Business Re.Invented #4 with Omnipack and Last Mile Experts
Hi everybody, welcome to the next chapter of Business Re.Invented. Today we will talk about e-commerce trans-border, or cross-border, it depends on how you name this. This is a very exciting topic, and we have guests who can talk about this a little bit more. But before we start, I give you some numbers from a recent research. The market is representing 10 Billion of cross-border
orders yearly, even over 10 Billion recently, and based on the estimation, by 2030 the market value is expected to reach 1 Billion US Dollars, then we are talking about big money. And right now, let's introduce our guests: Michal Gebala, Head of Partnerships from Omnipack, and Mircea Stan, CEO of Postis from Romania. Gentlemen, I know both of you, but I think it would be very good if you can introduce yourself to our audience, briefly. Michal? Hello everybody. I'm happy to be here and talk about a very important and interesting topic. I am, as you mentioned Mirek, I am Head of Partnerships here at
Omnipack. Actually, also Head of Merchant Success starting the last week, and I am responsible for, basically, creating new opportunities among partners within the logistics market here at Omnipack, both here in Poland, and on the international level as well. From a personal point of view, I am a father of two daughters, Hanya and Helenka, a fan of music, golf and running.
Great, thanks Michal. Mircea? I'm the founder and CEO of Postis. We started the business here as a startup in 2016, we launched the product live in 2017, and now, five years later, we cover not only Romania, but recently we opened a new office in Poland at the beginning of the year, in March, and we expect to open a new office later this year in Germany. We are a tech company helping logistics and retailers to be more efficient and optimize their operational activities.
I will tell a few things about myself: I also have two kids, one boy and a girl. And I also like running and playing football, coming from my previous life, when I was a little bit younger. We are not at all old, come on. We are not that old. We have a lot of things in common, not only the business, but also on the personal side, and also regarding the said activity that we opened in Poland, and also in Romania. Super, thank you, guys, for your interaction.
Let's talk about the business, because this is a Business Re.Invented chapter. Michal, you're representing Omnipack, a fulfillment center who is supporting merchants, sellers. What do you think, how can you help the customers to develop their business and what is your best description of your offer to your customers? Basically, Omnipack is a 3PL company, a Thid Party Logistics company, and our target audiences are companies that are e-commerce businesses or sell directly to consumer, and we basically help companies grow frictionlessly so they can focus on their business, by taking responsibility for their logistics processes. And I would say that this is like a full stack responsibility,
because we cover all logistics processes starting from the data integration, which is a kind of tech similar to Postis, but we are also very brick and mortar. Goods inbound, warehousing, picking and packing, of course delivering the goods, so shipment, and then returns. And what describes us, and what differentiates us from some of the other logistics companies, is the fact that we own our warehouses, so we have a great control over the quality of services that we are providing. And, I would say that at the very moment, because we are based in Poland and we have two warehouses here in Poland, we are helping international brands from different countries, mostly from Europe, and we are covering most of the geographies here in Europe. So our merchants can ship their goods
across the whole Europe at the very moment. And I would say that we are delivering goods, most of the times, within a one to three days time span in the whole EU. Okay, thank you, Michal. You mentioned you are delivering the packages across the EU and Mircea mentioned, before, that he developed an IT company. Mircea, you're the A.I. master, you're managing millions of millions of data kilobytes every single second. How can your company help companies
like Omnipack or others to improve their last mile? Thank you very much for the question. Starting from what Michal described, we are pretty much complimentary, because we are focusing on the last mile delivery. We deliver a software which tries to optimize, using machine learning and AI algorithms, what is the best option for delivery. We started ourselves here in Romania, we collect some data, we provide a solution, and now we help retailers, logistics, 3PLs and other companies which need to be more efficient on the last mile delivery, to improve on how to choose the best option for them, how to have a transparent flow for their end-users, to be always in control, and also to offer to the shoppers what we call an unmatchable customer experience, fully integrated in the retailer's or 3PL's flows, end-to-end.
Thank you, Mircea. Gentlemen, we observed that e-commerce is growing since many, many years. You know, in some countries single digits, in some other countries double digits. Of course, pandemics speeded-up for everybody,
but right now some of the people see some kind of black clouds over their business. I'm not so sure, because people still want to buy through the internet and they expect that packages will be shipped quickly. You're representing different markets,the Polish market and the Romanian market. There's a different point of view, probably different customers behaviors, different approaches for the business. Can you explain, a little bit, about how
you see this from your point of view applied to cross-border, and what could be the biggest difference between the two. Give us at least 3 samples of your improvements which you can offer to customers. Michal? I think that the trend is there, and nothing can stop it, consumers are becoming more and more comfortable. And they are expecting the goods and their purchases to be delivered fast to their doors, and I don't think that this will change. The trend is very strong and it will last. And it's quite obvious that
nothing can stop it, even a pandemic, even different scenarios or different situations shouldn't stop it. But there are also some key drivers that would encourage more and more cross-border trade. I would say that, in any company that is developing and any e-commerce company that is successful, there is a moment when they think about expanding, making more revenues, and reaching new customers. Especially looking from Eastern Europe, there is a great market in the West of Europe, with bigger purchasing volumes and bigger baskets.
So I think that the opportunity is there and nothing can stop it. On the other side, I would say that companies will do more and more cross-border because they can, I mean because there are pan-European regulations, so using the European Union regulations and a common market, they can and they will use this opportunity. And also, I think because there are more and more either logistics or marketing solutions that are scalable to other markets. A company can have a greater return on the investment it has already made in the domestic market. So this is a great leverage for companies to grow. Thank you, Michal? And next is Mircea. What do you think?
Yes... what do I think... First of all, let's analyze a little bit what are the macro-economic and macro-trends in Europe, at least, because we are placed here in Europe. For this year, due to the war in Ukraine and also due to the inflation that now is raising in the whole Europe, we have some unpredictability and a very fluid situation that is a little bit different from the two years of pandemic. Because of that, I believe that there will be 3 main characteristics that we have to oversee this year and also the next year. One: it's because of this impact that the inflation, but also the uncertaintitude from the Ukraine, are having in all of the countries in Europe, I believe that it will be a must-have for e-commerce and retailers to diversify their offerings, and cross-border is one option which can help them to be more protective for the local market. Second, I believe that, even though the trend will continue to grow for e-commerce, it will not be uniform, meaning that the companies which will offer a very good quality and very good services will feel growing.
Maybe not as expected from the last year, but they will have a good growth. But there will also be a lot of companies which have not put a focus on the customer experience and shopping experience, and they will suffer. That would be the second trend that I would see in e-commerce. And the third one, and this is also important, in order to fulfill all the needs in the market, at least with regards to delivery, you have to offer them a lot of options, from home delivery to out of office, or different methods of delivery, from fast to other methods to do the delivery to, I don't know, trying to be much closer to what it's needed in the market. By offering these 3 characteristics, I believe that it will be a good chance for the players in e-commerce to thrive and also to make the best of their opportunities.
Thank you, thank you, Mircea. Michal, both of us are located in Poland, and Poland is very well known in Europe as an European hub for logistics. We become more and more attractive for many companies. A lot of companies, in the old days, had their own warehouses,
distribution centers across the continent, they had a lot of logistics behind, a lot of owned resources. But right now, the trend is totally different. The companies are shutting down their own operations. They outsource this to companies like yours, and we observe that there are many industries or many producers, like cosmetics, fashion, apparel brands, they are all shifting into this model. What do you think and what can you recommend to such companies, how should they deal with their problem between the owned and the outsource logistics? Basically, I would say that in uncertain times it's better, and these times are coming, it's always better to have a more flexible solution, yet a working solution, a solution that you can rely on.
Of course, there are some advantages for having your own warehouse and managing it yourself, I mean everything is under your control and if you can run it well, you can always create a margin on this business activity as well. Though, I think, you know, it means taking a lot of risks, meaning you would have a lot of fixed costs that you would have to cover, and then a lot of investments that you need to cover. And then, once you are thinking about going abroad, as we are discussing here right now, this would also mean that you would need to put even more investment and then become a professional, basically, in the logistics area. So, I would say that the approach of outsourcing this kind of services, and having this kind of services outsourced from a reliable player company like Omnipack, can be a great solution, because then you can actually focus on business development, on marketing, on gaining more and more customers, and on reaching new international markets. And, of course, from our point of view also, there are different approaches even to logistics, which means you can have a more centralized model, or a decentralized model, and there are pros and cons for each, but I would say that, in the end, having a professional player behind you can become your advantage and another asset where you can actually gain more market.
Thank you, thank you, Michal. Mircea, correct me if I'm wrong, until recently, Romania was kind of an inbound country, the goods were just coming to Romania. But recently, I observed that more and more logistic companies are developing their operation in Romania, some of the big players are setting their fulfillment centers, distribution centers in Romania. How do you see this perspective? What is the future of e-commerce in Romania, especially from a cross-border view? First of all, I believe that Michal has very well synthesized why it is needed to have some external services, like, instead of having fixed costs, to get to the variable cost.
Secondly, in imppredictable times, you need to be more agile and flexible, and also try to minimize the risk. That is also happening in Romania since the last years, taking into consideration the same overall context in which we are right now, such as the unpredictability and so on. The Romanian market is not such a big market, and also Michal spotted a few questions to ask, that, in order to have a good reach on some external markets, maybe there are some bigger markets like Western countries, like Germany, France, Spain, even Poland, as a Romanian player, you need to go abroad, meaning that you have to move some volume from the local market to cross-border markets. And what we saw in the last year, an year and a half, is that, if we compare the growth rate on the local e-commerce with the volume on the cross-border, there is at least 3 or 4 times more growth in the trans- or cross-border activities in Romania compared to previous years. Therefore, there are
good signs that the Romanian companies, and also Romanian players, in order to still be competitive and remain in the market, they have to expand their activities outside Romania. One option is to do it from Romania, but also they could use a player like Omnipack as a local hub there. And, besides the fixed or variable costs, they will have very quickly the possibility to test the new markets and see if they have potential for the future. Mircea, one more, if you don't mind. For e-commerce sales, one of the key elements of the customer experience is the successful and quick delivery. Especially, the last mile is one of the most important elements because, in fact, this process is literally the end of the shopping experience from the customer perspective.
Not just closing the basket when he's ordering something, but the final delivery is the final experience which the customer has. How can Postis influence not only companies like Omnipack, but also their customers and the end-users to buy your solution? It's a very good question. What we realized in the last year or so, is that in the shopping experience, you have two import moments. One is when you select the goods, and you have a lot of emotion put there, especially for some products, and then, the second part, which creates a lot of emotion, is the waiting for goods to be delivered. And, if you compare what will remain in the customer's mind from those two important moments which create emotions, the last one, the delivery, is the most important, at least from what we captured in the customer feedback that we collect. Therefore, what we see with our clients, is that it's not only
a good thing for retailers and, in general, the e-commerce, to put some effort in whatever the customer experience is in the site until the shopping basket is closed, but also in how to prolong or extend that shopping experience until delivery, having a very transparent delivery process, be proactive with the end-users, be transparent with them, give them possibilities to interact. And, I will say that it's important to have a very fast delivery, but also it's more important to give predictibility and visibility to the end-users. This is why we developed a user mobile app, which gives the possibility to the end-users to track all their orders, from all the retailers in the market, and be informed in real time with notifications on what's happening with their order and, if they want to change something and, at the end of the process, if they want to give feedback to the retailer or the company that managed the delivery, which in return get the feedback and see what was their entire shopping experience and how they could improve in the future. And by doing that with some of our clients, we successfully improved their Net Promoter Score at least with 20-25% after two months of working with us.
Sounds good, promising. I would be a customer, for sure. I need to install the app from my favorite shop, in hope that this shop will use the platform. Actually, it is no need to be our client. We offered this functionality to the clients or the shoppers which are clients of our clients, or retailers whom we work with.
But it is also available for other retailers and e-tailers outside the Postis ecosystem. This is what I mean, me as a consumer, I would like to go to the e-commerce platform, to the shop which offers the most expanded portfolio for delivery, because I want to have a choice. As simple as that. And then, my preferred shop would be not with the lowest possible price, because usually something is behind this, but with the best offer especially for delivery. This is what I'm looking for in this kind of platforms. Another question to Michal. We are talking about Polish companies, Romanian companies and international business. It is quite tricky, because when you're running the company
from the Polish or Romanian mentality, perspective for the business, you think differently than your customers and their customers. Then, what is, from your perspective, what is important? What should be done by retailers to fulfill the expectation of international customers, using a platform like yours. Thank you, I would also add something to what Mircea said. I would say that it's not even creating this incremental value and experience for the consumer when you have the whole visibility of the goods that you bought and of the shipment, but it's also something that is creating a value to make the conversion.
So basically, people are sometimes, a lot of the times actually, they're not buying a good because they don't have their method of payment or their method of shipment, so on and so forth. So I think it's not only the value post-purchase, but it's also a value pre-purchase, where this can create additional revenue for the e-commerce business. So the more options, as you mentioned, the more options you have, the expectations of the current consumer, who wants to decide, and the markets are becoming more and more customer centric and I would say that, what we are facing at the moment, is at the same time like a global perspective, because markets are becoming more and more global, and borders are open. We have Europe as a very big region. Yet, at the same time, there are some
local preferences of the customers. Let's talk about Germany only where you have 62 Million online consumers and 46 Million of them bought something from abroad, which is a very nice value. So basically, German consumers want to buy something from abroad, but they expect to have a product described in their language, they expect certain last mile couriers because they got used to some kind of service, they expect certain delivery times, like the shipment should be delivered within forty eight hours maximum, and like the delivery method or payment, as Germany is known for the fact that a lot of payments are being made by Paypal so, if the e-commerce business doesn't have it, basically it's a lost opportunity and so on and so forth. So there are many aspects that have to be fulfilled for an e-commerce business to make the business running from the consumer perspective. Thank you, Michal. Mircea, let's continue this. The people want to have the choice, of course, absolutely.
And your solution is giving to customers a wide range of possibilities, because your platform is offering the hundreds of carriers across Europe with many different solutions for delivery: time in transit, type of delivery, value added services to those last mile efforts which carriers are doing. How is it working in the case of the cross-border delivery? Orders, most of the times, have different players for the international segment and the local capitality. Tell us about this. We wanted, and this is what we promise to our clients, that delivering cross-border should be as simple, and having the same options, as delivering locally in one's country. We make a lot of effort to put all these options available for them, no matter if they work with us in Romania, in Poland, Czech Republic, France or Germany, they will have all the options that they needed. And, as Michal said, when you are used to work with some specific company from those countries, and if you buy something from a Romanian company, but it's delivered in Germany, they should have the same shopping experience and delivery experience as in the case of a local retail.
Therefore, we strive to add as many delivery options in our catalogue, and we try to simplify the flow when they choose to select the delivery company, but also during the delivery itself so that, even though it's a cross-border delivery, to be felt like a domestic delivery from their point of view. It should be transparent, without any additional friction from their point of view. Of course, it is not always possible to fulfill that need, but we try with our clients and partners to simplify the integration and also the customers' flow in order to be as simple as in a local market. Thank you, Mircea.
Which is a challenge, I would say, because it's covering a lot of markets with those local preferences and this is something that I believe can be very, very helpful. Right now, when we are discussing, I would say that it seems so easy, but it's not. You have to fulfill so many expectations, and you have so much competition out there in the market, so every single factor counts. I just wanted to add that, it's a very important topic. Yes, Michal, thank you very much. In fact, this is why I'm saying that 30 years ago, it was very simple to send the package from A to B, because usually you had one or 2 couriers which offered the basic service and that was all.
Right now, you can choose several of many hundreds of them and especially having the tools like Postis Platform, with the algorithms and with the artificial intelligence thinking behind and optimizing their every single shipping process, day-by-day, minute-by-minute, second-by-second. This is an amazing tool which can really support business and customer experience. Okay, gentlemen, I have a few more questions. Let's move forward. Returns. I think this is a very, very hot topic. Not only because it's summer...
... but also because some of the people are saying that returns are free, which is not true because nothing is for free. Somebody has to pay for this sooner or later and then... What do you think? How should the companies manage their returns, should they just avoid this by raising the prices for returns, like, for example, Zara has done recently, or maybe this should be free of charge or maybe, there's another solution to optimize the returns, because the return is, simply, a cost for somebody. What do you think, Michal? Of course, there are two perspectives but, at the end of the day, the market decides in a way. Companies can have different approaches, but I would say that consumers expect their returns to be handled well and to be comfortable and easy, in a way. Also, there is a regulation behind, like a fundamental and underlying regulation, that you can return the product within 14 days and, I think, it's a value itself and this creates more and more online purchases.
Returns are something that we cannot avoid, they will happen. But it's important how this is handled and, of course, there is a cost. So, maybe, the optimization process is the most important, especially right now when fuel surcharges happen and shipping the goods becomes more and more costly. I would say that, what companies and e-commerce businesses can do, is to try to avoid as many returns as possible, which would mean many different solutions, but basically, describing their products as accurately as possible, with photos, with detailed descriptions. Maybe, even, with artificial intelligence or augmented reality when you can try-on goods, so they are not returned but, of course, there still is a sizing thing that creates returns. And the packaging.
So, what it is said, is that 60 to 65% of returned items are linked to poor product information and poor decision making, and sometimes products are faulty when they come because they are not packed well. This is something that companies can influence and, in my opinion, somebody has to take the cost. But this is something to be handled, we cannot avoid this. Mircea? I will start with the end. It's something that we cannot have, deliveries without returns. We cannot have zero returns.
There are some fundamental factors for the returns. Therefore, we have to start from this truth: we have to handle the returns. Now, depending on how you approach this, the best way to handle the return is: first, due to the regulations, but not only for that, because we have some data that shows that, if you prolong the normal return time or give the possibility to return within fourteen days, if you have a good shopping experience, you can reduce the number of returns by informing very well the customers, having a very good customer flow until the delivery, and also giving the possibility to do the post-delivery, including the returns free, easy, without any frictions.
Having said that, you will have to do a lot of optimizations which can be addressed along the entire flow, and try to minimize the returns. What we noticed, in our case and, as you mentioned, we analyzed last year half a million orders, is that there is a direct correlation. For instance, if you promise that you will deliver the goods in 24 hours or 48 hours, when you exceed that promise, and it's not about whether it is quickly or not, but if you exceed the promise that you made to your clients, then there is an exponential probability to have the goods returned. Secondly, there are a lot of factors which come with, for instance, whether you pay with card or if it's with cash on delivery and also other factors. All these could be optimized and you could try to offer the best option for the retailers and people that are handling the goods in order to minimize the number of returns, but keeping in mind that you cannot have zero returns, but trying to have more of happy customers and, in general, to deliver on your promises, from what product you deliver, how you deliver it, how it is packaged and, at the end of the day, to having the freedom to choose, if the product does not fit or if they have done a wrong choice, to be able to be returned.
If you do all this, in time you will be able to reduce the number of returns, and also have a very good loyality from the customers. Interesting. Let's move further, because we are approaching the end of today's Business Re.Invented. I would like to give to our audience some more details. Let's share the "secret sauce" which you have in your recipe for players who are trying to expand to the international markets.
What would be the three things which they need to consider when planning for the expansion. Michal? I would say that we have a lot of markets. So, it's very important to understand and analyze which market you would like to enter, which means getting some data about demand and competition, so that you understand what are the circumstances that you are entering into, kind of. And then, you need to understand your unique selling points, how you differentiate from the competition, because it's a new market, so it will be, definitely, more challenging for you to deliver the added value.
So this would be the first two points, and connected with that I would say that, because it's something new, you need to allocate some budget to test the market, so you don't overspend. Yet, you know you have enough money to actually test if this is working for you or not and, of course, we already talked about those local preferences of the consumers. Play the game well, do your checkboxes and tick all of them, in order to make this new venture that you're trying to build in a new market a possible and a winning scenario. Okay, thanks. Mircea? I will try to be very brief and try to take it more like the startup approach.
First, you do it fast and try to experiment. Meaning that, no matter how much you will analyze the market where you will enter, the best option to validate if it's a good market or not for you, is to test it. Therefore, you have to choose carefully what are the solutions to use in order to be able to experiment in some markets. Experimenting some markets, experimenting some product in some markets, and so on, and figure out very quickly if it's okay for you or not to go in that market with those products. Secondly, as Michal said, be aware that, even though there is something that worked very well in the market where you're playing right now, you should take in consideration some local, cultural or whatever factor that can influence the success or failure in that market.
And third, I believe that you have to be very well prepared, from the beginning, to change the game in a matter of weeks or something like that, because if you miss an opportunity, it will not last for ever. You have to take it as quickly as possible, and try to scale it very quickly. If you do these three things from the beginning, and have the proper mindset, you will succeed. But at the end of the day, it's a trial and error process that you have to develop yourself in the new markets for a specific period of time.
True, true. And this leads me to the very last question for today's session. Just warn them about three things that they shouldn't, never, ever try. Michal? Maybe I would say something obvious, that seems to be obvious in our current discussion, but remember about preferred delivery options, remember about preferred courier companies, and remember about ecological practices. This is something we didn't mention, but in some markets this is very important. True, true. Very true, especially the Nordics are very focused on
sustainability, and more and more countries are developing the sustainable delivery methods as a must have. Mircea? You have to know from the beginning that you'll have a lot of opportunities, you have a big market, which is the European market, but you will have some local fiscal and currency aspects that you have to take into account. Therefore, it will be more complex. Instead of managing one price, you have to manage 10 prices, then it comes the fiscal regulation. Therefore, you have to avoid this, or try to overcome this.
Secondly, I will get back to what I said: because you have to experiment as quickly as possible, don't over-analyze, especially in the conditions that we are facing right now, with a lot of volatility in the market. If you don't do it quickly and you over- analyze if it's a good market or not, you will miss the opportunity. And the third one, I believe that by trying to approach with a local mindset the foreign country, and to do what works well in your local country, is not something to replicate in other markets. You have to adapt to the local conditions, and try to understand customers from that specific market. As you mentioned, Nordics prefer, maybe, a more sustainable approach, than people from Romania or Poland. Thank you, Mircea.
Let me close this session by one of my favorite quoutes: "You never have a second chance to make the first impression". That's very true. It's like the second attempt to deliver. It's usually twice more expensive than the first successful delivery. Gentlemen, thank you very much for your time.
It was very nice to talk to you and meet you. It was our next chapter of Business Re.Invented. Mircea Stan, CEO of Postis, and Michal Gebala, Head of Partnerships and..
Merchant Success, at the moment. Merchant Success from Omnipack. Congratulation, you're back from vacation and you get promoted. Ah, kind of. More responsibilities, you know. Gentlemen. Thank you very much. It was a pleasure to meet you and have a good afternoon. Thank you.
Take care. Thank you very much, it was a pleasure. Thank you very much. Bye bye.