“In some countries the companies from the clothing industry report even 70 percent of product returns. This is a huge scale which we cannot afford,” said Jacek Kujawa, Vice-President of LPP, a Polish company which is an owner of such brands as Reserved, Mohito, Cropp. Nevertheless, the company does not intend to go into same day delivery. It claims that it has found better solutions.
Dorota Ziemkowska, Trans.INFO: According to the announcements, LPP this year will run shops in 23 countries. How will it impact planning of logistics in your company?
Jacek Kujawa, Vice-President of the Board, LPP: New countries are not a big challenge for us because every year we add three new countries, so we have a large experience in this scope. Last year, we opened our shops in the United Kingdom, Serbia and Belarus. This year, we debuted in Israel and Slovenia, and we are entering Kazakhstan soon. Our plans for the next year include Finland and Bosnia and Herzegovina. So, it is a kind of routine for us. We do it on purpose so to all the time be prepared for adding new markets.
So, I think that introducing RFID (electronic labels attached to products – editor’s comment) will be a much bigger challenge for the logistics function. It will allow us to precisely know what is contained in each box coming from the supplier. Similarly, we will know what was in the box put in the carrier’s truck. There will not be any chance for errors because every time the box enters or exits the logistics centre it will go through a tunnel where its content will be checked. The system will be more precise than the currently used sorting systems.
So, if another system indicates that the box contains 39 pieces of clothing, while RFID shows that there are 38 pieces, the box will be immediately set aside for verification. The precision of the other systems is limited as they can provide only approximate values. RFID gives 100% certainty. It will make our whole supply chain very tight at each of its stages.
When will RFID be really applied in the whole LPP? Currently, you are testing it in only a few shops.
We are testing it in three shops in Tricity, Poland, however, we would like to conduct the implementation next year. Probably we will do it in February, but it will be a gradual operation. Mainly because, although the software and the technology are not the biggest challenges, the processes that “go” through the whole organization are very complicated. As a matter of fact, RFID impacts the processes in almost every part of the organization, so most of the mechanisms connected with the products have to be redesigned. It will be a huge challenge.
We will also have to face another challenge related to logistics, namely building the new warehouses, e.g. in Brześć Kujawski.
You mentioned the activities undertaken in Poland. But you also plan to open new warehouses abroad.
That’s right. But they will only support e-commerce logistics. It is important to underline that we have two logistics which we develop separately. There is a separate product volume for physical shops and for e-commerce. And different rules.
As I mentioned before, when it comes to physical shops, we really want to keep the products in one place to send them exactly where we need. In the case of e-commerce, the most important thing is to reduce the time from the moment the order is placed by the customer to delivery.
We have analysed the results of many studies which show that with every day of delay in delivery the probability that the customer will return the product rises. And the returns are a very important factor in the fashion industry. In some countries the companies from the clothing industry report even 70 percent of product returns. This is a huge scale which we cannot afford.
So, will you pursue same day delivery?
Why? This is one of the main trends.
I think it strongly depends on the industry, which is clearly visible, for example, in the British market which is more mature than the Polish market. Same day delivery is very important for the producers of food and similar products. When the customer orders coffee they do not want to wait for it until the next day because they will not bear this waiting, right?
On the other hand, what do the German clothing companies do? They build their warehouses outside their biggest German market. They do it in Poland. Not because they want to implement same day delivery, but because they are fine with next business day delivery. It is still a fast delivery, and additionally they can decrease the costs of logistics, which are very important for them.
This is what we strive for in the e-commerce delivery: next business day delivery. And I think that a perfect solution, which is not available in many markets yet, will be to deliver the products on the next business day in the late evening, after 6:00 p.m. Because the customers place most of their online orders in our shop in the evening. So, if the customer buys something at 9:00 p.m. she would be happy to try it on after work, at home, where she feels comfortable. At home she will have time to see herself in the mirror and show the new outfit to her partner. She will not do it at work. So, I think that what we strive for is to offer a tailor-made service.
A service which requires new investments. Where do you plan to build another LPP warehouse in the nearest future?
In Romania. We have already signed a contract for the construction of the building and chosen the company which will manage this investment for us. It will be the second country where we will build an e-commerce warehouse. The first one is located in Russia. Probably, we will build more such warehouses in different regions. Our market is starting growing, so we have to build such logistics centres to be as close to our customers as possible. So that the customers could receive the products on the next day after ordering them.