Dive Brief:
- E-commerce retailer THG’s beauty division cut back on sales in the first half of the year in territories furthest from its global distribution hubs to reduce costs, CEO Matthew Moulding said on a Sept. 14 earnings call.
- THG began upping its focus on driving more profitable orders since Easter of 2022, Moulding said. The farther a distribution facility is from an end customer, the more expensive it is to serve that customer.
- "This led to us reducing volumes within some parts of Europe and Asia, while maximizing our competitive actions across core markets," Moulding said. As of April, the company had 16 fulfillment centers in the U.S., the U.K., the Middle East, Southeast Asia and India.
Dive Insight:
THG's focus on more profitable territories in its beauty and nutrition divisions helped it boost gross profit margins as it aims to become "a simpler, more profitable business for the future," according to the company's first-half results.
The now-complete buildout of THG's global fulfillment network, which involved opening facilities in key markets, is further reducing the company's cost to serve customers — a key metric — while upping delivery speeds.
"Across all our distribution centers, our checkout to delivery speed is half a day quicker year-on-year as we focus on efforts in continuing to enhance the customer proposition so customers receive their products as soon as possible," Moulding said.
An increased use of automation in the distribution process has made these facilities more efficient, faster and able to deliver with a lower headcount, CFO Damian Sanders said on the call. He pointed to the company's New Jersey warehouse, which activated automation in April, as a recent example.
"Implementing automation in our warehouse in New Jersey has accelerated the operational efficiencies, further improving our U.S. proposition and significantly improving our dispatch-to-delivery speeds," Sanders said. "In short, getting our products to our customers much quicker."
THG expects more than 30% of its orders to be fulfilled by automated sites by the end of this year, COO John Gallemore said in April.
