Per WSJ, some companies that set out to build e-Commerce fulfillment services when pandemic-driven online sales boomed are now cutting back on their logistics ambitions. E-Commerce service provider Shopify, apparel retailer American Eagle Outfitters and meal-kit delivery company Blue Apron are among the companies that hoped to gain greater scale, with some looking to establish distribution channels to compete with Amazon. As growth in online commerce drops to pre-Covid levels, some companies are indicating that regular, reliable home delivery has proven more challenging than expected.
Shopify acquired two logistics firms and spent several billion dollars over the past several years to offer fulfillment to its customers rivaling Amazon. But as e-Commerce growth has receded, Shopify recently opted to sell its fulfillment operation to freight forwarder Flexport and focus on its core business, selling e-Commerce tools to retailers.
American Eagle sought to expand its logistics operations rapidly by offering its growing capabilities to other retailers. It created a subsidiary, Quiet Platforms, after buying logistics providers Quiet Logistics and AirTerra, and spent hundreds of millions of dollars to build scale to spread out its own fulfillment costs. While the effort cut delivery costs for American Eagle brands, the retailer began this year to cut Quiet’s workforce after saying that the subsidiary’s third-party services had not met expectations.
Blue Apron built its manufacturing and distribution operations in the meal-kit sector, offering weekly home delivery of pre-measured ingredients and easy-to-make recipes to its customers. The company added two warehouses and hired about 1,200 workers to assemble boxes to keep goods fresh during expedited shipping. However, early growth in the meal-kit sector has receded and Blue Apron has struggled to increase sales and keep customers in the expensive business of delivering perishable items. The company recently announced it is selling its logistics assets to FreshRealm, which makes meal kits for grocery chains Kroger, Publix and Walmart. FreshRealm will now handle logistics operations for Blue Apron. The expectation is that this will cut Blue Apron’s logistics costs by outsourcing manufacturing and delivery to a lower cost provider.
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Read more: https://www.wsj.com/articles/companies-find-ambitious-logistics-strategies-havent-delivered-9b5c0dd3