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2014 06 EC-logistics-strategies_v2

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E-commerce and Logistics strategies in China for fashion industry
E-commerce represents a promising yet relatively small share of the overall fashion business. Yet the statistics show that Apparel is the most popular category for Online Shopping in China. Aiming to capture as much a possible of the projected growth in this segment, the Brands have to consider multi-channel strategies to cover Brand Awareness, Transaction Media, Delivery Channels and Management of after sales including everybody’s black beast : “Returns”. All these elements are connected and should be consistent with the Digital Strategy, resulting in a mix of delivery means ranging from Home delivery or In store Picking to Click and Collect, whether managed internally, via partners or outsourced ; likely a mix of all.
While evaluating the right mix of the various options it is important to understand how each choice can impact the Distribution set up. Laurent proposes a pragmatic overview of the most popular options and the associated Supply Chain organization impact.
Laurent Cochet, Partner, Ecosource
Laurent has built his 23 years career in Hi Tech Industries with 3 keywords: “Multicultural+B2B+Technical”. He has been involved in several Warehouse set up projects in China over the past 5 years. His Track record includes large and automated logistics centers such as Nike DC in Taicang. He worked recently for VF Corporation DC. Laurent now works as an independent consultant based in Shanghai and he is also an entrepreneur, setting up a portfolio of Energy Efficiency services with a company named Ecosource.
Presentation delivered at Cahina Live 2014, Shanghai

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2014 06 EC-logistics-strategies_v2

  1. 1. E-Commerce Logistics Strategies for the Fashion Industry Laurent Cochet Independent Consultant +86 139 1679 0471 YOUR DC PROJECT IN CHINA SUPPLY CHAIN - LOGISTICS WAREHOUSE DESIGN AUTOMATION MHE - IT ROI ENERGY EFFICIENCY Shanghai, June 11 2014
  2. 2. STORES DROP POINTS HOME HOME EC PLATFORM and/or PARTNER NATIONAL DCs REGIONAL DCs X- DOCKING PLAFORMS EC PLATFORM and/or PARTNER OWN EC PLATFORM and/or PARTNER 3PL 3PL and/or KUAIDI
  3. 3. NATIONAL DCs REGIONAL DCs X- DOCKING PLAFORMS Challenges Trends (mature brands)  Consolidation  Automation  Networks designed for wholesales models  Limited proximity Coverage Challenges Trends  Moving from liquidation to selling New Styles  SKU Range  <2 Items / Order Challenges Trends  Kuaidi & China Post  Heterogeneous coverage & costs Challenges Trends  Regional or “Zones” strategies  Size and diversity of the country
  4. 4. NATIONAL DCs REGIONAL DCs X- DOCKING PLAFORMS Trade-off between cost and service level Use EC to reach areas with no stores
  5. 5. EC PLATFORM and/or PARTNER OWN Luxury Goods Online Share (including Fashion) Luxury Goods: a “less likely” online segment … but growing  E-Clients expect bargains (30 to 60% discount)  Counterfeiting Risk remains the main barrier in China  High end luxury brands are not selling online (yet) * Global Trend across categories
  6. 6. EC PLATFORM and/or PARTNER  Internet overall shopping growth in China*  66% in 2012  43% in 2013  Already online players expect 20/30% over next 2 years  Apparel accounts for 36% of online Chinese consumer goods spending* * Source: McKinsey Insight, 2013 Key Figures  Lack of real time visibility on Own Customers Habits Brand Loyalty and deep understanding of customer’s taste are key to EC business  Lack of real time visibility on daily sales, affecting replenishment reactivity Besides lead times, smart replenishment and real time inventory visibility are key to EC business Challenges *(2013, average from multiple sources)
  7. 7. HOME HOME EC PLATFORM and/or PARTNER NATIONAL DCs REGIONAL DCs X- DOCKING PLAFORMS EC PLATFORM and/or PARTNER EC PLATFORM and/or PARTNER 3PL 3PL and/or KUAIDI 1 - Pure Platforms (Tmall, Taobao)*  Vendors operate their e-store and own the products  No in-house logistics, relying on third-party players to fulfil orders, though delivery and tracking is integrated 2 - Open Platform (Jingdong)*  Vendors own the products but only partially operate the e-store  In-house logistics capabilities, option to use a third party and pay a service fee 3 - B2C pure players (51buy)  Platform Operate the e-store and fully own the products  In-house logistics * Most players have now diversified their strategies EC PLATFORMS: 3 main (original) Business Models
  8. 8. HOME HOME EC PLATFORM and/or PARTNER NATIONAL DCs REGIONAL DCs X- DOCKING PLAFORMS EC PLATFORM and/or PARTNER EC PLATFORM and/or PARTNER 3PL 3PL and/or KUAIDI  Require to manage multiple business models across Regions, Brands and Product Categories, hence making it difficult to align the organization with the EC Strategy  Real Time Replenishment  Delivery Tracking  Returns Management  Limited Online SKU Range  3PL historical set up  WH space rental contract Challenges  Brand need to cope with heterogeneous set up for now  Both EC Platforms and Vendors are preparing the next move: EC Platforms are massively investing into in-house logistics capabilities, but likely also aiming to sell their own products Brands are ramping up their emphasis on their own e-store operations Trends
  9. 9. STORES DROP POINTS HOME NATIONAL Cs REGIONAL DCs X- DOCKING PLAFORMS OWN  Many brands have a limited geographical coverage (Tier 1, 2…)  Achieve short home delivery times in a wide geographical area  Develop IT capabilities to ensure full line real time Sales & Inventory visibility across a diverse fulfillment network  Widen Online SKU Range Challenges  Consolidate the network so as to concentrate picking in less locations  Leverage existing assets  Improve operational efficiency through modern warehousing:  Advanced Process Design  WMS  Automation when justifiable Trends
  10. 10. Laurent Cochet laurent.cochet@cocoongroup.net.cn +86 139 1679 0471 Logistics Centers Projects – Independent Consultant SUPPLY CHAIN - LOGISTICS WAREHOUSE DESIGN AUTOMATION MHE - IT ROI ENERGY EFFICIENCY

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