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Retailer's tale of online evolution towards integrated logistics

21 January 2016

It’s a story that is being played out around the world. One Nordic sports retailer is following a path towards integrated logistics that’s been proven time and again. Stefan Karlöf, a renowned Swedish expert in supply chain management, looks at what lessons can still be learnt.

The Nordic sports chain, Stadium, was early in developing an online presence, with its first site over a decade ago.

Since then there has been an intense effort to develop the company’s e-commerce capabilities, particularly in Sweden, Denmark and Finland, where internet penetration and online shopping is higher than average - Swedes shop the most, but per capita, Norway has the largest e-commerce market, closely followed by Sweden, Denmark and Finland.

A Stand Alone Function

The logistics processes serving Stadium's e-commerce orders were built from the start as a separate function, detached from the regular store inventory, and so it has remained. Like many, Stadium's standard logistics equipment was designed for large bulk flows to retail outlets, not based around individual picking and consumer-friendly handling that is typical of e-commerce.

As take up was fairly slow during the initial few years, trade was small, despite many website visitors. Recently, that has changed, with substantial increases year after year. By 2015, Stadium.se was receiving over a million visitors per month and online orders have growing very rapidly. In principle, the same things are sold online as in stores, but like the rest of the world, the shift to online purchasing is clear.

"We introduced a hybrid of manual and automatic handling in 2009 and we began to develop logistics in a more conscious way,” explains Fredrik Persson, head of online business at Stadium. “Now, e-commerce has its own inventory in the warehouse, from where we handle individual picking, packing and distribution."

Seizing The Initiative

Online sales are now becoming so important that retailers can ill afford to postpone investment in a bespoke e-commerce system. It’s a pattern that has developed globally and has rewarded those quick to seize the initiative. The demand for automated logistics solutions that can manage orders efficiently and quickly, regardless of order size, has seen a corresponding rise. Customers want simplicity and speed from order to delivery, whilst e-tailers want low picking and personnel costs.

They also look for the capabilities to increase volumes when needed and a need to pick and deliver individually, quickly and accurately. The result is an increasing interest in flexible, scalable and modular-based automated systems. As Fredrik Persson points out:  "Now, no one can ignore e-commerce and their online presence. It has become a natural part of the way we buy. Therefore, retailers must offer good e-commerce, which requires holistic and well-structured processes."

The key to really obtaining an integrated and well-structured e-commerce omni-channel is to have a holistic approach to the business and work with organization and business processes so that the customer experience will be as good as possible, regardless of the channel. "You have to go from the outside to the inside and have an overall view of the customer,” adds Frederik. “You have to make the customer's experience and purchasing as good and as simple as possible, while at the same time ensuring efficiency and profitability. Against this background, it is extremely important to have well-structured and effective logistics operation; both distribution and returns management.”

A Maturing Market?

So now no one can ignore e-commerce, is it safe to say the market has already matured? What is interesting is that the ideas around online promotions have indeed already begun to evolve. Even in the US, where the Black Friday and Cyber Monday sales events are closely tied in with public holidays, there’s scepticism about the ongoing participation in the phenomenon. This year was the third time Scandinavian’s have taken advantage of the promotions, and in that time online sales have more than doubled during both days. But many already believe that the discounts are too high and the costs of dealing with the onslaught of customers too large.

This is especially true of the cost of personnel and for the handling of goods and the logistics required for the goods to be available in stores and be able to be delivered fast enough. In addition, many merchants suffer due to the fact that consumers expect continued discounts and offers up through Christmas, which further erodes profitability. So the fluctuations in orders may bring forward (rather than add to) retail revenue streams, whilst stretching outmoded logistics capabilities to the maximum. And if the patterns emerging in the US and Europe continue in Scandinavia and elsewhere, the lesson may be that the shopping public has already taken e-commerce to their hearts. It would seem there’s now perhaps no need to try to entice them in with extra gimmicks.

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