Online shopping poses challenges

WITH people increasingly favouring online shopping over brick-and-mortar stores, internet shoppers are seeking ever shorter delivery times for their purchases. As a consequence, retail and its related sectors of transportation, logistics, storage and even real estate, have had to adapt to this change.

While the pressure to speed up delivery time is nothing new in Slovakia, one of the main problems e-shops in the country have had to face from the very beginning was the question of trust, Jozef Dvorský, the executive director of the Slovak Association of Electronic Commerce (SAEC), told The Slovak Spectator.

“Due to the higher extent of uncertainty and complicated, time-dragging law enforceability in Slovakia, local clients of e-shops have always been more interested in what is happening with their order than consumers in Western Europe,” said Dvorský. “While, for example, in Germany the client orders goods and calmly waits for their delivery, the Slovak client, a few hours after sending the order or the next day at the latest, inquires via phone or e-mail about what is happening with his order. From this point of view, the Slovak client has been more demanding and much less patient than clients abroad.”

This is why Slovak e-shops do not regard the pressure to reduce delivery time as a radical and unexpected market change. Because of this, Dvorský considers Slovak e-shops to be better prepared and further along in development than their western European peers.

According to Dvorský, delivery time is a competitive tool, and all Slovak e-shops are working to reduce it. The biggest online shops, like www.martinus.sk, www.mall.sk or www.hej.sk, have adequate stock and processes that enable them to dispatch goods often within an hour after receiving the order.

“Further reduction of the time of delivery depends especially on the possibilities of delivery services,” said Dvorský, adding that these operate in 24-hour work cycles, which means that they take over dispatched goods once per day and deliver them the next day at the earliest. Dvorský does not expect this system to change soon, because in most cases delivery of common goods within two or three days of the order is fully satisfactory.

Alexander Kieslinger from the Gebrüder Weiss transportation and logistics company, which operates in Slovakia, does not believe reduction of delivery time is crucial.

“Cutting the time of delivery is not required non plus ultra, this is a mistake,” Kieslinger told The Slovak Spectator. “E-commerce clients prefer free delivery to receiving [the goods] on the same day. Because of this, storing processes and processes related to deliveries to clients should be created in a simple and effective way.”

This means that storage technologies and processes must be set at a high number of orders with a small number of positions, explained Kieslinger.

Tomáš Ilavský of the Slovak arm of Gebrüder Weiss confirms that the online shopping boom has had a huge influence on merchant flexibility.

“The aim of trading companies is to sell goods and to supply them as soon as possible for as low cost as possible,” Ilavský told The Slovak Spectator. “This affects logistics and transport processes. Cut-off time is being moved to later hours while delivery within 24 hours must still be guaranteed. Effective planning of resources in such a case is very problematic.”

Ilavský added that it is very demanding to predict the consumer’s behaviour, who makes orders online at any time.

“Our experience shows us that the biggest wave of orders arrives after the weekend or holidays, and with the approaching end of the [work] week it has a descending tendency,” said Ilavský.

Mária Džundová, country sales and marketing manager of the Slovak branch of TNT Express Worldwide, a provider of transportation and express services, said that one of their main activities is tracking shipments and that the basis of online shopping is the transfer of data. Thus, the arrival of e-commerce has not brought any significant changes for the company, “maybe only greater interaction between the receiver and the transporter”.

“Today the receiver of the shipment can select and adjust the date himself, as well as the time and the address for delivery,” said Džundová, adding that he can even do this during the transportation of the shipment, which was completely impossible before.

Džundová said that the growth of online shopping and its impact on transportation companies operating in Slovakia reflects the small size of the local market. This means that more shipments are being delivered from stronger markets to Slovakia than goods from Slovak e-shops abroad, which makes Slovakia different from Western European countries.

“Also, the model of TNT Express in Slovakia mimics the market – we deliver more shipments from foreign e-shops [to Slovakia] than pick up … shipments from Slovak e-shops,” said Džundová.

According to Gefco Slovakia logistics service provider, online shopping and shortened terms of delivery impact storage premises, but the type of stored goods and the average storing capacity have a bigger influence.

“It is different to secure storage for GPS navigations, tyres or large white goods,” Michal Bodocký from Gefco Slovakia told The Slovak Spectator.

Bodocký added that the growth of online shopping increases the need to respond quickly. This means a quality warehouse management system must be able to fulfil various client requirements, various ways of marking goods and various ways of dispatching, and the ability to enter the system frequently and make changes on the fly and extend working hours.

The development of e-commerce has also brought new requirements for logistics and warehouse premises. Peter Bečár, the executive director of PointPark Properties (P3), a developer and asset manager of warehouse properties for the Czech Republic and Slovakia, forecasts that, thanks to e-commerce, large hubs over 30,000 square metres in size which are focused on consolidation of warehouse stocks, and whose location will depend on costs for storing, will be built. He also expects development of smaller regional cross-dock centres between 3,000-5,000 square metres in size, which will be closer to the client and thus have more flexibility when delivering goods.

P3 already feels the impact of these trends. Bečár cited the company GBM as an example of the growing demand for smaller logistics premises, which operates a network of shops selling musical instruments, and which has rented about 1,000 square metres of its facility in Bratislava. Earlier this year P3 built a 3,400 square metres large distribution hall for the DHL Express company, which is interconnected with the area of the Bratislava airport.

“DHL has created here a new distribution node, which supports the quickly growing number of clients of this company in Slovakia and serves as a strategic node for the operation of DHL Express in Austria and the Czech Republic as well as a transit node for the Balkan countries,” said Bečár.

According to Bečár, logistics real estate changes to reflect the changing requirements in the labour force, as the work in such premises no longer involves only storing and manipulation of goods, but also includes packing orders and other responsibilities.

Martin Polák, vice president and market officer for the Czech Republic and Slovakia at Prologis, said that the e-commerce industry typically requires a handful of specialised activities within the facility, such as smaller batch order picking, individual order shipping and returns processing.

Karimpol International Slovakia sees e-commerce and related logistics services as promising, with prospects for a bigger share of the total industrial real estate market. But in this respect Peter Bahník, responsible for customer relations at Karimpol, told The Slovak Spectator that currently the decisive factor is the quality of the offer of the e-commerce service and the willingness of people to shop in this way.