ASOS and Boohoo’s purchase of high street brands like Topshop and Debenhams seals online retail’s dominance and highlights the value of strong tech and logistics capabilities for the new retail landscape. Many LSPs now offer to build these capabilities for retailers quickly, but can they save omnichannel retail?
Since the outbreak of Covid-19, we have seen an acceleration in online retail sales, with many retailers forced to go online or face complete closure by lockdown restrictions. For pureplay online retailers, this has been a huge boost to sales and for the more agile omnichannel retailers it has been a route to survival, but for many retailers with limited online capabilities, it has been a huge challenge.
As is well reported, pureplay online retailers saw huge increases in sales in 2020, ASOS saw a 23% increase in sales in the four months to December 31 and Boohoo saw a 45% increase in sales in the 6-months to August 2020. This growth was powered primarily by the switch to online retail in a suppressed total retail market. According to the ONS, the UK saw total retail sales in 2020 fall by 1.9% compared to 2019, but online retail sales as a % of total retail sales jumped from 21.4% in December 2019, to 31.3% in December 2020.
But the story has been very different for omnichannel fashion retailers and in the UK we have seen major companies being broken up and brands sold off to the online-only players. For instance, the once-mighty Debenhams (with revenues exceeding £1.4bn in 2019) was sold to Boohoo on January 25, 2021, for just £55m, since then Boohoo has also purchased the Dorothy Perkins and Wallis brands. Similarly, ASOS purchased Topshop, Topman, Miss Selfridge and HIIT brands for £265m on February 1. In both cases, ASOS and Boohoo plan to wind down the physical stores and create value by leveraging their existing technical and logistics capabilities to maximise the potential of their newly acquired brands’ existing online presences and brand-equity as online-only operations.
Other omnichannel retailers are still working to enhance their online and logistics capabilities to ensure their independent survival. Perhaps the best example is Next which had a competitive online presence and delivery capability prior to Covid-19 and has developed this over the course of the pandemic. Although Next did have some issues in the early stages of the pandemic, like the closure of its warehouses for three weeks in March to implement social distancing, it was able to increase its online sales by 9% over the year, although total sales declined by 15.9% in 2020. However, the situation improved further over the year as Next developed its capabilities, with the retailer increasing its online sales by 36% year-on-year in Q4 2020, with total sales declining by just 1.1%. Crucially, Next has been able to use its online capabilities to produce estimated before-tax profits of £370m in the year to January.
The examples of ASOS and Boohoo’s pureplay online success, and Next’s omnichannel survival, show that it is possible for retailers that have strong online presences and good underlying logistics capabilities to succeed in the most challenging of times, but other brands with more limited pre-existing online and logistics capabilities have struggled. This has led to a sharp rise in retailers seeking help with the transition to online and support to build the strong logistics capabilities online operations require. Over the last year three paths to follow for this process have emerged, to seek to position your products on an existing online marketplace, to partner with a company like Shopify or Commercetools to build an online presence, or to work with an LSP to provide the technology for an online presence and the logistics capability to fulfil and deliver orders at scale.
This trend has led to an explosion in the addressable e-commerce logistics market for logistics providers and has accelerated the rise of new e-commerce logistics offerings from major LSPs. Some examples of new offerings launched recently include DSV Multichannel, KN OmniChain, XPO Direct and Geodis e-logistics, alongside DHL e-commerce Logistics. These offerings leverage the existing logistics networks of these large LSPs, and their underlying e-commerce technology, to support moves to online operations for retailers of different scales within relatively short lead times, often making use of shared user warehousing.
These e-commerce logistics solutions have the potential to support many retailers struggling to make the transition from the pre-covid retail world to the new normal. The value proposition lies in leveraging the capabilities of major LSPs to help retailers which have fallen behind the omnichannel development curve to catch-up with the leading e-commerce logistics capabilities developed by ASOS and Boohoo.
If you would like to find the right LSP to help develop your online retail business then please take a look at Ti’s Supply Chain Leaders tool which will help you to identify potential logistics partners: https://www.ti-insight.com/supply-chain-leaders/
To find out more about the e-commerce logistics market and to track trends in this space please take a look at Ti’s Global Supply Chain intelligence (GSCi) platform here: https://www.ti-insight.com/product/gsci/
Source: Transport Intelligence, February 9, 2021
Author: Michael Clover