Analysis: Benefits and drawbacks of outsourcing to logistics providers

Transient, fast-fashion trends that come and go in a matter of weeks and the traditional fashion calendar as good as torn up means getting clothes to shoppers is complex and potentially costly if not done right.

Behind the scenes, retailers are having to bend over backwards to get every stage of the transaction right from order to delivery, managing the whole process to turn a profit and get clothes to shoppers faster than ever before.

N Brown womenswear trading director Linda Quinn says: “Consumers are just so much more demanding and they’re really driving everything. We’re sourcing products from quicker response sources to shorten lead times. Fast-fashion products have a six-to-eight week turnaround, you can’t afford to lose any time.”

The need to put speed at the forefront of the fashion supply chain has been dictated by the changing mindset of increasingly confident online shoppers, believes Mark Catley, head of ecommerce development for supply chain management firm Norbert Dentressangle.

“The consumer is always king, and what the consumer wants drives the industry. Broadband has improved and shoppers have got more and more confident,” he says. “The consumer has a level of certainty now that they didn’t have previously - you know that once you click that item it’s yours. The supply chain does the rest.”

Outside help

Ecommerce logistics has become crucial to fashion retailers’ business, and so costly and difficult to manage at the same time that retailers are increasingly turning to third-party logistics providers (3PL) for the infrastructure and processes they already have in place.

Andy Gulliford, chief operating officer of property investment and development company Segro, says: “You need to be able to deliver to the home and give customers a great experience, but there are only a few retailers like Amazon that can do that themselves. Most will continue to outsource. To set up a network of hubs is hugely expensive.”

But using a 3PL isn’t the answer to all of a retailer’s headaches. One reason for Amazon’s phenomenal success is its ability to manage every step of the process, including delivery. As brand identity is such an important part of a retailer’s marketing, outsourcing often has the opposite effect.

“The problem is that the retailer is effectively handing over its brand to a third party,” Gulliford says. “The customer only sees that part of the chain. Some retailers are a bit uncomfortable doing that and some people have talked about taking it in house.”

For fashion retailers in 2014 this is a big dilemma. Horror story rumours about parcels being thrown over garden fences during Christmas have only added to their unwillingness to hand over the delivery process to parcel companies, given how crucial home delivery now is to their reputation. But the alternative is often too complex and expensive to consider.

Savills director of industrial and distribution Toby Green says retailers’ hands are tied, especially when it comes to fast fashion. “It’s a massive challenge,” he says. “It’s all about speed to market. To set up the infrastructure required to deliver hundreds of parcels a day is a considerable problem. If you want to become an internet retailer the easiest way is to do it via a 3PL.”

Click-and-collect

But one development is taking some pressure off. Contrary to some predictions, shoppers are showing an increased willingness to use click-and-collect instead of home delivery - a welcome development given that click-and-collect is much easier to manage because it can be built into existing supply chain infrastructures.

Gulliford explains: “People want convenience over speed. Click-and-collect is growing faster than home delivery and a lot of retailers are encouraging it in store.”

And there is an added benefit that retailers are beginning to take advantage of. “Retailers like people to return things to store because they often make an impulse purchase while they’re there. But you’ve got to be careful that your store doesn’t turn into a warehouse. You can get a really muddled sales space,” Gulliford says.

Establishing click-and-collect in store is relatively easy for fashion brands. But another big shift that is already underway is the growth of remote collection locations. Driven by the need for convenience, retailers such as Amazon and Asda have installed collection points in a number of locations including car parks and even on the London Underground.

The announcement from Asda last autumn to offer grocery collections in selected Tube station car parks was only an embryonic version of the full click-and-collect offer that many envisage for the Tube and other transport networks. But it was a major step forward and, for fashion retailers, an intriguing glimpse of the future.

Where the grocers lead, fashion often follows, and with customers demanding greater speed and convenience, the clothes model may well start to reflect food deliveries.

Green observes: “Click-and-collect is growing quicker than expected and the supply chain is evolving around that. Everybody is following the model of the food retailers.”

Global move

Having achieved ecommerce success in the UK, the next step for many of fashion’s biggest names is to roll out the service on a larger scale, including overseas. In 2013 a host of fashion names took the plunge or expanded, including Asos, which launched its standalone Chinese website, Asos.com/cn, in November, adding to its operations in other countries including Russia.

Sean Hallows, operations director for logistics firm Clipper, says it brings a host of challenges, including one issue that is starting to feature more and more in supply chains operations - returns.

He says: “Ecommerce retailers are starting to trade globally. It’s a constantly changing situation. On the Continent, levels of returns are higher, which is part and parcel of the process. As retailers grapple with this overseas, it’s going to become an even bigger challenge.”

Not only is the web getting wider in scope, but Hallows, who was previously European distribution director at TK Maxx, says the same risk taken by retailers using a 3PL in the UK - of trusting a third party to face the customer - is even more of an issue when supply chains cross borders.

He explains: “It’s about getting the right talent and a combination of finding the right people who know how it’s done and finding people with local knowledge. If you’re supplying overseas from a retailer’s perspective you really need to have a good relationship with that third party.

“Just because a 3PL might be strong in the UK doesn’t mean they’re going to be able to recreate that in another country.”

In a globalised world where shoppers demand fast fashion at the click of a button, the new challenges are huge. If fast-fashion customers are to be kept happy, retailers’ supply chains and delivery offers need close attention.