Q: Nabil, following the explosion in online retail during the pandemic, would you say that 2023 has brought a kind of normalization back for e-commerce?

A: I think this year has certainly been one of transition, and it’s fair to describe it as normalization. Volumes are either stable or slightly down compared to during the pandemic. However, one thing that hasn’t changed is that our e-commerce customers at DHL haven’t changed their plans. Perhaps the investments that they have announced have been pushed back a little into 2024, but those investments are continuing. If you look at the statistics, you will see a positive trend in the growth of online sales that will probably last up until at least 2030. In fact, in every major economy, the growth projection is between five and ten per cent, so we will see e-commerce becoming even more important.

I think where there is still work to be done is in omnichannel. We are yet to see anyone really unify the digital experience with the physical one or make the most of the supply chain and inventory opportunities. So there’s still a lot of work to be done and that’s what we’re working with our customers on. There are some exciting times ahead!

Q: What challenges do retailers face in achieving omnichannel success?

A: Being truly omnichannel means being able to offer cross-border sales to consumers in other regions. But most retailers or brands use different channels for distributors and wholesale, and so on. Some companies are quite advanced in their omnichannel journey, while some companies tackle just one single market because it’s much easier to do so.

Even localizing your website so that it’s in multiple languages, currencies and payment methods is something that many companies have only done in the last few years.

So I think currently there’s a big gap between having your online and physical inventory connected – being able to offer an omnichannel experience in a single country – and being able to sell across multiple platforms to multiple countries. That is the next level in delivering a true omnichannel experience and creating a true value chain.

Q: What are we likely to see in terms of the influence of AI and robotics on the e-commerce supply chain?

A: A good indicator of the extent to which automation has penetrated a company’s operations is to look at how many robots per employee they have. In the US, currently, the average is 140 robots for every 10,000 employees. At DHL we have around 2,000 bots per 10,000 employees in our fulfillment business for e-commerce.

Fully automated systems are still comparatively expensive, and they are also quite complex to deploy. So I think we are really just at the beginning of the automation journey.

When you look at other industries, for example the automotive sector which is well advanced when it comes to robotics, most businesses are still not very developed on that journey. But I think we are going to see a lot more – not just in terms of physical robotics and automation, but also in software.

Clearly there is a lot of momentum around AI, but the reality is that most businesses involved in supply chain have been using AI, or AI-based tools, for a couple of years already. We use AI in carton optimization, for example, so that – to take an extreme example – you don’t put a small product in a large box. Something like that is a simple application but it helps to save costs, improve sustainability and benefit the customer experience. There are so many potential applications in the warehouse environment, in last mile delivery, or in returns management, that there is still a long way to go with the use of AI in the supply chain.

Q: What implication does the increasing use of automation have for the workforce?

A: History has shown us many times before that industrial automation has created fears for peoples’ jobs. But the reality is – whether it’s in driving jobs or in manufacturing, or the warehouse environment – it is actually quite hard to find people during this talent shortage.

At DHL our deployment of automation and robotics has been accelerated over the last couple of years, but our workforce has increased as well.

There are other categories of jobs that have also appeared, as a result, like systems engineers, and maintenance specialists for this new automation. So in the short-term, I think automation is going to help us resolve one of the biggest supply chain problems which is the talent shortage.

Q: What developments are we seeing in e-commerce returns, as more and more retailers move to charging consumers to return goods?

A: As e-commerce growth slows down, companies will have to get better at optimizing their gross merchandise value. One of the biggest pain points is returns but this is one of the areas that that can definitely be optimized.

Opportunities are being created by increasing ‘right to repair’ regulation in Europe and the US which mandates companies to sell spare parts and avoid destroying manufactured items that could be resold.

There is also a big reputational issue that comes with this. You cannot claim to be a brand with ESG at your heart if you destroy perfectly good products.

The returns experience is therefore important, not just in terms of the refund, but also in the wider customer experience.

Many platforms incentivize consumers to buy more goods because they offer free shipping over a minimum level of orders, and then don’t penalize them no matter how many of those goods they return. Of course, that means that customers buy more items to reach the threshold and then return several of them.

All these factors mean that the returns issue is becoming a critical area for businesses to tackle. We think that it’s a big opportunity and we are working with some of the largest retail brands to resolve their returns issues holistically.

One key element is for them to analyze the data and learn what causes those returns. Because if it’s just 1% of their customer base that are abusing the system and causing 40% of their returns, they might be able to find a solution that doesn’t involve charging the 99% who are shopping responsibly.