gained from working alongside amazing brands.
[00:41:50] Retailers, 3PLs, and VCs, so you can make the most out of your supply chain journey.
[00:41:55] Dan Coll: If you like what you’re hearing, we truly appreciate your support with a 5-star rating on your favorite podcasting channel. Your feedback not only keeps us going but also helps others find the podcast. If you think Fulfillment IQ can assist you, or if you have an idea related to logistics, just reach out to me on LinkedIn.
[00:42:12] I’m always up for a chat. And ready to explore new possibilities together.
[00:42:16] Ninaad Acharya: Stay tuned to the Ecom Logistics Podcast on your favorite podcast platform for fresh and practical insights into ecommerce and logistics. Until next time, let’s keep making a difference in logistics together.