Please present the Benetton Group’s business.
Valentino Soldan: Benetton is based in Northern Italy, in Treviso. In 2019, sales reached €1.2 billion through 4000 stores in 80 countries. E-commerce accounted for 10% of the business. To date, 10% of orders are collected from a store and 90% are delivered to a home. The challenge of the last mile is therefore at the heart of our concerns. Last year we shipped 900,000 Web orders from our Italian warehouse to Europe, the U.K. and the USA. In 2019, we started to restructure e-commerce logistics, which was previously outsourced to a third-party partner. We must make full use of the synergies with our brick & mortar business.
How successful is seamless merging online and offline?
V.S.: We launched a click & collect service 18 months ago and have added in-store returns of online orders. When an item is no longer in stock, staff place Web orders from the store. The main objective is to avoid missing a sale, when the product is not physically present, but avoiding returns. Omnichannel is stimulating more business. A customer trying clothes in a store but only in the wrong colour can order online, knowing the fit is correct.
Many retailers like carrefour, Lidl, Kaufland and Costco, opt for independent delivery platforms. How does this fit?
V.S.: We are in discussions with Deliveroo and Uber about this aspect of our business. From a logistical point of view, it’s really interesting. We are looking for players with fleets of bicycles or electric vehicles which allow us to reduce the environmental impact and meet demand for sustainability from our clients. The growth of players like Everli (note: an equivalent of Instacart, with staff acting as personal shoppers collecting in a store and delivering to clients) is motivating. They started delivery of food or grocery and expanded into clothes, cosmetics and shoes. It would be a win-win solution to add fashion to their range of services.
Your warehouse is in Castrette, Northern Venezia. Why did decide on one European warehouse?
V.S.: We decided this 20 years ago. Logistics is based on mass and volume. It is simple to maintain a single, self-managed warehouse to speed up transport and delivery, even spending more on deliveries. This avoids additional costs related to multiple warehouses. However, we have inventory stored in third-party warehouses to cover Russia, Turkey and Mexico.
Is e-commerce profitable?
V.S.: Yes, absolutely. We are extremely cost-conscious throughout the entire supply chain. Today, returns management is a very important aspect. At the Benetton fashion company, returns are between 15% and 16, which is well below the average of the European fashion industry. The lower returns, the higher a margin. Of course, 60% of our business comes from southern Europe, where e-commerce is still weak in the fashion market. However, we are expanding online as fast as possible as it is one of the best levers to win new customers. Online clients are different to those in a store. They are aged 20-30 (compared with 30-40 for offline) and they buy more often.
What are best practices in terms of returns?
V.S.: It’s important to find the right balance between costs, speed and customer refunds. A major challenge is to speed up reimbursement of customers who returned an item. Indeed, this is key for customer satisfaction. Following the U.K. operations, we want to deploy a single collection point per country to optimise “reverse logistics”. We started this in Tilbury near London just after Brexit. It was a nightmare to get goods out of the U.K. for months because of Customs regulations. Online returns arrive in Tilbury to be checked as suitable. The customer receives confirmation and a refund. On a weekly schedule, we collect the items and return them to Italy. These re-stock the warehouse inventory for customers. Instead of managing individual packages, we manage pallets. We are going to launch the same system in Barcelona in Spain and expand into other countries. It helps reducing cost per return by 20 %.
How is your Order Management System evolving?
V.S.: After a year of e-commerce restructuring, we created the “One warehouse” project. This creates a new OMS, integrating a seamless and unified view of our products. We have been fully operational since the summer of 2020. The system deploys several volume and delivery speed scenarios. When a store makes a restocking order, we generally deliver 50 to 100 pieces. For “ship from store” orders, the flow out of the warehouse is smaller, from 3 to 10 items. Goods need to arrive in a store very quickly. For each shipment, we try to maximise volume, speed and a measured quality of customer service.
What are the priorities for the next 3 to 6 months?
V.S.: At the moment, 99% of shipments are made by express delivery. We want to reduce this rate as my first task every day. Automation of a warehouse is a priority. This has become compulsory because efficient automation allows to achieve a rapid R.O.I. In my opinion, a fashion retailer should consider warehouse automatization close to 1 million orders per year…
Finally, we want to be able to deliver seven days a week, especially on Saturday and Sunday. This service is missing to win in the last mile market. Delivery service providers are bound by a B2B rhythm, whereas on the customer’s side, e-commerce has no weekends nor public holidays. The logistics market players like DHL or Docaposte must move in this direction. The European market is waiting for this service.