Julia Swales, Senior Editor at Ti Insight, talked to Brendan Heegan, CEO and ecommerce expert and Tom Behnke, VP of Sales and Marketing from Boxzooka to hear about how the retail world is evolving in response to disruption, the importance of putting the retail customer first and how Boxzooka is differentiating itself from the 3PL ecommerce giants. The cost v customer service challenge is here to stay.
Overview of Boxzooka
Boxzooka was founded in 2015 and is a domestic and international Ecommerce Order Fulfillment Technology WMS platform. Headquartered in Secaucus, NJ, USA, the company facilitates warehousing, inventory management and pick/pack of consumer goods, fashion, apparel and accessories.
Boxzooka uses multi-client warehouses, so it can cross-utilise labour across multi-functions within the warehouse to reduce costs for clients. It’s personalised, almost like a boutique service. Bigger 3PLs have several 1000s of customers and a revolving door, as they’re constantly bringing in new accounts every day, while they’ve got other accounts leaving. Boxzooka has less than 100 clients and they pick and choose clients very carefully. They say no to 95% of the business that comes knocking on their door if it’s not something that fits in with the ideal client profile.
The company claims that the Client Success Management Group separates them from other 3PLs. They are the advocate for the client and they are all located in the company facilities. In the bigger 3PLs, account managers will have around 50 or 100 clients each. Boxzooka has 5.2 clients per Client Success Manager. The company is very hands on – if they can help their clients to be successful, then Boxzooka will be successful. That’s how they’ve run the business since day one.
3PL disruptors
The 3PL world, especially the ecommerce fulfilment world, has been disrupted in the past 20 years by Amazon, which became the king of fulfilment. They have disrupted retail in ways that are great as a consumer and really challenging as a 3PL competitor. This is also the story with Alibaba and JD. There are some huge American companies which are 3PL providers and are in the top 10 companies that compete against Amazon.
Walmart and Target also had to set up global distribution to compete in that market and offer home delivery and free delivery. Amazon Prime, with same day deliveries, increased client expectations and it also made the competitive landscape harder. There’s another tier of 3PLs in America and in the EU, which are local fulfilment companies that tarted out in supply chain or trucking then added fulfilment to that, such as DHL, FedEx and UPS. They all have a fulfilment arm, where they set up warehousing operations – they had one or two clients and then they grew. This is a dynamic landscape.
The Red Sea and Baltimore Disruptions
Disruptions such as the Red Sea situation or the Baltimore bridge collapse, end up costing consumers more and so it’s challenging for retailers, with the pressure on pricing. The retailer faces an increased cost for the inbound goods, which adds to the product cost overall. They must make a business decision on how they are going to absorb it.
Any retailer based out of the East Coast of the United States, uses Boxzooka’s Pennsylvania warehouse for fulfilment. If they manufacture in Southeast Asia or Pakistan, they want to find the lowest cost for freight coming into the port of New York, or Baltimore which is normally through the Red Sea. Now container ships are forced to either go around the horn of Africa, or to the West Coast of the United States, so across the Pacific and then into the Port of Long Beach, then the goods are put on trucks to go across the country. It essentially doubles the retailers’ costs and adds an additional two to three weeks of transit time, which is also cost. All the retailers, especially in the apparel business, use a seasonal marketing calendar to plan. When there is unplanned supply chain disruption, they still need to get goods in for the next season, or they lose their selling window. As a result, the retailer pays additional money for air freight and the price of the goods goes up.
To mitigate future disruption, retailers are starting to plan and design their products on a different schedule, so for example in apparel, retailers are ordering fabric earlier. They need to get used to last minute pivots and that’s the hard part, long term. The small retailers are more drastically affected by disruption than the big retailers, who get longer payment terms. They’re trying to lower their inventories so that they don’t get stuck carrying stock that doesn’t sell. The bigger companies can afford to flex a little.
It’s all about balancing costs and taking into consideration customer loyalty. This is difficult for the smaller retailers, who need to start charging for returns and restocking. The big retailers can manage this a bit better and provide lifetime customer value, but it’s complicated and it takes time. There are so many predatory competitors, especially in apparel. One of Boxzooka’s clients produces copycat high fashion, so, for example, they can copy a $1,000 designer sweater, manufacture it and sell it for $200 in six weeks.
The ecommerce retail marketplace is a tough environment to be in, but Boxzooka aims to mitigate some of the risk and disruption by putting the client first, working with them collaboratively and being willing to flex and pivot.
Author: Julia Swales
Source: Ti Insight / Foundation for Future Supply Chain
