Innovative online retail companies are learning how to compete with well-established companies by creatively managing their supply chain. By combining best practices and technological advancements, these companies are disrupting their competitors while maintaining lean inventories and cutting out the middleman to deliver lower prices to consumers.
“The pace of change happening within supply chains is extraordinary. These companies are forcing the marketplace to change due to their innovative supply chain practices,” according to Patrick Penfield, professor of supply chain practice at the Whitman School of Management at Syracuse University. “If you do not keep up with technology or constantly improve your supply chain you will not be in business long. Today’s supply chains are vital to the success and health of an organization.”
Learn how these five online companies are making a dent in the marketplace.
Warby Parker, an online retailer, was founded in 2010 with the mission of selling high-quality eyeglasses at a reasonable cost. While LensCrafters may be the largest retailer—known for its one-hour guarantee—Warby Parker focuses on selling stylish eyeglasses and sunglasses that would retail for $300 to $500 for less than $100, and that’s including the prescription lenses. The company has three distribution centers in just the U.S. and meets with their suppliers to help them formulate plans for scaling. Warby Parker sources raw materials—even down to the screws in the eyeglasses. An Italian company creates the acetone for the frame, and the company has the frames assembled in Asia before arriving to the U.S. where the lenses are edged and then inserted into the frames. The company recently opened brick-and-mortar stores, and to cut down on inventory taking up sales space, they use the type of pneumatic tubes found in banks to move products from the basement to the showroom.
Big box stores like Target, REI and ACE Hardware make money by maintaining tight product margins and by offering a variety of different products of varying quality. And while this business model may work for them, it may not work well for small businesses. Huckberry, an online general store that attracts a certain niche—male-centric brands—offers an array of home and outdoor products. Huckberry works with small suppliers that want a place to sell high-quality products under not-so-tight profit margins. The uniqueness of the items ranges from the world’s smallest production lighter to a wooden bottle opener. Huckberry also sells tools, flashlights, clothes, accessories, and shoe grease.
Casper creates a comfortable sleeping experience by building beds that combine a top layer of premium latex foam with a middle layer of premium memory foam. The result is a mattress that is both durable and relaxing. Casper works closely with their suppliers to make sure that the beds are true to their design and aesthetic. And similar to its competitor Sleepy’s, which boasts a bed in a box regardless of the bed’s size, Casper packages it in a box that is no bigger than a minifridge. This cuts down on inventory space and makes it easy to ship to customers. The bed expands to full size after opening. Casper boasts a no-hassle return policy and competitive prices for urban dwellers.
While the shaving market may be controlled by giants like Gillette and Schick, Harry’s Razors, founded in 2013, is shaving off some of their customers. Although the company only operates online, it’s become successful by cutting out the middleman, purchasing a 93-year-old factory, and raising more than $122 million dollars. When Harry’s founders decided to purchase their own factory, they conducted a thorough search process that ended with the company owning a factory with almost a century’s worth of experience making everything from low-end to high-end razors. In addition, the purchase of the factory gives the founders control over the designing, manufacturing, and selling decisions. Currently, Gillette and Schick are the only two competitors who have this type of vertical integration.
Offering quality comparable to J.Crew and Gap, Gustin designs button down shirts, denim and khaki pants, and other American-made products at wholesale prices. Using crowdsourcing, Gustin designs a product and creates a campaign for it. Consumers back the product by choosing to purchase it in advance. They enter their size and supply their credit card number. Once the item reaches the crowdsourcing goal, the consumer’s credit card is charged, production is started, and the item is delivered by the specified date. Gustin declines additional orders when a product reaches 100 percent funding. Also, the only items kept in stock are for returns, so consumers can’t purchase items “off the shelf.” This process creates zero waste and the consumer reaps cost-saving benefits that can exceed $100.