Mercado | Insights | Who is going to do to the first mile what Amazon did to the final mile?

Insight: First Things First – Who is going to do to the first mile what Amazon did to the final mile?

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First Things First

Who is going to do to the first mile what Amazon did to the final mile?

October 21st, 2022   ·   By Rob Garrison

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Every week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of an on-going series. Each article aims to share a little insight into what's going on that week, and to help foster discussion amongst industry professionals across levels, geographies, and companies.
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I remember when the legendary former CEO of Michael's Stores, Michael Rouleau, could not understand why anyone would ever want to buy their products online. He stopped short of saying it was a fad, but he was definitely not an early adopter.

Of course…the rest is history, and every business—including Michaels—was forced to change their model to compete with Amazon or be conquered. Beyond competitive reasons, it kept many businesses alive in 2021.

Shekar Natarajan (Chief Supply Chain Officer & Executive Vice President at American Eagle) is taking that concept to another level by suggesting the best way to compete against Amazon is to emulate their ability to scale through flexible infrastructure, technology, and partnering with “frenemies.” It's a bold concept, and based on metrics he shared at the Sourcing Journal Fall Summit this past Tuesday, it looks like they are seeing some early wins. For those not familiar with his strategy, the linked article by CNBC does a good job of explaining the vision.

My question, however, is who is going to do to the first mile what Amazon did for the final mile? In many ways, the first mile as it is in 2022 looks much like the final mile did back in 2000 before Amazon entered the picture. Products are purchased offline, networks are not connected nor shared, digitization is still a four letter word, and shipping is not automatically included in the purchase.

One company showed us the way forward, but no one has been able to replicate (or even come close) to their success. ZARA SA is the OG of the first mile, and as a result, they are able to turn their inventory every six weeks and produce incredible profits. However, there is a new participant in the first mile Olympics called Shein. Shein is CAF (controversial as f**k) in general—as is Amazon—however from a supply chain perspective, they are killing it. Like Zara they can also achieve delivery from Asia in six weeks from order, DTC.

Some brands such as Williams-Sonoma, Inc. are dipping their toes in this with select products, but Shein is all in. Considering it takes many apparel importers up to a year to bring products to market, it’s no wonder why we might as well face it…Gen Z is addicted to Shein. Did u say one year? OMG, like, that's insane...
Mercado | Insights - The $2.8T international supply chain visualized
"In an 'ideal' world, an importer would have at least one backup country, and one back up supplier for every critical product... All of this sounds good on paper, however it's actually incredibly difficult in practice."
One key reason is the dominance of China. Many importers are concerned about China as a sourcing point due to increasing tensions between the countries. However, the reality is that China dominates mfg in Asia, and they are very good at it.

As a result, quitting China is hard, as you will see in the excellent analysis below by Rita Rudnik.

A second reason is much more mundane. Most importers lack a robust database of their suppliers, and their supplier's suppliers. On the surface this sounds ridiculous, however we have gone through decades of 'predictable' supply chains where this wasn't a priority. Using the example above, most of the bike importers I spoke to were simply not aware of how reliant their suppliers were on Shimano.

My guidance to all importers is to address this database issue quickly. Beyond resiliency, knowing a lot about who makes your products, and who makes their parts, is also critical for understanding things like cost, ESG, and sales.

About the author

Rob Garrison, Mercado CEO
A highly accomplished Global Supply Chain executive with 25 years of experience, Rob Garrison has provided strategic vision and leadership to Fortune 500 companies. Rob has an impressive history of building agile, technology-enabled supply chains, and he has an established track record of forging high-growth partnerships, positioning organizations for success and launching innovative technology solutions that significantly improve end-to-end supply chain efficiencies.

Rob is currently CEO and founder of Mercado Labs.
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