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How AEO and Dick’s Are Creating More Efficient Networks

At the Shoptalk conference in Las Vegas, execs from AEO and Dick’s Sporting Goods peeled back the curtain on their fulfillment strategies and delivery networks as both retailers maneuver through endlessly increasing consumer expectations that seemingly aren’t going to let up any time soon.

Brandon Friez, vice president, global supply chain, American Eagle Outfitters, Inc., revealed that the retailer’s average cross-country delivery speed comes in under four calendar days, with most people receiving their package in two-to-three days. The company has also improved its inventory replenishment speed on average by 50 percent, in some cases and as much as 80 percent.

Prior to late 2021, AEO only operated two U.S. distribution centers in Ottawa, Kan. And Hazleton, Pa. despite its brick-and-mortar footprint of more than 1,200 stores. According to Friez, the retailer’s nationwide store network was beneficial in that it “kept us from having to build a distribution center for almost 10 years, but it created a lot of customer friction.”

The company’s ship-from-store program, which has since been decommissioned, connected the consumer with the right store approximately 80 percent of the time on the first try.

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“With over 1,000 stores that creates a lot of split shipments and a lot of customer cancellations,” said Friez. “At one point we had 1.5 shipments per order. That’s a lot of packages.”

In seeing this need to deliver speed and consistency while reducing costs, AEO built its Edge network upon acquiring two logistics firms, Quiet Logistics and AirTerra, both of which were combined under one unit, Quiet Platforms. With the deal, the retailer acquired and now operates six more fulfillment centers in major cities including Atlanta, Boston, Chicago, Dallas, Los Angeles and St. Louis.

“When a purchase order comes in to U.S., we look at all the inventory positions across the country, and we choose carton by carton where that product needs to go,” said Friez. “Additionally, we rebalance from our Ottawa and Hazleton facilities to our in-market nodes. So we’re constantly moving inventory through the network.”

Since establishing its Edge network, the American Eagle, Aerie and Todd Snyder parent has been able to cut its shipment per order total to 1.1—a “massive reduction” according to Friez.

Friez credited the retailer’s ongoing transformation into a one-to-two-day delivery network to the Quiet Platforms deal, explaining that the Edge network expansion has been accelerated by partnerships with last-mile delivery firm AxleHire and approximately 15 regional carriers across the country.

“We’ve had faster response times to customer demand,” Friez said. “Having a product closer to two quarters without actually having them in the store allows us that optionality, so we’ve been significantly able to reduce the time to consumer.”

After Shoptalk concluded, media reports revealed that AEO’s Shekar Natarajan, the president of Quiet Platforms, had departed from the business. In a statement, the retailer said the business had “grown nicely” but had “not achieved the plans we envisioned.”

So while the Edge buildout appears to have been a successful endeavor from a delivery and inventory standpoint, AEO is mimicking top logistics players like FedEx and Amazon by prioritizing cost cuts in the current economic environment.

“We must pull back on expenses to reset the business,” AEO’s statement read. “This is necessary to improve profitability, particularly given prevailing macro headwinds.”

Dick’s Sporting Goods is also pressured to drive profitability via its own fulfillment network, but has done that by bringing balance across its bevy of omnichannel fulfillment options.

According to Scott Casciato, vice president, omni fulfillment and athlete service, Dick’s Sporting Goods, this means pairing the highest-speed, lowest cost fulfillment options with relatively limited assortment.

“At any given store, we have 20 percent of our total assortment,” Casciato said, illustrating that a brick-and-mortar shopper is likely going to want to try on a few cleats to figure out which feel the best without needing a deep dive into a wider assortment.

On the other end of the spectrum, Dick’s has been able to substantially widen its assortment with its “vendor direct” drop shipping capabilities. The vendor direct program enables more brands to offer products on the Dick’s Sporting Goods e-commerce site, but at the same time the speed of delivery may be sacrificed.

To get a better read on high-selling products and preferred fulfillment methods, the sporting goods retailer engaged with consumers via feedback from customer experience platform Medallia.

For example, surveys have flagged popular products that tend to sell out or not be as readily available. Once these survey results are fielded and analyzed, the teams can turn this feedback around to cross-functional teams so they can better determine the appropriate distribution of a product at the SKU level.

One success story comes in buy online, pick up in store (BOPIS), one of the lower-cost fulfillment options Dick’s offers, which Casciato said nearly doubled since 2019.

During the session, Casciato shared a pivotal lesson he’s learned from his time at Dick’s—“metrics drive behaviors.” He noted that the company tracks key experience and profit measurements including click to deliver, on-time delivery, OSAT (overall customer satisfaction) and shipping and fulfillment expense as a percentage of sales that dictate the next decision.

“We’re constantly looking to figure out the best way to get that product to our athlete in the fastest and most cost-effective means,” Casciato said. “We’re looking at how we’re measuring the effectiveness of this program, and the next wave for us is about how we take commonly classically known distribution strategies and use them to keep us closer to the end consumer and make ourselves more productive.