Fulfillment for Luxury Brands

Our Fashion, Beauty & Lifestyle industry manages a number of luxury brands. How is the market structured and what opportunities do you see for further growth?

We structure the market into the generally recognized segments of luxury fashion, decorative luxury articles such as jewelry, watches or writing instruments, and luxury beauty articles such as cosmetics and perfumes. These are always very high-end products. The market volume in these three segments is estimated at $310 billion US in 2022.

By 2030...

...the market is expected to grow by 5.4 percent annually to reach $480 billion US. However, forecasting is not easy at present due to the geopolitical situation and its impact on global supply chains and consumer behavior.

Although the target groups in the luxury sector generally hold the corresponding purchasing power, we see changes in the market that have considerable influence. Customer groups are becoming younger and subjects like sustainability are gaining in importance. When it comes to the purchase itself, end customers expect to find more – more omnichannel, more digital, more integrated, more personalized. There is a lot of movement here to take into consideration. We are very familiar with ongoing developments and changing requirements. Arvato has managed the online businesses for numerous fashion and beauty brands for many years while product ranges moved beyond clothing and cosmetics. These now also include shoes, handbags, sunglasses, jewelry, watches, fountain pens, and other items from the accessories sector.

These products are not unlike the range offered by premium brands, and you will find that fashion and accessories sectors often overlap. The great expertise we have acquired in this area paves the way for further growth opportunity in the luxury segment.

Luxury brands expect luxury fulfillment. What is particularly important?

The key is to handle the product with respect. Its value must be in focus through all processes – from goods receipt to warehousing, picking and packing, right through to shipping. Often, the challenge is how to make that brand stand out against other companies in all areas of the value chain. What can we do differently in the warehouse? How can I package the product to make it stand out, or just how quickly can it reach the end customer? Often there is a more individualized, flexible logistics solution than one that would be used for a large volume order business. We look very closely at the client, their wishes and their products to ensure we deliver a truly first-class customer service.

What value added services are required?

There are a wide range of value added services – like elaborate packaging or gift-wrapping using gloves, the use of tissue paper, bows, greeting cards and the like, so that buyers have a similar unpacking experience to what occurs in store. We advise our clients on which materials they might wish to purchase and offer ideas for different ways to package. We have already set quite a few benchmarks here, but we also always pay attention to the sensible balance between costs and efficiency in the warehouse. Another trend is the increasing desire for product personalization, as in engraving or finishings. We have specially trained employees to carry out these activities on the appropriate machines in the warehouse. In the beauty sector, we even mix individual perfumes or shampoos for end customers. These are processes that are typically only carried out in stationary retail.

What role does international business play?

The luxury brand segment is a global business segment featuring large companies that are present all over the world. For brands managing their own supply chain – including transport and all the other areas of business – internationality greatly increases the complexity of operations. Our advantage at Arvato is that our network and our IT setup is also global, and our experts have gained a lot of experience with comparable customer solutions in the individual markets. We definitely score points here – as well as in the area of trade and compliance. We have a division devoted to this, and staff with strong expertise and now act as a specialist for clients worldwide.

How well equipped is Arvato with its services for this market?

With our portfolio of services, we consider ourselves very well positioned and have shown our ability to respond in a flexible way to the requirements of our clients. In addition to the traditional logistics services of warehousing, picking, automation, and transport management, we also offer varied value added services and comprehensive omnichannel solutions for B2C and B2B commerce. This is complemented by our in-house consulting where, for example, we support clients in designing general supply chain strategies. In this case, it is important to find the ideal balance between proximity to the customer and the capital commitment to inventories at a warehouse location.

The decision between creation of a hub location, multiple satellite locations or an interim solution is a serious consideration for every business, and we are called upon to design individual and flexible solutions. In the process, we also scrutinize omnichannel functionality.

For high-value, premium luxury products, security and fraud management are critical issues. Our finance management completes checks on creditworthiness and manages the entire payment processing for our clients. To safeguard products in the warehouse, different storage areas have been created with individualized access controls, and special cages and product safes can be used to store particularly valuable items. The use of security personnel and camera surveillance is standard practice.

An important topic in this context is also the selection of the automation solution. These partly include a certain safety aspect in the area of storage.

What expectations does Arvato meet?

Full end-to-end transparency is important across all services. We monitor payment processing closely and manage the supply chain carefully, taking precautions to ensure that the product reaches the end customer. Comprehensive status information is available throughout the entire series of events until arrival and creates the basis for transparent communication and delivery of a consistent brand image to the end customer.

Consumers who make high-priced purchases expect a certain level of service and exclusivity. The customer journey must therefore offer an ideal experience through order placement, financial processing, and finally on-time delivery. As an e-commerce service provider with a strong end-customer focus, this is what we aspire to deliver. We choose which carriers are used to deliver goods by considering all aspects of security and service. We also use the data we generate along the entire supply chain to continuously improve the customer journey.

What is Arvato's USP?

We see ourselves as a high-end partner for customer-oriented and secure supply chain solutions across all channels. A key USP (unique selling proposition) we offer is that our solutions can be flexibly adapted to each client and market. The client is in the spotlight – we adapt our solution according to their requirements and needs. Additionally, we are able to take market conditions into account and can react quickly to changes in the customer segment or in the supply chain. Our company size is also of value, and that we have an international network positioned globally.

Another USP is certainly our automation expertise. Arvato has their own logistics engineering division whose experts have clustered different automation technologies according to standards of application, independently of manufacturers. The pieces required for each project are then individually assembled from this modular system based on the respective requirement. We model our solutions in advance to see at which step automation makes sense. Depending on volumes, we have the ability to start a business somewhat manually, and then move to fully automated processes – or if the customer does not insist on exclusivity, we are also able to offer multi-client solutions which offer lower process costs.