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Coppel Bets on Inventory Diversification to Cut Logistics Costs

By Antonio Gozain | Wed, 09/07/2022 - 15:27

As retail continues evolving and e-commerce grows in popularity in Mexico, department store chain Coppel works hard to transition to omnichannel sales by investing heavily on an inventory diversification logistics and supply chain strategy.

“We want to be a world-class customer-oriented omnichannel supply chain. Today, our client is comparing us with a delivery from Amazon or Walmart, which are transnational companies,” said to T21 Angélica Bojórquez, Supply Chain Officer, Coppel.

Coppel is the second largest retailer in Mexico and its competitive advantage during this transition must be based on a combination of data analytics, continuous evolution and highly skilled talent, said Bojórquez. Between 2019 and 2021, Coppel invested MX$31 billion (US$1.55 billion), from which US$33 million were destined to build the retailer’s first digital campus in Culiacan, Sinaloa, where about 2,000 programmers work on the digital transformation strategy.

Coppel’s 23 distribution centers (DCs) are strategically placed. One of its main DCs operates in Culiacan, in a 3,900-square feet facility with five storage floors. In total, the retailer manages 80,000 stock keeping units (SKU) from about 3,700 different suppliers, from which 55 percent are located in Mexico. Each DC serves about 100 department stores, providing an average delivery time of 3.5 days across the over 1,600 routes.

“In Mexico, storage is much cheaper than transportation. The most expensive part is the first mile and last mile logistics. The inventory diversification strategy instead of the centralization of the inventory brings the product closer to the demand, reducing logistics costs drastically,” said Bojórquez.

The pandemic boosted e-commerce adoption and growth in Mexico. In 2020, online shopping grew by 81 percent, according to AMVO. In 2021, e-commerce grew by 27 percent. “This year, more people are expected to make their first purchase online or make this their favorite purchase method,” wrote for MBN Karen Herrera, PR and Editorial Manager, Kueski.

These consumer habit changes led Coppel to digitize its sales. The retailer’s online sales in 2019 represented 2 percent of total sales, but now make up 8 percent of total sales. While the company plans to reach the 20-percent mark on online shopping in the next few years, it is also focused on providing a good service, with 87 percent of its current digital sales operating on a next-day delivery basis, said Rubén Martínez, General Manager Transport, Coppel: “Nobody beats us in volume. We perform 97 percent of deliveries within the promised time.”

Coppel owns a freight fleet of 2,238 units and has invested MX$1.5 billion (US$75 billion) between 2019 and 2022 to renew its primary, secondary and collection fleets. By 2030, Coppel expects that 25 percent of its secondary fleet will be hybrid-electric or fully-electric.

The omnichannel sales approach is not only a logistics and supply chain challenge, but also a technological and cybersecurity one. “The challenge for digital transformation here is large. We are moving from controlled, physical environments to different channels that are public. Regarding omnichannel sales, we already do transactions via WhatsApp, mobile applications and webpages,” said Antonio Saracho, CIO, Grupo Coppel, during Mexico Cybersecurity Summit 2022.

The data used in this article was sourced from:  
MBN, T21
Photo by:   Unsplash
Antonio Gozain Antonio Gozain Journalist and Industry Analyst