Will ‘coopetition’ enable retailers to profitably deliver online orders?
Shekar Natarajan, chief supply chain officer at American Eagle Outfitters, thinks it’s in his company’s best interest to work with competitors to deliver online orders to consumers across the U.S.
Mr. Natarajan, speaking earlier this week at the National Retail Federation’s inaugural NRF Supply Chain 360 conference, told the audience that collaborating with other competitors is a win all around for retailers, parcel delivery companies, consumers and the environment.
He described a system whereby consumers give retailers permission to consolidate orders. Packages from multiple retailers are sent to a single “funnel” point and boxed together for delivery to their final destinations.
Retailers and brands benefit from sharing last-mile shipping costs. Courier companies are able to achieve “more density at the doorstep,” making it cheaper for them to make deliveries. Consumers benefit because they are now getting one box at their doors instead of several, which reduces the number they have to break down. All of this activity from retailer to consumer, Mr. Natarajan pointed out, is also good for the environment given the reductions in fuel and packaging costs.
American Eagle Outfitters last year, it should be noted, acquired AirTerra, a shipper aggregator system startup founded by former Nordstrom chief supply chain officer Brent Beabout. The retailer also bought Quiet Logistics, which operates in-market fulfillment centers to provide cost effective same- and next-day delivery services for AEO and other retailers and brands.
Mr. Natarajan said that it does not take that many retailers participating in the system to make a big difference on the cost line.
More than half the nation’s GDP is concentrated in the top 25 cities, he said. Those markets represent about 300 million packages delivered, with American Eagle accounting for about 10 percent of the total. A collaboration between ten American Eagle-sized businesses can result in real cost reductions. Get that to 100 businesses doing a similar volume and the math really begins to add up on an annual basis.
“We project that 49 billion miles will be saved [and] 90,000 trucks will be taken out of the system. And we will basically save $40 billion for everyone who’s participating in this, and it’s like a 30 percent reduction in carbon footprint,” he said.
- American Eagle Outfitter’s Chief Supply Chain Officer on a building a shared supply chain service – YouTube
- American Eagle acquires logistics startup to help transform its supply chain – RetailWire
- American Eagle Outfitters is literally serious about owning its supply chain – RetailWire
DISCUSSION QUESTIONS: How likely are retailers in large numbers to buy into a delivery aggregation system like the one described by Shekar Natarajan? What do you see as the advantages and potential disadvantages to such a delivery system?