Profits dip for online companies ensuring long-term future

Clothing and other retailers are investing heavily in new warehouses and this is having an effect on short-term profits.

The Office for National Statistics is reported that online clothing sales represent over 20% of all garment sales. In 2016, the figure was less than 5%. Many clothing retailers have warehouses that were built for bulk orders distributed to high street stores. The systems needed to process online orders are different as each order contains one or few items.

Some retailers are building new warehouses specifically to handle online orders. Clothing company ASOS will soon open a million square feet warehouse in the USA and is opening a “Euro hub” in Berlin. This is a costly expansion and has resulted in a decrease in ASOS’s profit, but the company sees this expansion as future-proofing the business, believing better logistics will result in more profit in the future.

Other businesses are adapting the warehouses they already have. Small-to-medium businesses continue to rely on operators pushing heavy duty storage trolleys to pick items but have introduced automated warehouse management systems that maximise the space and the accuracy of processing orders. Automated systems plan picking routes and direct pickers to precise locations, while some companies are using robots to streamline the picking process.

In highly competitive online markets, businesses must adapt by using new systems or opening new warehouses. Whichever route they take, like ASOS, current profits can decrease, but in the long term, new warehouse systems can ensure business survival.

You may also interested in: