How does one build up a uniform online business as a stationary retail chain without putting one’s own franchise partners in a bind? German BabyOne specialty store chain with over 30 of its own stores and 73 partner stores, has found its very own solution.
At the end of 2019, just a few months before the outbreak of the pandemic, owner-operated specialty store chain BabyOne for baby and toddler supplies with over 100 stores in the DACH region went live with a hybrid online store model. At the time, no one had any idea how quickly this would become important. Until then, the company had only operated its own online store as a digital showcase for the specialist stores. What is different about the new model is that the online store integrates all franchise partners so that the customer has a uniform shopping experience and all partners can benefit.
Despite the pandemic, the family-owned company closed the 2021 financial year with record net sales of 255.5 million euros. The online channel grew particularly dynamically at 34 percent, but the company also made gains in its stationary business. As in the previous year, the entrepreneurial focus was on transforming the business model from a stationary retailer to an omnichannel player. The two siblings Anna Weber and Jan-Willem Weischer, who have been managing the company in the second generation since 2021, explain their ship-from-store model, why they developed it, and how it has proven itself so far.
You have developed a hybrid online model that also involves your franchise partners. According to you, there hasn't been anything like it on the market yet. Why go through all that trouble? Why was it important for you to include all retailers in your online model?
Jan-Willem Weischer: It was extremely important for us to evolve from being a purely stationary retailer. But for our franchise partners, of course, every additional online store is always a competitor. That's why we wanted to design the store in such a way that everyone benefits from it. After all, it doesn't do us any good if we prosper but our franchise partners do not. The result is our hybrid ship-from-store model, which links our stores to our online store.
Anna Weber: In our case, the franchise partners did not have their own online stores yet, which made it easier to introduce a joint online model, which everyone found best to set up in this situation. It felt right for everyone. We noticed that there was a lot of interest, and to our knowledge there was no comparable solution on the market yet, so we had to develop it ourselves.
What were some of the challenges?
AW: The difference to other online models is that we are dealing here with a franchise model, i.e. with independent companies. We are therefore convinced that we can only work out solutions for our overall system together. For this reason, we designed the ship-from-store concept jointly with our franchisees right from the start. Together, we also developed solutions for territory protection and found ways to integrate the new processes into the stores so that they could be mapped well there. It was also important that the connection could be made via existing systems so that there were no additional costs for the franchise partners. Conversely, of course, this also meant that we needed much technical integration and had to establish new processes.
JWW: During the development phase, the aim was always that online customers should not notice that the stores are different companies and that orders come from different places. The shopping experience should always be consistent. It is also important to remember that the stores had to take on entirely new tasks, right down to how to pack a package and how to secure items so that they do not move around in it. To ensure a consistent customer experience, we had to reconcile 100 stores.
How exactly does your hybrid online model work?
JWW: When we receive an online order, the system automatically checks which retailer has all the products in stock and can deliver the entire shopping cart. The next step checks the location: The retailer with the shortest transport route can send the package - and make the sale. That means the revenue stays with the retailer, and we get a fee. Returns, on the other hand, are handled centrally. That was a general wish. We have a central office that carries out quality controls.
When you launched the ship-from-store model in 2019, it was just before the pandemic. How did the first few months go?
AW: Yes, in terms of timing, it was a stroke of luck that we had already rolled out our hybrid online model fully by the end of 2019. It took two and a half years to develop, so we couldn't have set it up quickly in light of the store closures that initially affected our segment. Of course, Covid accelerated the online store’s success: Before the pandemic, the online share of sales was around five percent; currently we are at around 16 percent. The number of items has also increased. Covid was a digitalisation booster. Our franchise partners have become true online store specialists in the meantime.
What happens to returned merchandise that cannot be sold again?
AW: We offer these to our partners again. Our returns rate is relatively low compared to other industries and is between 10 and 15 percent, even for clothing. With baby clothes, if the items are still too big, customers simply keep them for a few weeks until they fit. That's why they don't send them back.
Does the online store cover the entire product range?
JWW: There are currently around 25,000 items online and we are continuing to gradually expand the range, but with a focus on good curation. An average-sized BabyOne specialty store has a product range of about 15,000.
With online retailing gaining in importance, what does that mean for your product range? Are there any shifts there?
AW: Definitely. We are still in the learning process. There are items that sell like hot cakes online and not in stores. Balancing this correctly is a task that we naturally have to tackle as an omnichannel provider.
What about marketplaces?
JWW: We are keeping an eye on them, of course, but this is not on the table at the moment.
AW: It is very important to us that we have direct contact with our customers. What we learn this way is more important than being part of marketplaces.
The topic of babies and children is highly emotional and requires a lot of guidance. How do you implement this guidance in the online store?
AW: We have definitely become much better since Covid! Of course, we tried out many things during the lockdown phases, including live chats and live sessions where employees walked through the store with the Facetime app open and advised customers. Necessity is the mother of invention. We've retained and developed much of that and now do it more professionally - even our live shopping sessions can now be accessed later. Our midwife consultation, which we play via social media channels, has now become an integral part of our customer approach and is very much appreciated by our customers. We definitely notice that customers use these services and that they are important.
How is your online model doing? How many packages does a retailer ship on average today?
AW: Since launching the online store, we have definitely all grown in terms of sales. Each retailer now sends out around ten to fifteen parcels a day, perhaps more on Monday mornings because orders have piled up from the weekend. What's more, our method gives our customers a real advantage - we can supply them from over 100 warehouses. That is optimal. We are much faster with our system than with a central warehouse.
JWW: Since we developed the system ourselves, we had few points of reference at the beginning. But that also makes the project even more valuable, because all stakeholders were involved in the process from the beginning and in the end, we created a real team solution that is supported by everyone in the BabyOne franchise network.
What are your goals for the coming years?
JWW: We want to position ourselves even better in terms of IT, improve and become more convenient for customers in our omnichannel activities. We are also planning to launch our own brand this year, but we can't say anything about it at the moment. The goal is to move away from comparability.
This article was originally published on FashionUnited.DE, translated and edited to English by Simone Pruess.