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4 innovative retail fulfilment methods to know

The on-demand economy has fueled consumer desire for instant gratification. Products and platforms ranging from Airbnb and Uber, to Seamless or Deliveroo, have resulted in growing appetite in the market for convenience and immediacy on virtually anything and everything we can dream of today.

Needless to say, that has therefore filtered over to retail, with mega corporations like Amazon only feeding the notion that we need access to products within the same or next day – leaving little option but for other businesses to follow suit.

By 2021, over 2.14 billion people worldwide are expected to buy products online, reports eMarketer. A core aspect of the purchasing decisions that come with this is speed of delivery. According to McKinsey & Co for instance, 25% of consumers would pay a premium to receive products same day.

This of course presents logistical challenges. The cost of global delivery amounts to €70billion a year, according to McKinsey, with the last mile portion of that being the biggest challenge to fulfill efficiently. As a result, numerous logistics businesses have been scrabbling to offer the right kind of solutions for their clients. Over the next five years, 78% of them are expected to provide same day delivery, and within 10 years, 39% anticipate two-hour delivery, reports Zebra Technologies.

In a bid to be competitive, luxury has picked up on it as well. Farfetch now offer 90-minute delivery in 10 cities globally for instance, while Net-a-Porter is also striving to improve the shopping experience by offering its top tier a ‘You Try, We Wait’ same day service.

There are many others experimenting with their own methods alongside. Here are four areas of innovation within the delivery space we’re currently tracking…

CROWDSOURCED DELIVERY

The last mile of fulfillment is the most expensive and time consuming part of the delivery process, but numerous startups are looking to disrupt this space by enabling anyone to have anything delivered on-demand by trialling such areas as crowdsourced delivery. 

Similar to the structure of Uber, this allows individual couriers to deliver parcels straight to your door, or facilitate them for pick-up or drop-off around individual homes and offices. Crowdsourced delivery is expected to be adopted by 90% of retailers by 2028, according to a report by delivery company Roadie.

One e-commerce company currently trialling such a scheme is Zalando. This allows people to volunteer their homes as pick-up and drop-off points in Scandinavia. Primarily intended to benefit the customer, it also enables self-employed, retired or stay-at-home parents to earn some extra income.

ROBOTIC POSTIES
Ford Delivery Robot

McKinsey & Co predicts that more than 80% of parcels will be delivered autonomously in the next decade. The thought of robots walking around town beside us may seem a little futuristic, but many companies have already successfully tested them.

Postmates is intending to roll out a new autonomous delivery robot in Los Angeles later this year, for instance. The self-driving rover, named Serve, uses a camera, light detector and sensor to safely navigate the sidewalk. This can create a virtual picture of the world in real time and communicate with customers via an interactive touch screen. Serve is part of Postmates’ vision of a world where goods move rapidly and efficiently throughout cities.

Ford meanwhile is experimenting with a package carrying robot that will be able to walk, climb stairs and deliver your parcel to your front door. In partnership with Agility Robotics, the robot – called Digit – can successfully carry a 40lb package.

DRONES
Amazon Prime Air Service

Next up is autonomous urban aircrafts, otherwise known as drones. This could become a $1.5 trillion industry by 2040, according to Morgan Stanley Research.

Amazon has been leading the way in the space for some time with its Prime Air service, which is under constant experimentation. Its latest announcement said consumers will be able to get parcels delivered within 30 minutes or less by drone, thanks to a sophisticated ‘sense and avoid’ technology allowing it to safely maneuver in the sky. Executive Jeff Wilke stated that between 75%-90% of deliveries could technically be handled by drones in the future.

Strictly speaking, however, when that will be is still unclear. While the technology is improving constantly – using a combination of thermal cameras, depth cameras and sophisticated machine learning – there remains the small issue of authorization. Regulation is continuing to evolve, with a recent test moving things forward in the US market, and further developments happening in Europe, but Amazon’s view of commercial drone deliveries ready within just a few months, seems unlikely.

It’s not alone in trying however. Wing, a drone service from Alphabet – Google’s parent company – has completed a successful trial in Australia and is now doing so in Finland. Similarly, UPS is currently testing drones for the use of medical supplies and samples in North Carolina. Its long term plan is to eventually roll out the drones for the industrial, manufacturing and retail markets. UPS is another that has applied for a Federal Aviation Administration certificate that it hopes will allow it to operate the drones on mass.

ALL ACCESS
Waitrose While You’re Away Yale Technology

In a bid to combat the fact so many parcels see unsuccessful delivery attempts due to the absence of the recipient, there are also numerous experiments in the market to get around the need for humans to be present when the action takes place. This is especially being considered in the online grocery market, which is expected to grow 52% over the next give years to £17.3billion, meaning investments in home deliveries will need to be expanded.

One example we’ve seen comes again from Amazon, which has developed a system that allows couriers to deliver parcels to a customer’s car. The Key-In-Car service is available for all Prime members with a Volvo or General Motors vehicle dated after 2015. Through encryption, the courier can unlock the trunk without needing a key. This is available in 37 cities across the US. Similarly, Skoda is developing a technology that allows delivery firms one-time access to the trunk of the car. The biggest challenge to this opportunity is the threat of security. The risks can be mitigated however by couriers wearing body cameras and sending photographic evidence upon delivery, but retailers must gain consumer trust in the process first.

British supermarket Waitrose, part of the John Lewis Partnership, has gone even further by testing a ‘While you’re Away’ service in south London. This initiative gives delivery drivers a unique code that gives them temporary access to the customer’s property, allowing them to put away the shopping on their behalf. The lock technology has been developed by Yale and will be free to install for customers. To give them piece of mind, each driver will indeed wear a video camera to record their steps, which the customer can request access to.

How are you thinking about innovative delivery solutions? The Current Global is a transformation consultancy driving growth within fashion, luxury and retail. Our mission is to solve challenges and facilitate change. We are thinkers and builders delivering innovative solutions and experiences. Get in touch to learn more. 

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In-depth: H&M puts tech at the heart of action plan to turn the brand around

H&M

H&M’s failure to adapt to the digital age is beginning to show, as its dismal results for the year ending November 2017, announced last week, highlighted.

Once the darling in the fast fashion world, the company at large just posted its biggest profit drop in six years – down 14% in the year ending November 2017, to 20.6 billion SEK ($2.6 billion).

While the group is made up of eight (soon to be nine) brands, including COS, & Other Stories, Monki and more, the H&M brand itself still contributes circa 90% of revenues. Getting this original part of the business right, then, is crucial for the long-term health of the company.

“The fashion industry is changing fast. At the heart of the transformation is digitalisation and it is driving the need to transform and rethink faster and faster,” said CEO Karl-Johan Persson in an investor call earlier this year.

Although the brand has attempted to catch-up with its competition by shifting to online (it now offers e-commerce in 43 out of its 69 markets), deep-rooted supply chain issues have made integration with its offline stores difficult. Last year Goldman Sachs reported that H&M had lead times twice as long as its biggest competitor, Inditex, which owns Zara. It’s also facing ever-stiffer competition from the likes of ASOS, Boohoo.com, Zalando and more.

Add to that the fact it has just announced that while it is opening 390 new stores this year, it is closing 170, resulting in 220 net new; a dramatic fall from it’s previous standing. All of that left the company’s stock price at its lowest in a decade earlier this month.

H&M Capital Markets Day
H&M’s Capital Markets Day

In a bid to update and reassure investors on its strategy for recovery, the company hosted its first Capital Markets Day in Stockholm yesterday. Speaking to the audience, Persson explained both the company’s failings and its understanding of the changing retail and consumer landscape.

“We know the industry is undergoing a huge shift – the catalyst for this transformation is technology. It’s not just one technology, but a set that includes artificial intelligence (AI), augmented reality (AR), robotics and more,” he said. “There are changing consumer behaviours as a result – they are expecting more and more. They expect a more tailored offering in how we set up our stores, in how we communicate with [them]. They want a hassle free shopping experience, and the ability to shop anywhere and anytime. And they want even better designs at higher quality and better prices.”

He added: “We know what our mistakes are, and how to improve them.” At the heart of this – in addition to fixing issues around the assortment and excess inventory – is a bid to make the shopping experience both online and offline, more inspiring, relevant and convenient.

Facilitating convenience

A big focus at the core of H&M’s announced plans is a focus on reducing friction. Leading this charge is investment in three new automation warehouses that will mean next-day delivery for 90% of the European population over the next 12 months.

Delivery anytime, anywhere is an important demand from always-on customers, Daniel Claesson, head of business development at H&M, explained. The company next aims to launch same-day delivery to key cities in Europe next year.

It has also recently introduced free shipping and returns to its loyalty customers, or Club Members. On top of that, from a convenience perspective, comes a new option to choose specific timeslots for when deliveries will arrive, as well as to opt to return in store.

The company is also upgrading its payments capability, thinking about local preferences to make it easier to pay both in-store and online relevant to the market. One example is how it recently introduced a ‘Buy now, pay later’ option online in eight markets, with plans to roll it out further to new territories, as well as in-store, ahead.

Inspiring discovery

As part of its focus on improving efficiencies in its supply chain, H&M is particularly driving visibility and thus accuracy around stock. By next year, it expects 80% of its stores to be powered by RFID. In addition, it’s in the process of upgrading eight of its most mature online markets to a new platform that will enable better integration. All of its online markets will be on the new platform a year from now.

Off the back of that, it’s able to offer all manner of new discovery and easy-shopping options for customers. Find a Store, for instance, shows them whether an online item is in stock at a physical store nearby. Scan and Buy, meanwhile, allows the customer to scan an in-store label and find out its availability beyond that store – both online and offline.

The team already offers personalized recommendations in the online store, and will now be bringing that into the physical store too, also thanks to RFID. “In-store mode” in its app enables shoppers to explore product suited to them and their preferences in that particular store, in real-time. The brand has also launched visual search, enabling users to search via images in its app.

In addition, the store experience itself is due to get an overhaul in a bid to enable more emotional connections with consumers, Claesson said. The team is already testing the idea of a flagship of the future, with numerous “add-on services”, as a result. It intends to further learn from these in 2018 and then scale the project up in 2019. The details of what this looks like were not yet revealed.

Relevancy and personalization

“Five billion visits and 800 million transactions – that is an asset in a data-driven world,” Claesson remarked in relation to the company’s focus on advanced analytics and AI.

That capability will bring value to everything from product development, to all levels of the supply chain and to the customer experience, he explained. One of the key failures for the brand in 2017 surrounded issues in the assortment and its allocation – through data, or its quantification allocation process, the team will place more relevant product in each and every store. This is in pilot stage in two stores already.

Brands need to be local and personalized, Claesson highlighted. For brick-and-mortar, this means curated assortments relevant to each location, responding to granular customer needs. “Personalization is about turning our store, into your store,” he said. Advanced analytics is what makes a true one-to-one experience possible, he added.

The brand is also making strides with its digital communications – last year it tested personalized emails, targeted offers and push notifications. “[Eventually], the customer experience will be personalized in everything, from presentation to checkout and delivery options,” Claesson said.

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What you missed: Mary Meeker’s internet trends, inside 24 Sèvres, robots making our clothes

Mary Meeker delivered her annual internet trends report
Mary Meeker delivered her annual internet trends report

A round-up of everything you might have missed in relevant fashion business, digital comms and tech industry news over the past fortnight.


TOP STORIES
  • What Mary Meeker’s 2017 internet trends report means for fashion [BoF]
  • Inside 24 Sèvres: LVMH opens its first multi-brand internet store [FT]
  • The case for letting robots make our clothes [Motherboard]
  • The Google Cultural Institute’s new digital archive could mean big things for fashion history [Fashionista]
  • How the luxury retail sector is using technology to remain relevant [Independent]

BUSINESS
  • What Trump’s climate reversal means for the fashion industry [BoF]
  • Mickey Drexler’s J. Crew departure marks the end of an era [Retail Dive]
  • Kering makes pledge to circular economy in aim to build sustainable practices [Glossy]
  • Mapping the benefits of a circular economy [McKinsey]

SOCIAL MEDIA & MARKETING
  • Kate Spade continues #MissAdventure campaign series [AdWeek]
  • Saks Fifth Avenue is turning to iMessage to bolster sales [Glossy]
  • Crocs thanks Instagram users for sharing with original art [MediaPost]
  • How six retailers are using chatbots to boost customer engagement (and why you should too) [ClickZ]

RETAIL & E-COMMERCE
  • What online fashion brands can learn from Amazon’s stores [Glossy]
  • This is what will happen to all the empty stores you’re seeing [Forbes]
  • The real cost of e-commerce logistics [Retail Dive]
  • How shoppers use their smartphones in stores [Retail Dive]

TECHNOLOGY
  • The Unseen has designed a t-shirt that senses climate change [Dazed]
  • Amazon patents shipping label with built-in parachute for dropping packages from drones [GeekWire]
  • Inside the production of WearableX’s first responsive yoga pant [Glossy]

START-UPS
  • Nomadic nabs $6M for its modular VR system for retail spaces [TechCrunch]
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You can now have Gucci delivered within 90 minutes in 10 major cities

Store to door in 90 minutes from Gucci and Farfetch
Store to door in 90 minutes from Gucci and Farfetch

“Store to door in 90 minutes” is the headline behind a new partnership between Gucci and e-commerce platform Farfetch. The duo have teamed up to indeed enable shoppers to receive items they order from the Farfetch website or app within a 90-minute window.

Those orders are fulfilled directly from Gucci stores in London, New York, Dubai, Los Angeles, Madrid, Miami, Milan, Paris, Sao Paulo and Tokyo. A launch video (as below) shows three women – in Tokyo, Milan and LA – having an urgent need to replace their Gucci wares after laundry shrinkage, coffee spills and theft.

Said José Neves, founder, co-chairman and CEO of Farfetch at an event launching the company’s Store of the Future concept yesterday: “Luxury takes time but it needs to take time the right way. If you’re in a Michelin-starred restaurant, you want it to be slow. What you don’t want to be is waiting for the table. So luxury takes time to produce and bring to market. But once it’s there then it’s all about fast delivery. And the reason for that is that time has become – or perhaps was always and now we’re more conscious of it – the ultimate luxury good.”

He referenced start-ups including Airbnb, Uber, Deliveroo and Spotify as providing us what we want, exactly when we want it, as well as research carried out by Bain & Company that shows the number one consumer criteria when buying luxury online, is timely delivery.

Farfetch operates a distributed model, meaning it has thousands of points worldwide it ships from – including brand stores, boutiques and warehouses. It does so to 190 countries, with 89% of its shipments heading overseas. It already offers click and collect in 24 markets and same day delivery in 12 cities.

This 90-minute launch with Gucci (also dubbed F90) is an exclusive one for six months before it will roll it out to other partners.

Gucci president and CEO Marco Bizzari said: “This service represents the type of new service level that the luxury fashion industry needs to embrace in order to meet the ever-increasing expectation among luxury customers today, for an outstanding level of service that is flexible and seamless across channels and geographical locations.”

A number of other fashion retailers have trialled such deliveries in the past, including the likes of Warehouse and Oasis in the UK. MatchesFashion.com recently launched 90-minute delivery in London also, while Net-a-Porter and Mr Porter are testing out a “You try, we wait” service.