Retailers are starting to sell something new: Logistics services

Clothing retailers Gap Inc.

and American Eagle Outfitters Inc.

is betting that their logistics expertise can bring in revenue alongside the sale of jeans and T-shirts, at a time when strains on supply chains increase the importance of delivery security and speed.

Retailers want other companies, including rival merchants, to use their warehouses and distribution networks to manage their product flow. The effort reflects the strategy Amazon.com has implemented Inc.,

which operates its Fulfillment by Amazon warehousing and shipping service for third-party merchants even as they sell its own retail products online.

However, supply chain experts say retailers face obstacles pushing into the logistics market, including concerns potential customers may have about data privacy and potentially giving up the competitive advantage they may have when they control their own logistics network.

“Customer fulfillment activities are so central to any retailer — any business, but a retailer in particular,” said Michael Dominy, vice president of supply chain research at research firm Gartner Inc.,

because “you deliver that customer experience. So handing that over to someone else is always challenging.”

San Francisco-based Gap recently launched what it calls GPS Platform Services, a logistics and fulfillment network open to other companies. AEO, based in Pittsburgh, created a subsidiary called Quiet Platforms after buying logistics companies Quiet Logistics and AirTerra last year. Quiet Platforms provides fulfillment, logistics and transportation services for other brands.

The two companies are launching the platforms as issues of controlling logistics operations have become more pressing in the wake of pandemic-driven supply chain disruptions that included port bottlenecks and other challenges that tied up inventory and cost some companies sales.

Some major retailers, including Walmart Inc.,

Goal corp.

and Costco Wholesale corp.

have moved to take greater control of their supply chains in the wake of the disruptions, including by chartering their own cargo ships to import goods.

Target added a third-party distribution component with the acquisition of Shipt in 2017 and offers same-day delivery to other companies.

Walmart entered the market in August 2021 with GoLocal, an attempt to create a revenue stream by leveraging its own investment in express delivery to service the needs of other merchants. The company said last week it had reached more than 1 million shipments in its first year of operation.

Dale Rogers, professor of supply chain management at Arizona State University’s WP Carey School of Business, said the services from Gap and AEO are an attempt by retailers to maintain control of their own networks while reducing costs. “By captaining the logistics services and being able to spread some of the costs over other players, they can ensure that they get good service,” said Mr. Rogers.

The clothing retailer Gap Inc. recently launched what it calls GPS Platform Services, a logistics and delivery network open to other companies.


Photo:

Eduardo Munoz/REUTERS

Quiet Platforms said it is partnering with sports retailer Fanatics Inc., shoe brand Steve Madden Ltd.

and discount outlet Saks Off Fifth. Gap said it works with Fortune 500 brands and did not disclose client names.

Shivi Shankaran, CEO of Saks Off Fifth, the discount retail sister business of luxury retailer Saks Fifth Avenue, said the brand decided last year to diversify its companies, which led it to begin working with AEO’s AirTerra and later to sign on with Quiet Platforms. The moves have expanded Saks Off Fifth’s capacity and shipping options and sped up delivery times, Mr. Shankaran in a statement.

Vivek Astvansh, a professor of marketing and data science at Indiana University, said retailers who outsource their supply chain operations risk their ability to manage the flow of goods during periods of stress, such as severe weather.

“If I’m running my supply chain, I have visibility and transparency around that risk. I know one of my warehouses is in Tennessee or Kentucky, and I know when that tornado is going to be, and I can plan proactively,” said Mr. Astvansh.

A Gap spokesman said the company provides visibility to its customers in line with other logistics providers. An AEO spokesperson said that customers of Quiet Platforms have full visibility into their supply chain operations.

Retailers considering other retailers’ networks may also have concerns about data privacy, especially if they are competitors, said Cathy Roberson, president of research and consulting firm Logistics Trends & Insights LLC.

The Gap spokesman said the retailer employs data protection and information is only available to authorized logistics operators and staff on an as-needed basis. The AEO spokesman said Quiet Platforms is run as an independent subsidiary with its own client-related technology team, systems and operations, and said AEO does not have access to client data.

Mr. Astvansh said companies that don’t compete directly with retailers’ third-party offerings are the most likely targets for the services.

“To the extent that these retailers are in different product categories, there is a synergy,” he said. “But if they are both in fast fashion or fashion, then there is a risk that you can expose your core competence.”

Every day, millions of sailors, truck drivers, longshoremen, warehouse workers and delivery drivers carry mountains of goods to move into stores and homes to meet consumers’ increasing expectations for convenience. But this complex movement of goods that underpins the global economy is far more vulnerable than many imagined. Photo illustration: Adele Morgan

Write to Liz Young at liz.young@wsj.com

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