American Eagle acquires logistics startup to help transform its supply chain
American Eagle Outfitters has acquired AirTerra, a logistics startup founded by former Nordstrom chief supply chain officer Brent Beabout, which has developed a shipper aggregator system it claims will not only deliver packages to businesses more quickly but do so with greater reliability and less cost.
AirTerra’s system aggregates packages from multiple shippers through its own network in major metropolitan areas. It’s “point-to-point” network is designed to ship parcels across long zones faster and with a greater degree of control than offered through legacy shippers. In the end, companies selling goods online see the time from “click to deliver” reduced along with costs for those deliveries.
The startup, Business Insider reports, began shipping its first packages this week with the service currently reaching 61 percent of the U.S. population. The deal is seen as unusual for American Eagle as its only two publicly-known acquisitions over the past decade have been for clothing brands.
The retailer made the deal as digital sales continue to grow in importance for the company. COO Michael Rempell, speaking on American Eagle’s first quarter earnings call in May, described the “remarkable results” coming from the digital side of the business.
“Our revenue rose 57 percent from 2019, producing incremental revenue of $150 million in the first quarter,” he said. “Online traffic and transaction — transactions increased well into the double digits. We achieved strong AURs (average unit retail) and significantly higher margin. Further fueling an already highly profitable channel, digital penetration increased to 40 percent of total revenue, up from 30 percent in 2019.”
Mr. Rempell discussed strides being made by American Eagle on the supply chain side on the same call. He said that even as progress was evident, the retailer had just begun “scratching the surface” of its potential. The company has sought to leverage delivery expenses and “had fewer shipments per order and delivered to customers 1.5 days faster than in the first quarter of 2019.”
American Eagle’s COO said the retailer was looking at merchandise returns as an opportunity. “Our challenge is, how can we make that a great experience for the customer, how could we refund money quick, how could we get that inventory returned quickly and back into the spot where we’re most likely to sell it?” he said. New technologies implemented in the first quarter helped American Eagle make gains across all these objectives.
- American Eagle acquires Walmart alum’s logistics startup – Business Insider
- Why American Eagle Acquired Nordstrom Alum’s Logistics Startup – Sourcing Journal
- Services – AirTerra
- American Eagle Outfitters Inc (AEO) Q1 2021 Earnings Call Transcript – The Motley Fool
DISCUSSION QUESTIONS: How do you see American Eagle Outfitters and its various retail businesses leveraging AirTerra’s service? What do you think about the retailer’s approach to reaching its supply chain potential?