Kuehne+Nagel: Logistics Can Keep Consumers Loyal to E-com Brands

Logistics and Supply Chain News

As consumers grew more confident with buying online their loyalty towards brands diminished. We spoke with Sebastian Wouters, SVP, Global Head of e-commerce, Kuehne+Nagel, at Deliver, one of Europe’s leading e-com events, about how logistics can keep consumers loyal and the importance of inventory. You can read more stories from Deliver in this edition.

What are customers asking from their logistics providers when it comes to e-commerce?

First of all, e-commerce logistics is different to the more traditional store deliveries and B2B. Also returns are becoming more of a challenge as e-commerce is picking up.

What small to medium size customers are looking for is help with scaling up and growing internationally. Kuehne+Nagel is a globally active company that offers local and international solutions and we help our customers with both. The larger customers have seen their e-commerce share increase every year too so they need help with that.

Another big category is the trend towards direct-to-consumer. A lot of businesses are realising they have an opportunity to reach directly to the consumer whereas traditionally that would only happen through retail channels. In addition, they can now also take control over what the brand and consumers’ experience looks like. Order fulfilment can help create all of these.

Have your customers experienced e-commerce orders slowing down since reopening of retail stores?

Yes, to a certain extent. I see no reason to assume that things are back to pre-Covid levels. What has happened, specifically in the markets where e-commerce penetration was relatively low and for older generations, is that consumers have now tried it and know it is not that hard. I believe the behaviour has been adopted by consumers and they feel more confident.

Not everyone is going to keep shopping online the same way they did during the pandemic. Also, the amount of money people might spend on things will change. A study in the USA showed that even though store purchases have increased, that did not lead to e-commerce orders going down. That might change due to the war in Ukraine and the high energy costs.

How can logistics help brand awareness? Do you expect companies like Kuehne+Nagel to turn into a one-stop-shop for retailers?

Yes and no. We, as a global provider, can offer a huge variety of services for fulfilment, order management, last mile, first mile, etc. We believe we can help customers to scale up internationally or help them with multiple aspects when it comes to growing. The industry can really help with simplifying the logistics management piece and remove the need to manage multiple companies. Just like e-commerce is making it easier for shoppers to shop and buy, e-commerce businesses want the same from logistics providers, i.e. simple to use solutions. I believe this is very appealing to medium size companies. Large customers tend to buy more in segments.

Are retailers bringing logistics and visibility back in-house?

I think for retailers offering a good customer experience is really important and part of that is visibility. When we go to a store, we have some emotion connected to the purchase, specifically in fashion retail and luxury goods. That is not the same when you buy online but it is still as important. Getting the customer experience right after a customer clicks “buy” is largely a supply chain capability. For me, if a store or a brand wants to offer the full logistics experience, that is great. But what would they need for that?

They would need reliable information from multiple sources: warehouse management system, tracking, customs clearance, etc. What ultimately is important is the quality and the timeliness of the information. There are multiple solutions logistics can offer to retailers. At the same time, inventory accuracy for webshops is vital. If a consumer buys something and it turns out it is out of stock they will just go somewhere else. Customers want to see when they get their orders. In many cases, they prefer to have more accurate or predictable delivery rather than the fastest promise.

What should we look for in the coming few years? What should we worry about?

Inbound supply chains are being disrupted at the moment because of Covid, imbalance in supply and demand, port congestion, high energy prices, and the war in Ukraine. This means that the increased cost levels, which in the very beginning were absorbed by many companies, are now being passed along the supply chain to the end consumers. So products will become more expensive. This is a driver of the inflation levels that we are seeing around the world. There is more focus on efficiency. Even companies who traditionally focused more on growth than on efficiency are now talking about it.

Managing cost levels and availability of products for online retailers will be key for success. As we said, consumers have already learnt that if the product they want is not available in one store, they will just go to a different one that has it. That unloyalty has stayed post-Covid and everyone has learnt how to go somewhere else. So, e-commerce businesses will need to make sure to have products available to sell, but also do this more efficiently.

Would we see a shift in manufacturing due to continuous supply chain issues?

It would really depend on the product. The costs of manufacturing and shipping a lower value item is quite different to the costs of higher value items. What is becoming more and more important is topics related to ESG: where do you source materials, how you produce it, how you control inbound supply chains, etc.

Some supply chains might shift but there won’t be enough capacity to move everything to a new location and it certainly won’t happen overnight.

Would we see retailers asking consumers to pay shipping costs?

I think it will be very hard for companies to introduce this, because the trend has been the other way around. E-commerce is all about convenience and how easy it is to buy from one seller compared to another. If you now add cost for shipping or returns, it potentially hurts the brands. I think brands would rather increase their prices, than explicitly ask for shipping to be paid. An interesting research shows that people are prepared to pay more for a product that has free shipping included than for a cheaper one that doesn’t.

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