Mateusz Iłowiecki, Senior Consultant, JLL: The numbers show that the e-commerce industry is growing rapidly and is not going to slow down. What does this mean for storekeepers?
Rafał Szcześniewski, COO & Founder Omnipack: First of all, we need to ask which storekeepers. Market growth means something different for big players like Empik, Zalando, and yet something different for medium-sized companies. It attracts traditional brands that previously only sold offline and encourages them to direct more and more attention and marketing budgets to the Internet channel.
On the other hand, it supports those strong brands that appeared on the market 5-10 years ago, such as Amazon or Zalando. It gives them the means to invest even more in further growth.
Competition is getting tougher, medium-sized companies are under pressure from big players and have to become professional - e.g. they have to invest in UX for their website, in customer service and in logistics. In the latter area, there has been a significant overvaluation – today it is no longer a matter of simply delivering the product to the customer.
Today it is all about doing it quickly, inexpensively (preferably offering free delivery), exposing the brand (e.g. thanks to the branded packaging), and the whole process should evoke the maximum client’s positive experience.
Last year, the well-known Eobuwie.pl store introduced the so-called same-day delivery service. Is it a kind of “pressure” you are talking about and does this mean that this type of service will soon become a trend?
Indeed, there is a relationship between the movements of large, well-known stores and market behaviour or creating certain expectations of customers. However, as far as same-day delivery is concerned, it has been discussed a lot for several years, but in Poland consumers are still not ready to pay extra for faster delivery. On the contrary, the popularity of e.g. AliExpress shows that we are able to wait longer to buy cheaply.
By the way, Sugarfree.pl, our current client, was the first to introduce this service in Poland. And it was almost 5 years ago.
What trends in e-commerce logistics can we expect in 2019?
I think that 2019 will be a year in which many entrepreneurs will face a turning point. Why? We are awaiting a continuous increase in salaries for employees which we already see in the increase in prices of courier services.
What is more, higher and higher prices of construction services translate into higher rent for the warehouse. Finally, in order to keep pace with competition, online retailers will have to invest in the new technologies needed to handle orders efficiently.
In addition, there is also the interest in outsourcing logistics – not as a source of savings but as a way to stop the increase in costs. By using the services of a logistics operator, costs become very predictable and stable and we have access to better infrastructure and professional parcel handling.
Well, what is really the outsourcing of logistics and why do other stores decide to use this model?
Outsourcing, i.e., in our case, fulfillment – one of the logistics models, next to e.g. dropshipping or owning a warehouse. In this model, customers “entrust” us with the handling of all stages of the logistics process.
Their products are stored in our warehouse, we pack and handle shipments, and if necessary, we handle returns. In short, we relieve online store owners of the obligation to manage such a large and time-consuming area as logistics.
Why do customers choose this model? As I have already mentioned, firstly, this allows them to convert fixed costs into variable costs, proportional to turnover. Secondly, almost overnight, they gain a professional shipping service, a dedicated team that they don't have to train, and they don't have to worry if the staff, for example, gets ill.
However, I would perversely say that outsourcing is not for everyone. For example, imagine an owner of an online store that does not expect significant growth, either in terms of expanding its product range or in terms of attracting new customers.
He runs a stable business, is able to organise the warehouse by himself and employs, e.g. friends that he prefers not to put out of their jobs. In such a situation, we do not see any reason why he should use the services of the operator.
Where did the idea of creating a company that deals with fulfillment come from? It is probably still not a very popular model in Poland.
To put it bluntly, we saw an opportunity. First of all, while working in Westwing Home & Living, where together with Tomek Kasperski we created a logistics centre, we saw that such service is simply needed. Secondly, it is still undeveloped in Poland.
It was in Westwing that we had to face the problems that all Internet entrepreneurs face - building infrastructure, storing, packing and shipping thousands of items such as glass, ceramics, furniture of different sizes.
It was a demanding school of logistics. At that time we decided that with such know-how we can create a company that will help other online stores to solve problems for which we have already found a solution.
However, Omnipack is growing fast, as investors have noticed, last year you obtained 5 million of financing. What makes you stand out from the industry?
I don't know to what extent it's different from our competitors, but from the very beginning we have been guided by the rules that we believe determine success in cooperation with our customers.
First of all, flexibility, which cannot be lacking in such a dynamic industry as e-commerce, the fluctuations in volume are very large, it results, for example, from seasonality or point promotions, and we have to cope with it.
Another thing is transparency, our customers need to “know” the statuses of orders, know what is going on in order to react properly, that is why we take great care of fast flow of information and efficient reaction.
Probably the most valued by customers is the special emphasis that we put on personalisation, starting from the pricing of services and offer that we provide, we individually approach the requirements of each of our customers and the specificity of their business. Among other things, special packaging requirements, various delivery methods, infrastructure adapted to many industries as well as one that will be prepared for shorter and shorter lead time, this is our standard.
In addition, what is quite obvious in our industry, integration with many subcontractors. We have many courier companies (also international), many purchase channels, various ERP systems. All this has to “fit together” in accounting terms.
Are customer requirements increasing?
Of course, in parallel to the growing expectations of the target consumers, the demands of our customers are increasing. The challenge facing us is, first of all, to offer them more and more dedicated and complex services. As I mentioned before, today it is no longer a matter of simply delivering.
That is why we are still flexibly expanding our offer. As an example, I can mention a recently launched service for one of the fashion customers, the dress rental store.
Dresses sent to customers have a return label, which directs the returned dress straight to the laundry. Both the customer and we have 24-hour access to the panel of our carrier.
After the laundry service, we send the dress back to our warehouse. Together with the customer, we have developed this process to the smallest detail, e.g. the fact that barcode labels are resistant to washing. As a result, we have no problem with identifying the product and putting it back on the market quickly.
Do these requirements strongly influence your warehouse space decisions? Is this the reason why you are looking for new locations?
The main reason for investing in new space is simple, Omnipack is growing, we acquire new customers, not only from Poland but also from abroad, so we need more space.
Our latest contract involves the lease of 2,500 sqm in SEGRO Logistics Park Warsaw, Nadarzyn, a logistics centre located 15 kilometres from Warsaw.
From our point of view, the key factor was the location, which enables us to continue our growth and expansion, including international expansion. However, we are not stopping, we are already negotiating two more locations.
Are there any foreign locations planned?
Yes. Yes, we started our foreign expansion which we want to continue and develop. At this moment 5% of the total volume are foreign customers. That is why we are seriously considering the location close to the German border, from a business point of view, it is an excellent link between Eastern and Western Europe.
How was the year 2018 for Omnipack? And what will 2019 be like?
I hope that 2019 will be at least as good as 2018. First of all, we won the trust of investors, closed the round of financing and gained 5 million for further development. Secondly, we opened the above-mentioned new location in Nadarzyn which enabled us to continue our rapid development.
Last but not least, we managed to significantly expand our team, building teams of specialists in every key area. We have experienced warehouse managers and a strong team of warehousemen, we have experts in IT, BI and international development. On the commercial side, we also strengthened our team.
That is why we look at 2019 with optimism, it can be said that the “fire-fighting” period is far behind us and we have a stable development ahead of us. We certainly want to invest in software and IT solutions as well as in customer service which in our opinion is the key to success. We are also planning further international expansion.