Inside Logistics

Major brands missing e-commerce target

New study finds few brands excel at required logistics capabilities


October 9, 2020
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PARIS – Few major brands are doing e-commerce as well as they should. A new study by global third-party logistics provider Geodis and consulting firm Accenture found that while there are key logistics capabilities required to build and maintain successful e-commerce operations, few brands excel at any of them.

“This study takes stock of the ambitions and concerns of European and American companies facing the rapid increase in e-commerce. If they want to take advantage of the rise in online sales, they must develop omnichannel logistics strategies tailored to their maturity levels,” says Marie-Christine Lombard, CEO of GEODIS.

Two hundred European and American companies that operate multiple channel logistics were interviewed about their e commerce-related expectations for growing their brands’ sales.

2020: The acceleration of e-commerce

First and foremost, the study confirms that the pandemic greatly accelerated online commerce growth. Brands estimate that e-commerce in 2020 will represent nearly half of their sales (compared to a third before Covid-19).

Before the crisis, companies were making 34 percent of their sales online (28 percent on average in marketplaces and six percent on their own websites).

During lockdown, 65 percent of sales were made online: 38 percent via marketplaces and 27 percent on brands’ online stores. The increase is even more marked in Europe than in the United States. European companies without online sales solutions were heavily penalized, with 40 percent of the brands surveyed estimating that sales lost due to COVID-19 will exceed 15 percent of their earnings on average.

A desire for greater e-commerce ownership

A second finding indicated that most companies (52 percent) felt that their e-commerce potential is limited by their logistics capabilities.

“Many brands use marketplaces as a one-stop shop for selling their products online. This allows them to reach a wide audience and compensate for a lack of resources and logistical infrastructures, all while providing an expected customer experience,” said Sohel Aziz, managing director, Accenture Interactive.

Fifty-nine percent of European companies rely on marketplaces for their online sales, a number even higher than for American companies (46 percent). Marketplaces held a 28 percent market share in the pre-Covid-19 period, a number that has risen to 38 percent during the pandemic.

However, most of the brands surveyed believe that over-reliance on marketplaces is not sustainable and wish to shift more of that balance toward owned e-commerce channels. Nearly two-thirds (64 percent) state that reducing their dependence on marketplaces is their first or second priority for the next six months.

Within three years, 77 percent of American companies and 56 percent of European companies surveyed wish to sell directly to consumers via their own websites, aiming to make 20 percent of their total sales there.

“Direct sales from brands’ retail websites currently represent five percent to eight percent of online sales. Brands would like to increase that to 20 percent or 30 percent in the next three to five years. The survey shows that brands are aware of the fact that improving their omnichannel logistics capabilities, such as customer experience – through customization of delivery options and tracking or customers’ ability to modify orders, for example, is essential and urgent if they are to reach this goal,” concludes Aziz.

Improving customer experience

Seventy six percent of the companies surveyed state that improving the customer experience is their greatest long-term challenge.

“The customer experience includes the purchasing experience and the delivery experience,” notes Ashwani Nath, vice president and global head of e-channel solutions, Geodis.

Brands strive to provide a delivery experience that equals the act of purchasing. Among other things, this means providing improved e-fulfillment, a range of flexible delivery options, more practical tracking visibility and simple returns,” explains Nath.

Currently, 38 percent of American brands offer two-to-three-day shipping nationwide, and 56 percent plan to do so within three years (25 percent and 57 percent for European brands).

For international (intercontinental) shipping, no American brands currently offer two-to-three-day shipping, although 17 percent plan to do so within the next three years; 15 percent offer four-to-five-day shipping, with 66 percent planning to do so within the next three years. As for European brands, none of them currently offer two-to-three-day international shipping, although seven percent plan to do so within the next three years; four percent offer four-to-five-day shipping, with 76 percent hoping to do so within the next three years.

The study reveals the ambitious objectives of the brands to reduce shipping times to three-day shipping within a maximum of three years for the domestic market and four-to-five for intercontinental shipping.

Lack of real-time visibility

Other challenges are emerging. Although they differ between the United States and Europe, the actions taken are comparable: Brands have worked on offering greater shipping flexibility and simplifying returns (80 percent of the brands surveyed had recently made efforts to provide a more practical product return process).

However, the survey points to the fact that just 16 percent of the companies questioned are able to get real-time key performance indicators for their supply chain (only 25 percent of American brands and 10 percent of European brands say they have access to this information). In addition, 40 percent of European brands say that their analytical capabilities are too rudimentary, generating data in a fragmented way, often manually and without clear governance.

“Only a minority of them have real-time supply chain inventory visibility. However, this visibility is essential to ensuring product availability, offering a variety of shipping choices and informing the customer of the product’s shipping status. In short — satisfying the customer,” says Nath.

“Behind the scenes, this means optimizing the logistics cost for each order and overcoming many logistical challenges: reconciling the physical with the digital, maintaining a real-time inventory, optimizing stock, managing transportation, orchestrating orders while dealing with a variety of processes and partners. This will help brands to better utilize their physical assets and gain a competitive advantage.”

“This calls for integrating stores with e-commerce networks to serve as order processing centers, collection points, shipping facilities and fulfillment centers. One thing is for certain: inventory will have to be closer to the end customer, no matter where they may be, to ensure agility and availability,” Nath concludes.