American Eagle Outfitters (NYSE: AEO) aims to master a key business function: the supply chain. The company looks up to Amazon, which was similarly impacted by the Covid-19 pandemic, but succeded amid its established pipeline.
The retailer has managed to acquire two supply-chain businesses within the past year as it strives to lead the industry to vertical logistics and diluted costs. The move comes under the direction of American Eagle’s chief supply chain officer, Shekar Natarajan.
According to Natarajan, the company intends to “Uber-ize” the global supply chain, by making it a shared service for retailers. He argues that brands that go up against each other for customers in clothing, makeup, or home goods, should not also be competing for things like faster delivery and cardboard boxes.
In an interview, Natarajan explained his vision of having multiple businesses work together and unite their resources, allowing them to possibly ship out just as many daily packages as Amazon. Natarajan has dubbed the communal supply chain vision as the “frenemy network.”
“The only way that you could actually have Amazon-like scale, Amazon-like costs, and Amazon-like capabilities — you have to share,” said Natarajan. “Collectively, we can have the same [package] volume as Walmart. … And that way, companies are only competing on what they do best, which is the product, marketing, and customer experience.”
Amid continuous backlogs and shortages, the company has opted to fast-track the creation of the streamlined model as a means to offer retail partners help with anything from securing orders containing several items packaged together, to hastening the delivery time.
“This strategy was laid out pre-pandemic,” Natarajan said. “We just accelerated the entire journey by almost four years.”