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Upstream Focus: Seko Logistics’ David Emerson on Returns, Online Retail & VAT Rules

Upstream Focus is Sourcing Journal’s series of conversations with suppliers, associations and sourcing professionals to get their insights on the state of sourcing, innovations in manufacturing and how to improve operations. In this Q&A, David Emerson, senior vice president of Seko e-commerce at Seko Logistics, discusses the impact e-commerce has had on returns and how his firm is addressing the changes to import requirements for the E.U.

David Emerson Seko Logistics
David Emerson, senior vice president, Seko e-commerce at Seko Logistics Courtesy

Name: David Emerson

Title: Senior vice president, Seko e-commerce

Company: Seko Logistics

What’s the number one question you get from your apparel clients now that was never really a consideration before?

Can you do returns in all global markets? Everyone knows that with apparel in particular, with e-commerce, you’re going to get consumer returns. We’ve always had Return to Sender undeliverables, and consumer returns really just added to that. The thing that’s changed with returns is that consumers now want the same experience on the reverse logistics as they do with the outbound—it’s fully tracked and they have a degree of control and flexibility. They can go into a portal and decide which items they’re returning and provide returns reason information.

What is the main thing brands and retailers could do (or stop doing) right now that would immediately improve logistics?

Standard global sizing would help with returns. The key reason for returns is that something is the wrong size or it’s a look or a colorway that doesn’t fit with what the consumer saw online during the purchasing process.

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As customers, we all know that the sizing is not consistent across brands. Anecdotally, I bought two pairs of jeans yesterday in London. I tried on one pair and said, “I don’t need to try on the second, do I? It’s exactly the same size and colorway.” And they said, “No, you want to try on; it varies by batch.” And that’s a single seller with an identical SKU.

Expand that to cover multiple geographies with different sizing conventions, then retailers within each geography using quite different sizing, that’s going to lead to returns. In e-commerce, you can’t try it on. Even with online magic mirror technology, you still can’t get a proper understanding of size. If sellers could standardize product information—not just sizing by the way, but product codes and product information—that would really help.

Given the rollercoaster of demand and shipment volumes during the pandemic, how are you adapting your operations to better prepare for and react to uncertainty?

Moving to 24/7 operations in most fulfillment locations has become more of a necessity just to smooth out logistics. We’ve gone live with a large volume client of late, and their fulfillment center is open every day apart from Christmas Day. So those volumes need to be collected and processed daily. Clearance, handoff, carrier processing, downstream access routing and then delivery all need to be daily. Where we see things get bumpy is where we’re able to control that first mile and middle mile daily, but clearance fees and final mile ends up being five days a week rather than seven.

The pandemic might have brought that to a fore because volumes increased due to e-commerce shopping, but capacity of flights and airfreight also cause bumpiness. This is just a wider piece around smoothing out a supply chain, and ultimately that means daily; 24/7 is the extreme, but five days a week is sort of an old-school cycle.

Which piece of technology or innovation have you found most useful during this time?

Slack collaboration tool has helped us massively as a business, but of course you can’t mention pandemic and innovation without talking about Zoom and Microsoft Teams.

Resiliency has become a buzzword since the disruption caused by the pandemic. What could brands and retailers do right now to immediately start preparing for the next unforeseen event?

Having plan B’s for sourcing locations would be a great start. Having diversity in the sourcing portfolio allows the brand to not be so reliant on one location or country.

What should be brands’ and retailers’ top lesson from Covid-19? How can they address this in their operations?

E-commerce is king; be online or prepare to die.

What’s one piece of legislation that should be on fashion firms’ radar? 

The introduction of IOSS (Import One-Stop Shop) regulations in the E.U. on July 1. This is a big shake up, probably as big if not bigger than what happened on Jan. 1 with Brexit, and that whole change to duty and tax being applicable from the U.K. into the E.U. Everyone who’s shipping from the U.S., for example, already had sales tax and duty requirements.

It’s not just importing into Europe with IOSS, it’s also importing within the E.U. with OSS. It makes sense in theory to ensure that VAT sales tax is being applied correctly for each destination country, but it’s hugely complicated to put that in place.

How can companies prepare for this policy?

A lot of sellers have registered for IOSS but very few have received their IOSS registration number. So what we’ve scrambled to do and what we’ve got in place is IOSS if retailers are ready for it, as a carrier we’re ready for it, but we’re also continuing to offer non IOSS DDP (delivered duty paid), delivery into Europe. That’s a tremendous relief in terms of continuity of service.

What we’ve seen really connected with Brexit as much as connected with IOSS, is we’re seeing a lot more demand for what we would call B2B2C. So we’re doing a consolidated B2B shipment and clearance into the E.U. and then handing off injecting into B2C networks once we’re inside that free trade area. So [IOSS] was designed for simplicity; it was delayed from Jan. 1 by the E.U. because of the pandemic. It’s created a lot more complexity that everyone’s had to navigate their way through. We’re ready for it, but fully expecting in the coming weeks some carriers not to be. A couple of carriers fell over after Brexit, and the same may be true here.

What keeps you up at night?

Are we ahead or just keeping up? Worst still, are we behind?

What makes you most optimistic?

That we have a strong global e-commerce led business and are well positioned for growth.