The ever-evolving e-commerce revolution is reshaping the fashion retail scene and providing unprecedented convenience to consumers. However, for businesses navigating this dynamic environment, this transformation comes with many logistical challenges, making the complexity of effective logistics management increasingly critical to business success.
In 2023, logistics will be greatly influenced by geopolitics. Rising transportation costs due to inflation have led companies to adopt new practices. Within this framework, the path is guided by the keen marketing acumen and optimization mindset of the most progressive fashion companies. Some of them recognize that optimizing logistics and costs is not only a path to efficiency, but also an opportunity to move toward sustainability and responsible practices.
Increased product returns and loyalty initiatives
In the realm of e-shopping experiences, consumers are actively seeking a smooth and adaptable journey with flexible shipping options, fast and free shipping, and easy return processes. Prompt and appropriate delivery of products plays a vital role in customer retention. According to his Cubyn, a leading provider of e-fulfillment and e-commerce robots in France, virtually 96% of consumers consider the quality of their delivery experience to be an important factor influencing their future purchasing decisions. I am. Consumers are also interested in innovations that improve their shopping experience, such as mobile shopping and voice shopping.
However, these methods ultimately encourage impulse purchases and contribute to the growing trend of returns. In 2022, he Statista reported that 20% of French consumers returned clothing ordered online. This, along with the complexity of inventory management, poses a significant logistical challenge for major e-commerce players. Free product returns are common, especially in the fashion sector. At least it used to be available in large quantities. From 2022, ready-to-wear retailers such as Zara, H&M, Boohoo and Next will start charging fees for returns of items purchased online, marking a departure from the era of excessive “free returns”. For example, Zara currently has a $1.95 deduction. Even the $90 billion Chinese giant Shein has introduced a restocking fee, although returns are free for first purchases.
What's more, these marketing-savvy companies have turned the financial and logistical challenge of increasing profits into a unique opportunity to build and cultivate customer loyalty. Similar to the Amazon Prime model, the fashion company offers a membership-based return option to her VIP customers, offering a more personalized experience to her high-value and loyal shoppers. Membership programs have been proven to not only increase consumer loyalty, but also increase average spending. His 2020 study by McKinsey & Company found that shoppers who enrolled in a free loyalty program spent 30 percent more than non-members, and this figure rose to 60% more for shoppers who paid for membership. It has been revealed that the percentage has increased. Perhaps indicative of the success of the VIP rebate program's proliferation, according to Statista, in the first quarter of 2023, French consumers online shopping their baskets averaged 10.1% of their The amount has increased to 68 euros.
But it's not just inventory, logistics and finance costs that are causing businesses to rethink their approach to returns in 2023, but rather the rise in transportation costs, which poses further challenges for e-commerce platforms. .
When road availability increases due to rising transportation costs
For e-commerce customers, fast and accurate delivery is no longer just a competitive advantage, but a fundamental requirement. The challenges of ensuring timely delivery and accurate order fulfillment are even more pronounced, especially during busy seasons and promotional periods. This challenge is further exacerbated by the significant increase in transportation costs from 2022 onwards, primarily due to rising energy and labor costs. This upward trend is expected to continue until the end of 2023, with the National Roads Commission forecasting cost inflation excluding fuel in France of 8.8%. Fashion companies are currently faced with two crucial strategic choices: optimize logistics and supply chain management or outsource logistics.
But this year, other factors come into play and hinder this trend. That is the reduction in road costs in Europe. In fact, in 2023, the availability of European roads expanded significantly, increasing competition between road transport operators and, as a result, significantly lowering spot rates. According to Transporeon, the transport capacity index jumped by 22.7% in March 2023 compared to March 2022. This trend can be attributed to the acquisition of smaller road transport operators by larger companies due to the financial burden of increased operating costs, as suggested by Transport Intelligence. Unfortunately, consolidation is becoming increasingly common, with recent notable examples being Rhenus Logistics' acquisition of Croatia's Trans Integral and the Netherlands' Nederlandse Transport Maatschappij, and Geodis' acquisition of France's Transports Devoluy. Examples include acquisitions. By leveraging artificial intelligence (AI), companies can take advantage of the increased accessibility of Europe's roads to improve cost-effectiveness by optimizing route efficiency and gain an advantage in an ever-changing delivery environment. can do.
Opportunity to leverage AI to optimize logistics
AI has the ability to perform predictive analytics, helping fashion companies predict customer demand, optimize inventory, and plan routes efficiently. Software company Oracle envisions major changes in the fashion industry through the integration of AI. Rationalizing costs requires intelligent carrier selection, and AI machine learning can carefully assess a supplier's past performance and use this data to predict future reliability. In today's fast-paced business environment, where time management is paramount for both e-commerce and traditional businesses, AI can predict the likelihood that a supplier will not deliver an order on time.
Factors such as weather forecasts can be incorporated to predict potential impacts along the industry value chain. For example, assess the impact of an impending drought on cotton production or the impact of heavy rains on road traffic. Such data can improve logistics route optimization by identifying the shortest distance between two points while avoiding traffic disruptions. Integrating AI technology into the supply chain will also enable route optimization by providing drivers with informed decisions. For example, it can help you find the most efficient refueling or lunch break locations, reducing the length and number of stops you make during your working day. This minimizes fuel costs and increases transport efficiency and sustainability.
Exploring sustainable transport partnerships that pursue efficiency
Indeed, what better strategy for fashion companies in 2023 than to seek sustainable partnerships while streamlining logistics? Collaborative platforms and partnerships are currently thriving in the industry, with logistics service providers The joint efforts of and e-commerce companies are creating solutions for shared warehousing, optimized transportation, and multimodal delivery systems. These efforts not only lead to cost reductions, but also to increased operational efficiency. For example, Puma, H&M, and Maersk are working together to adopt more sustainable supply chain practices, including solutions such as supply chain visibility, low-impact transportation, and establishing green corridors.
In a talk on net zero at the 2023 Global Fashion Summit, Henriette Hallberg Thygesen, chief shipping officer at Maersk, pointed out that the average shipping container is only 70 percent full. emphasized. As French truck delivery drivers have denounced, this is the result of a surge in companies' promises to deliver within 24 hours, regardless of the customer's location. So H&M is taking steps such as partnering with peers that ship from the same locations to reduce the number of vessels it uses, while Puma is working with its sales team to analyze dashboards to better understand product demand. This has resulted in a 10 percent increase in container filling rates over the past year. Additionally, by right-sizing the average shoe box and packing more product into a single container, PUMA has reduced the number of containers it ships overall. Remarkably, H&M has achieved the milestone of shipping 100% of its online luggage in the Netherlands by electric vehicle through a joint initiative with Volta Trucks and electric motorcycle manufacturer Cake.
From improving container filling rates to right-sized packaging to the introduction of electric vehicles, these efforts address the urgent need for a fashion industry to become more environmentally conscious and socially responsible while meeting consumer expectations. It also embodies our efforts to address these issues. As industry experts agree, achieving a sustainable future in apparel requires collaboration across the supply chain and involvement from top-level leadership. This marks a critical moment when adaptations are needed for survival and growth.
