E-Commerce and the fashion industry: stores as automated distribution centers
The picture above shows the logistics center of Youngone Corporation, a multinational clothing and sports goods manufacturer from South Korea.

Trade in garments and other fashion articles is one of the fastest growing segments in e-commerce. At the same time, digitization is giving rise to rapid change, for instance requiring tailor-made processes for the material flow for omnichannel strategies. We have talked to expert Benjamin Dietrich, Global Sales Business Manager for E-Commerce & Fashion at Interroll, on the latest trends in the fashion industry.

Ben, why has Interroll been paying increasing attention to the fashion industry since last year? And what does the company have to offer this industry?  

Benjamin Dietrich: Because we consider the area of fashion – just as, for example, the tire or automotive industry – to be an important new growth area for our company. Current forecasts predict that global sales in clothing will increase at an annual rate of 3.5% to 4.5% from 2018 to 2022 to reach a volume of 2,500 billion US dollars (around 2,100 billion euros) worldwide*. For the issues that concern the fashion industry with regard to material flow, we have developed tailor-made process solutions. As a leading international supplier of platform-based products and services, we provide our customers, in other words system integrators and machine builders, with a very high level of expertise. We act, so to speak, as an enabler, helping our business partners to achieve their business goals.

We have developed tailor-made process solutions for the topics that are driving the fashion industry in terms of material flow.

What is the current situation in the fashion industry?  

Benjamin Dietrich: We are currently undergoing a paradigm shift, which is affecting company presentation and the entire value chain in the fashion industry – from the development of new fashion articles right through to sales. Digitization is a challenge for the industry. Omnichannel retailing is presenting the fashion industry with huge logistical challenges. In particular, the offensive marketing strategies of online retail platforms such as Amazon or Zalando, with their convenient means of delivering and returning products, have played a key role here. As in the case of other areas of retailing, this trend towards e-commerce has also really shaken up traditional fashion retail. In response, traditional retailers have invested, and still are investing, huge sums in the implementation of omnichannel strategies. This increasingly involves more than simply adding a new online channel to their own bricks-and-mortar retail offering. Companies also need to establish an intelligent connection between this channel and their existing distribution channels. From the viewpoint of intralogistics, it is a fascinating development.    

What does this mean?  

Benjamin Dietrich: To begin with, this means that fashion retail needs to revise its existing material flow solutions, in which the efficient processing of pallets and packages using manual pick & pack strategies has been the dominant factor up to now, making them more flexible and more powerful. In the past, it was primarily large packaging units that were transported from central warehouses to the various stores and back or to the company’s own retail outlets. E-commerce, in other words direct delivery to the end consumer, is changing the requirements that the supplier’s material flow needs to meet. What is then important is to be able to handle an increasing number of single shipments with shorter and shorter delivery times. These shipments are increasingly also being packed in plastic bags, referred to as polybags. What’s more, this applies not only to sending goods, but equally also to returns, which may account for around 40 to 50 percent of the flow of goods in this industry.    

How are users responding to these challenges?  

Benjamin Dietrich: Only in very few cases do companies develop major new infrastructures in which they need to completely transform their operating processes in warehouses and distribution centers. In most cases, users respond to the new performance requirements placed by e-commerce in that they progressively automate the material flow. The focus is then on innovative solutions that have already proven to be a technological success and that can be very easily integrated into existing processes. One advantage of this strategy is that companies can achieve the required increase in performance without any risk of overwhelming and thus disrupting their own organization. In addition, the necessary investments can in this way be adapted to meet the requirements of the company’s business development.    

What might appropriate solutions look like?  

Benjamin Dietrich: This depends, of course, on the requirements of the user concerned. It’s always about optimizing processes. For instance, as corresponding solutions at Paul & Shark, Youngone or Ulla Popken show, our conveyor platform that can be modularly extended is very well suited for developing tailor-made process solutions for the areas of fulfillment or returns and thus achieving a substantial increase in throughput. These automated conveyor systems that can be controlled intelligently from a decentralized location not only impress users with their modular nature and simple integration, but also make it possible to transport a wide range of articles using anything from a package to a polybag. The wide range of articles, in particular with regard to handling polybags, also makes the cross-belt sorter a very attractive option for the shipping process.    

Our modularly expandable conveyor platform (MCP) is very well suited to create tailor-made process solutions for the fulfillment or returns area and thereby significantly increase throughput.

Do online retail and the bricks-and-mortar retail outlets always have to be strictly separate distribution channels in an omnichannel strategy?  

Benjamin Dietrich: No. Several suppliers with a good branch network are currently working as fast as they can to link the advantages of their on-site presence with the benefits of online shopping. One example here includes “click and collect” concepts, where users have the convenience of ordering their goods online but simply collect them at the store. Another possibility is for clothing articles that have been tried on in the store to be paid for online by smartphone and then delivered to the customer’s home rather than being paid for at the till. For instance, the new flagship Zara store in London will be equipped behind the scenes with an automated warehouse. The store will then virtually become a small distribution and delivery center for the last mile, with customers simply entering a code and then receiving their orders without any interaction on the part of the staff. This service, intended to give the supplier a decisive competitive edge, can also only be implemented with an entirely automated material flow solution. Expertise in intralogistics and close cooperation with experienced solution partners are therefore becoming increasingly important in the fashion industry too.

*Mc Kinsey: “The State of Fashion 2018”

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