Westwing: The 14-country, zero-inventory challenge

March 28, 2017 by
Janine Nothlichs

_MG_6405Stephan Spijkers, Operations Director at Westwing

Who? He has worked for Westwing for 4 ½ years, practically from the beginning of the company in the Netherlands. He is responsible for the entire supply chain process, from ordering from the supplier to delivering to the client and everything in between, including transport, warehouses and last mile carriers. He also manages certain IT developments such as new features on the website, the app and the mobile site.

This article previously appeared in Cross-Border Magazine Nr.2, which you can download here.

Furniture and home decoration is one of the fastest growing categories in e-commerce, with around 30% of total sales in Europe, and one quarter of sales in the United States already happening online. Selling furniture online is a logistical challenge on its own, but combining it with a flash sales concept for sure ranks among the more complicated business models when it comes to operations. Nevertheless, furniture and lifestyle pure-player Westwing is pulling it off, having grown from a start-up in a German garage in 2011 to an international player active in 14 countries with over 26 million members. We met with Stephan Spijkers, the operations director for Westwing in the Netherlands, in Amsterdam, to discuss the operational challenges of the fast-growing, international home and living retailer.

A complex business model
The business model of Westwing is complex, describing itself as a ’shoppable magazine’. Westwing runs 1000 new products per day in a flash sale method with 30-70% reductions and without having any inventory. The continuity and amount of new daily products are a clear advantage of this idea. The ‘shoppable magazine’ is a hybrid of an inspiration source and a daily deal site, active in Europe and with a smaller focus on Russia and Brazil. The trade-off of the business model are the long delivery times and the dependence on the supplying manufacturers to keep their promises.

Just as many similarly operating websites, Westwing places an order with a contracted supplier once the flash sale is over. “One of our main challenges is how to get products to the client faster. As our business model has zero inventory, 24-hour delivery will not work for us, but if you look at where we have come from, we have already achieved a lot. One year ago, we communicated a 3-5 week delivery period and now 30% of our products can be delivered within 1-2 weeks. Improving delivery times without breaking any promises you make to the customer, is one of our major challenges,” explains Stephan Spijkers.

Start in-house, scale up with partners, refine in-house
Westwing started small, from a little office in Munich where all employees helped packing deliveries. When growth accelerated, a partner was docked with experience in the ecommerce sector. Through the facilities and services of the outsourcing partner, Westwing quickly scaled and ventured into many markets. “After a while, we refined our services by managing the processes with the suppliers ourselves, including purchase orders, invoicing, and communication. In Berlin, we have now gone back to doing a lot of things ourselves, such as the inbound operations, which form an important part of the business.”

Sourcing and selling
The local offices work on two fronts: they source products from local brands, and they serve the local customer buying from the website. At the moment, Westwing is most active in the countries where there is also an office, but they sell to most neighbouring countries as well. The local presence is important, because the differences in customer preference in this sector are very outspoken, even between culturally similar countries such as Germany and the Netherlands. However, some countries share offices and warehouses: the Benelux is managed from Amsterdam, and the Berlin warehouse not only serves these countries, but also the entire DACH region. “In each country that Westwing is active in, there is a staff of 110-120 people sourcing and buying products, presenting them on the website, telling stories, taking photographs and holding interviews for the magazine. There are also extra styling tips along with most sales”. The products sourced in one country can be offered on all 14 Westwing websites, depending on how many countries are interested. Spijkers: “Sharing these campaigns means that a very small manufacturer from the Netherlands gets the chance to launch his creations in France and Italy.”

Cross-border platform
Brands can thus use Westwing to sell into new markets and to test demand in these markets, which makes it, alongside Amazon and other market-places, an interesting cross-border platform. The operations director explains: “Westwing understands online marketing. This is particularly interesting for manufacturers from the home and living sector that have little online experience. We offer a marketing platform, millions of relevant newsletters and a good logistics system, while creating an individual, beautiful brand representation on our site. Even if that means we must change product descriptions or send our photographer there to shoot the right images. Our suppliers don’t have to do too much; we can facilitate everything from presentation to logistics.” Selling furniture online is often perceived as a challenge to traditional players, Westwing did it from scratch: “The most special thing about our work is that we ship large furniture all across Europe on a daily basis, without the customers even noticing. When they order something, they often don’t even know that these products come from all over Europe. Maybe we should communicate that more. For us, these are normal daily operations,” says Spijkers.

The delivery must match the brand experience
One of the goals is to find ways to make the delivery experience match the overall inspirational tone of voice the company which is presented on its site and throughout the shopping journey. All parcels are therefore re-packaged in branded, turquoise Westwing boxes with a special filling. Products are divided into two categories, packages and ‘2-man handling’ goods, which includes furniture like sofas or beds. Both categories are handled by separate, specialised last mile carriers. The quality of the delivery is an essential part of the branding and customer retention process: “You don’t want your €1500 sofa to be delivered by a shady operator in an old minivan,” illustrates Stephan Spijkers. Returns are free at Westwing, even if it’s a box-spring bed or a couch. Items are stored at the warehouse. “Either we run a new campaign with this same brand, or we sell it off to third parties.”

Logistic challenges
“Making delivery faster” maybe sounds like an easy job to accomplish, but if you look at the way a parcel has travelled before arriving to the customer, the scope of the challenge becomes evident. Spijkers: “Suppliers from the Netherlands deliver products to the Berlin warehouse and from there they either go to Dutch or German customers or to other warehouses in Europe. On a micro level, it seems more logical to send one pallet directly from the supplier to an Italian warehouse and another one to France. On a macro level, it works best for us to gather everything in Berlin, where we can make bulk deliveries, sending a full truck to the Italian warehouse.”

However, Dutch and Belgian clients ordering from Dutch brands also receive their parcels from Berlin. In order to improve the turnover time, Westwing has now outsourced part of its fulfilment of smaller packages. “We want to serve our Dutch clients quicker and also improve the export options for our Dutch suppliers, which is why we selected a local partner,” says Spijkers, adding: “It was vital for us improve delivery times, especially for smaller products, because that’s what the clients desire. Working with a local partner is faster for Dutch clients, but also useful for foreign deliveries.”

Drop-shipping- a holy grail of the future?
Drop-shipping seems like a quick-win solution when it comes to improving delivery times, but it makes it complicated to safeguard quality. Westwing has started pilots with certain suppliers, helping them with the packaging, IT solutions and offering them the same contracts with the parcel carrier that Westwing has negotiated. A complete transition seems far away, though Spijkers acknowledges the rise of this trend: “if you look at the US furniture industry, they are already ahead of us. There, 70-80% of furniture and home décor is drop-shipped directly to the consumer. We lower the barrier by offering suppliers a drop-ship starter pack, providing the boxes and we help with an IT integration. But there are limits to where this approach takes us. In the US, you see that drop-shipping starts as soon as the products are sourced from the factory. They come in dropshipment-ready packaging, directly from China or Indonesia. That is the future, but it still seems far ahead.”

No special offers for Christmas
Although home and living items seem like perfect gifts, Westwing does not massively scale up its offerings for the festive season. “We believe in presenting our selection beautifully, not by filling up the website. Why add more just because we can?” says Spijkers. Logistically, however, there is a lot of coordination required during the holiday season: clients order more and a whole group of new clients come in. This peak must be anticipated and communicated not only with the brands supplying the products, but also with the logistics partners. “We have to coordinate how much extra capacity we expect for this season, and how we can improve delivery times further for the Christmas time.”

The future
In Germany, Westwing is experimenting with pop-up stores and has launched an “on stock” online shop called ‘Westwing Now’. “Faster delivery is going to be an important component of such a shop’s success. However, Westwing has proven that brand experience and the product itself can be more important than the delivery time. Otherwise, we wouldn’t have become this successful.” 

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