The CQ: Supply chains are more than cost centers
Changes in fulfillment and logistics have been fast and furious, inspiring a risk-mitigation mindset.
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Buzzing at the Forerunner Office…
Brands have a window to set themselves up for success when it comes to logistics
By Eurie Kim, Managing Partner
@eurie_kim
In the last two years, the world of logistics and fulfillment has experienced seismic shifts with supply-chain slow-downs, worker shortages, and last-mile fulfillment woes. After Covid, supply-chain issues were the second-most cited barrier for U.S. business leaders to hitting their goals. While the pull back in ecommerce has allowed shipment delays and freight rates to settle, the market dynamic has intensified in other ways. The 15-minutes of fame for 15-minute delivery companies, including Gorillas, Getir, JOKR, and GoPuff, came to an end this summer. And, more recently, Fedex reported revenue and package volumes slowing due to Amazon’s latest investments in logistics and discounted shipping.
These touch-and-go times have brought into focus how supply chains are more than cost centers for a business: they are risk mitigation strategies. With the shifts in the market, enterprise and SMB brands have the opportunity to step back and set themselves up for success going forward. A McKinsey survey found that, in 2020, companies’ responses to Covid actually sped up their digital transformations of their internal operations and their customer and supply chain interactions by three to four years.
To date, Amazon and Shopify have driven the most change. And it’s a rivalry that has heated up as of late with each company seemingly making moves to outdo the other, and brands getting caught in the middle. Amazon’s new “Buy with Prime” offering, which allows its merchants to sell products on their own website but take advantage of the benefits of Prime’s fast and free deliveries and returns, has stepped on the toes of Shopify’s ambitions for a vertically-integrated business model. “Buy with Prime” is a white-label solution for Shopify sellers to leverage Amazon's last-mile and fulfillment network, but it only works for those who also fulfill through Amazon's warehouse network. Shopify’s follow-up came a few weeks later with a warning to its sellers not to install Amazon’s “Buy with Prime” button, citing that it violates Shopify’s terms of service and raises several security risks including not being able to protect against fraudulent orders and the possibility of Amazon saving customer records.
Amazon further upped the ante when it quietly acquired Veeqo, a multi-carrier shipping API, then offered up the service to Shopify sellers for free. This strategic move enables sellers to access discounted shipping rates in addition to consolidating all aspects of logistics operations into one dashboard. In the hopes to own how 1.7M+ SMB sellers manage their last-mile logistics, the classic storyline has shifted: It’s no longer David vs. Goliath, but Goliath vs. Goliath.
Larger retailers are taking matters into their own hands, owning their logistics and leveraging their supply chains as revenue generators in order to compete in this uncertain, ever-changing landscape. American Eagle Outfitters recently announced the acquisition of Quiet Platforms (formerly the well-known Quiet Logistics) and launched a white-label, last-mile delivery network that enables over 60 small and mid-sized retailers, including Peloton and Steve Madden, to access more than 40 carriers across the U.S. The clothing brand claims this has contributed to a reduction of about 35% in delivery times. Gap next stepped into the logistics ring a month later with the launch of GPS Platform Services, which offers next-day and two-day shipping, short-term storage, and returns processing to other retailers. Meanwhile, Spanish fashion brand Zara bought five logistics centers to better control their last-mile logistics in the U.S.
The proliferation of options and pace of change can leave heads spinning. How should founders set themselves up for success amidst all this change? There’s two important goals to keep in mind when it comes to fulfillment: 1) brands need to be able to deliver a delightful experience that meets (or exceeds) consumer expectations; 2) brands need to be able to meet customers where they are across distribution channels. For the former, Amazon set a high bar and companies must position themselves to be able reach that bar economically and with elasticity for scale and diversity for potential points of failure. For the latter, aim to stay out of the crosshairs of powerful players that can limit your business potential.
Brands today have no shortage of solutions to stay out of the cross-hairs and explore options outside of major carrier shipping. Swyft enables the transition to multi-carrier shipping, improving transit times to 95% 1-day delivery and in most cases reducing total last-mile spend. Narvar focuses on the post-purchase customer experience with high-conviction delivery dates, configurable fulfillment rules, and seamless returns. Shippo offers a multi-carrier shipping software while Veho offers modern delivery technology and service through a marketplace of crowdsourced drivers. And Shipbob creates a distributed network of warehouses for optimized omni-channel fulfillment.
Whichever path you choose, now is the time for brands to refine their strategy.
This Week’s Top 10 Consumer Insights
By Forerunner
@ForerunnerVC
As Russia’s war in the Ukraine drives inflation and the cost of energy higher, the Organization for Economic Cooperation and Development forecasted that the global economy is slowing more than expected, predicting that global economic growth would be a “modest” 3% this year, and 2.2% next year, down from 2.8% a few months ago.
The Consumer Confidence Index, tracking consumers’ feelings regarding the economy, rose to 108 from 103.6 in September, as new-home sales increased, and gas prices fell. Yet orders for long-lasting goods like washing machines and computers are on the decline.
Even in the face of economic pressures, a Mastercard study shows consumers are leaning into experiences and prioritizing essential goods now more than ever.
TikTok will expand the length of descriptions from 300 characters to 2,200 characters, creating a window for creators and brands to further improve content for search.
This is why every social platform seems to have the same content. Blame it on “bootleg content.” As The Verge explains: “For many accounts, the goal is to churn through enough content to build a following so they can flip the account into advertising mode for a quick buck.”
Amazon dominates the $113 billion smart home market — here’s how it uses the data it collects.
The past two and a half years have dramatically changed the way people shop for furnishings. Chairish released their second annual Home Furnishings Resale Report.
Lululemon is launching a fitness platform, Lululemon Studio, which will offer access to more than 10,000 on-demand and live-streamed classes for in-person or in-home workouts available through a Mirror subscription.
To attract younger audiences, Walmart enters the metaverse with the launch of two immersive experiences with Roblox. Walmart Land and Walmart’s Universe of Play will include virtual dressing room for Roblox avatars, as well as virtual concerts and games.
While 50% of senior retailer executives surveyed think sustainability is not a big consideration for consumers, a new report discovered two-thirds of consumers are willing to pay more than retailers expect for sustainable products.
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Weekly Wisdom
“I think a lot of times when people think about marketplaces, they get intellectually interested in the supply and demand side without recognizing the consumer just wants a simple, good experience.”
—Brian O’Malley, Managing Partner at Forerunner, talks to Nick Moran on The Full Ratchet podcast, about the key insight that some founders tend to lose sight of when launching a marketplace business
Forerunner Highlights
Kirsten Green spoke with Axios’ hosts Kia Kokalitcheva and Dan Primack and Citi Global M&A vice chair Christina Mohr about what’s to come in the M&A market.
Portfolio Highlights
Nylon praises Away’s new collection partnering with three queer designers.
Hims & Hers first annual Let’s Talk About Sex Report was covered in Forbes, Mediapost, and WWD.
Engadget, Daily Beast, Gizmodo, New Atlas, and The Verge applaud the sleeker, more comfortable design of the Oura (3G) Horizon ring.
Insider names Prose one of the 13 best haircare brands, according to professional hairstylists and trichologists.
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