US retail giant AEO eases supply woes with logistics buy-out
The US-based clothing retailer American Eagle Outfitters (AEO) is acquiring a digital fulfillment operator in a $350 million cash deal, as it looks to take greater control of its supply chain, reports the Wall Street Journal.
AEO’s acquisition of Quiet Logistics is its second in the logistics arena this year. The move has been prompted by widespread supply chain problems that means retailers are struggling to meet resurgent consumer demand and the pandemic-fuelled shift to online shopping.
AEO offers affordable clothing, accessories and personal care products under its American Eagle and Aerie brands. It has more than 1,000 stores in the United States, Canada, Mexico, China and Hong Kong, and ships to over 80 countries through its websites and mobile applications. American Eagle and Aerie goods are also available from around 200 international locations operated by licensees in 25 countries.
Quiet Logistics is robots pioneer
Quiet Logistics, based in Devens, Massachusetts, has eight fulfillment centres, with locations including Boston, Chicago, Los Angeles, Dallas, St. Louis and Jacksonville.In these centres, robotics technology helps workers fulfill shipping orders. The buy-out will allow AEO to place inventory for its customers closer both to the younger, urban consumers it values highly, as well as to direct-to-consumer shippers.
Quiet Logistics is a pioneer in automation, and created Locus Robotics, which builds so-called collaborative robots that are designed to work alongside people. The robots guide workers to relevant items, and can also ferry goods across a warehouse to be packed and shipped.
AEO’s acquisition - expected to be completed before the end of the year follows its purchase in May of e-commerce delivery startup AirTerra, which aggregates shippers.
AEO COO Michael Rempell says Quiet Logistics and AirTerra will be run by a single person, and that they will operate independently of both one another and of the clothing retailer.
AOE buy-out gives scale, flexibility
He added: “The two firms will give AEO and the customers of Quiet Logistics and Air Terra greater scale, flexibility and efficiencies currently available to major shippers such as Amazon.com Inc. and Walmart, by aggregating smaller shippers.
“We think it’s going to be a very big, very profitable and very successful business in its own right.”
Prior to the purchase, AEO used Quiet Logistics for order fulfillment during the coronavirus pandemic. AEO says the The pandemic accelerated the shift to e-commerce for many retailers. AEO’s digital sales accounted for 35 per cent of total revenue in Q2 this year, up a quarter on the pre-pandemic figure.
Although the shift to digital has delivered cost savings by allowing retailers to hold less inventory it also requires that they prioritise rapid home delivery. The shipping costs that result from this affect bottom-line results.
General and specialty retailers on average held 48 days’ inventory outstanding in Q2 2021, down from 61 days in 2020, according to consulting firm Hackett Group.
Supply chain now consumer-facing
“Supply chain is becoming more of a consumer-facing activity,” said Shekar Natarajan, AEO’s chief supply chain officer. “And in that world, you need to basically have consistency and control of your experience.”
Last year, AEO began ordering smaller quantities of clothing from suppliers. The Wall Street Journal reports that the company reduced store inventory by 40 per cent compared with the same period in 2019. Its net revenue hit a record $1.19 billion in Q2 this year.
Quiet Logistics was jointly acquired by the Related Cos. and property investor Greenfield Partners LLC for an undisclosed sum in 2019.
Gene Gorab, president and chief executive at Greenfield Partners and executive chairman of Quiet Logistics, said the logistics firm’s revenue quadrupled over the past three years and is expected to reach a forecasted $130 million to $135 million in the current financial year, which ends in March.