Many people have different ideas about omnichannel. At Bonami, an e-shop with furniture and home accessories, they do it by translating the advantages of the online world into brick-and-mortar stores. "You come there, and you don't have to buy just what's on the shelf, but you can buy anything that's on our e-shop, and we'll deliver it to your home, or you can take the goods straight away," says Jan Klička, director of logistics and sales at Bonami, in the Adastra podcast.
- When is it worthwhile for e-shops to have their transport, and when is it better to use the carriers’ services?
- What are the possibilities of using automation, machine learning, and artificial intelligence in e-commerce warehouses?
- Why do some e-shops find it worthwhile to set up brick-and-mortar stores in shopping centers?
- What are the benefits of omnichannel in retail?
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Ivana Karhanová: He originally came to Bonami, an e-shop with furniture and home accessories, from Alza. He says that next to it, every e-shop is small. At Bonami, he now connects the online world with the brick-and-mortar branches. His focus is on omnichannel, and, in his own words, he still has a lot to learn. Jan Klička, director of logistics and sales network. Hello.
Jan Klička: Hello.
Ivana Karhanová: Bonami still uses third-party shipping, whether PPL, DHL, DPD, or Czech Post. I hope I mentioned all of them that are operating here.
Jan Klička: Even some that we don’t use. And there are a lot of others because today we operate in nine European countries. And we have even more partners.
Ivana Karhanová: When a carrier doesn’t do something right, does the customer yell at the carrier or you?
Jan Klička: Well, experience tells us that usually, it’s at us as the e-shop that sends the product, rarely at the carrier.
Ivana Karhanová: Does that mean that in the future, you would like to limit or possibly eliminate third-party shipping? Is that even possible?
Jan Klička: It would be a nice wish to eliminate it, but it all depends on the size of the shop and the number of packages you send to each destination. We already made such an attempt more than two years ago.
We carry one part of our product range relating to sofas and large board furniture in certain regions, but our size simply doesn’t allow us to stock or send the goods to customers with our service.
Ivana Karhanová: Are you still too small for that?
Jan Klička: That’s right. Even a lot of much bigger e-shops are still small for the size of either the Czech Republic or some other markets.
Ivana Karhanová: Does that mean that even if you send all the packages, even the smaller ones, even the bigger ones, you are still too small for that?
Jan Klička: We are still too small for that, and no player in the Czech Republic can ensure that the price of a package, whether to an address or to pick up points, works out as well as if he uses the services of third parties, where many more packages are consolidated into a transport network.
Today we are talking about more than 100,000 a day. Because the quality of service to the customer is one thing, but on the other hand, the price tag also plays a role.
Ivana Karhanová: And if we look at it from the point of view of the experience of the customers who receive the goods, what do you get out of it? Which service is worth developing and keeping, and what do you try to gradually replace?
Jan Klička: We’ve historically done that. The services that have been the most problems have always been associated with oversized products like sofas or furniture.
When you use a conventional shipper, they typically don’t have one warehouse or depot from which we ship goods across the country or the region, but they have multiple depots. Well, and then in that process, there are transshipments of goods, which means that any transshipment of a bulky product that is also a little bit fragile or the packaging just doesn’t provide 100 percent protection in every situation, it’s going to cause some damage.
So that was what we were trying to eliminate, and that’s why we introduced our courier service just for those cases. From our central warehouse in Jenč and Dobrovíz – we have two warehouses, but it’s a central warehousing model – we send goods directly to selected regions with our service. This means that we eliminate transshipment at other depots.
Ivana Karhanová: How big would you have to be to make your transport worthwhile? Ten times?
Jan Klička: Own transport all over the country?
Ivana Karhanová: Yes.
Jan Klička: Maybe even that wouldn’t be enough.
Ivana Karhanová: You’ve also historically mentioned to the media that you want to control as much of your business as possible. So after a few years of running logistics, what do you get out of that? What makes sense to keep with you, and what makes sense to leave to third parties?
Jan Klička: It always depends on the partner, both on the objective evaluation criteria of our customers and our internal satisfaction with the partner. If the cooperation is fine, there may be no reason to replace it or try to come up with our solution.
We have plenty of examples where this has worked successfully. Or maybe you’re following a trend, like pickup points. Years ago, they just barely existed at all, and it’s good that they’ve taken off, that it’s possible to send goods to thousands of pickup points nowadays and not play cat and mouse – the courier and the customer chasing each other because the customer can’t and all that.
But it seems that, on the one hand, of course, we’re limited by size, that is, the number of packages we need to ship to the end customer, and in terms of the market, we’re not connected to all the carriers that are in that market. So we always have more to choose from and possibly change that partner if we are unhappy with them.
Ivana Karhanová: You just talked about transport. Is there anything else for you where you would like to eliminate third parties?
Jan Klička: It is a question of what we consider a third party. Certainly, a third party could be a picker in an automated warehouse. But I can’t think of anything directly within that service right now.
Ivana Karhanová: And since you mentioned the warehouse, you have over 55,000 square meters of warehouses.
Jan Klička: Today, even over 70 thousand square meters, we have expanded it.
Ivana Karhanová: Over 70 thousand square meters of warehouses… What can be automated in a big or small warehouse from your point of view? And what is not yet worthwhile?
Jan Klička: Again, it depends a lot on what you are storing and the business’s nature.
Ivana Karhanová: So you go from extremely small things to a living room wall or a sofa. Is that right?
Jan Klička: Yes, that’s right. I’ve historically worked on some automation options, and we have a collaboration project going on right now where we’re analyzing where automation would pay off.
We’re still seeing the possibility of automation in terms of technology for smaller items like vases, glasses, place settings, and other household items – home decor in general. But again, you’re looking at it in terms of the acquisition cost versus that third-party cost, which is our pickers today who are picking items off the shelves and putting them in a crate. Then it goes to shipping, gets packaged, and goes to the customer.
So that space can be automated in some way. We’re thinking a lot about that now because it’s also a trend where that automation is becoming more affordable in terms of price. We’ll see.
Ivana Karhanová: And at the moment, how is that working out for you so far? That still, in the short term, your employees are cheaper?
Jan Klička: At the moment, it is, but it’s all a question of payback. So far, the return we’ve calculated doesn’t work out so nicely that it’s worth investing in. But it’s very much because our product range, our average-sized product, is not a candle, but rather a set of dishes and plates.
A set of plates just fits one or two in a container commonly used in these automation systems, which is a size of 60 x 40 x 30 centimeters. So that limits your use of that technology, and then it’s not as efficient.
Ivana Karhanová: So you just have too many types of goods.
Jan Klička: We have too many types of goods and many goods that are prone to damage, like glasses. So because of the speed of automation, robots could potentially damage those goods. And it doesn’t matter if it’s a stacker robot or a robot that rides on top of the shelf.
Ivana Karhanová: When you have such a huge amount of stock, do you use any automated or smart prediction based on different machine learning or artificial intelligence to try to minimize the goods hanging in that warehouse for a long time, holding your cash flow?
Jan Klička: Well, we’re not to the point where we’re using machine learning yet, but it’s just some algorithms that are being discussed with a lot of people over a long period and do some fine-tuning of the thing.
Ivana Karhanová: Manually, but?
Jan Klička: Yes, it’s manual. It’s always based on historical data. You see how it worked out. The model is being adjusted over time, and we’re still learning from mistakes, but we’re doing it as humans. We’re not doing it by machine yet, but I think we’ll get to that stage too.
Ivana Karhanová: Could we say that the changes in the market right now, energy intensity or rising labor costs, are accelerating the need for these changes?
Jan Klička: Absolutely, it’s very visible in the fact that the range of solutions is much wider and much more sophisticated than it was a few years ago.
Ivana Karhanová: Like even two years ago when the first lockdown came?
Jan Klička: It seems like yes because I see that technologically, especially in logistics, a lot of things have started to change towards automation and to find ways to introduce automation and not throw those sticks under the feet in quotes. Any disruption in people, because simply those warehouses today require a human presence and very often they are just made up of people, is very sensitive. In contrast, a machine covid just does not get it, making it that much easier.
But of course, again, at the moment, it’s undermining, as you said, energy prices. That’s something that’s probably going to enter into that payback quite a bit again today. For example, someone who calculated that automation was worthwhile a year ago may not be paying for it today if they expect a shorter payback on that investment.
Ivana Karhanová: What do you mean now – that if it worked a year ago, it wouldn’t work this year?
Jan Klička: When you make electricity two to five times more expensive, robots consume electricity instead of eating and drinking. So it’s possible that this element could throw a pitchfork into it.
Ivana Karhanová: What is the biggest obstacle to Bonami’s current development? Leaving aside the fact that there are no people in the market, everybody says that.
Jan Klička: I think it’s the market situation itself because it’s been maybe even volatile for the last two and a half years. I think the biggest blocker is the stability of the market, the fact that you can predict how it will be for months ahead and not just a few weeks ahead. But that’s not just our blocker.
Here I think we generally share as an e-commerce platform this whole problem. But, of course, it also depends on what you’re selling. For example, if you’re offering a room, you will offer some elementary living things. So I think that prediction will probably be more stable than, say, in our segment.
Ivana Karhanová: Like beer.
Jan Klička: Like beer, exactly, then just in our segment because you don’t buy a seat weekly. You can see the nervousness in general.
Every time I see the headlines on the news or turn on the TV and watch the news, it’s no wonder these people are nervous. They don’t want to buy anything too much at the moment, and they’re very careful about what they’re going to put their money into now because it’s a massage every day. It’s just two or three headlines about what’s going to get more expensive, if anything is going to be sprinkled, and that something has changed. The uncertainty is there and generally affects or hinders the development of e-commerce a lot.
Ivana Karhanová: And you are also in a situation now where you are considering whether to make further investments or not? Or is there not such an impact on the e-commerce segment yet?
Jan Klička: As far as we are concerned directly, we stopped investing some time ago because we have been investing quite massively over the last two years, sometimes up until the summer of this year, both in warehouses and in technology and in the development of our offline leg that we are building. So we’ve put the investment on hold now, and we’re also waiting to see what happens and where the market goes.
Ivana Karhanová: When you mentioned the offline leg, you guys have opened a few showrooms, which is the biggest surprise for an online player when they decide to go into the brick-and-mortar world.
Jan Klička: It’s not just showrooms. It’s conceptually a store that primarily aims to display merchandise. But we’re surprised that I don’t know any company around here that has gone in that direction in our segment.
Ivana Karhanová: There’s a lot of the opposite as well.
Jan Klička: There’s a lot of the opposite, but those are bumping. And you could see it during the cover-up. And we decided to launch a couple of stores right when the covid was starting because I had a plan.
So one, of course, we were surprised by the drop-off of customers because they couldn’t get into those stores. So that was the first thing. And that slowed down the development of our offline leg a little bit because we didn’t have the data.
We just didn’t know because of those sales because the stores were closed for quite a long time and then variously on and off – they were open in the summer, then closed again for Christmas. So it was different in Slovakia. It was different in the Czech Republic.
Ivana Karhanová: A lot of one-off factors…
Jan Klička: Exactly. So when we looked at the data after the first year that we had a couple of stores open, I said, look, I don’t see any trend in it at the moment because it was heavily influenced by what was happening with the market.
It was only after two years and some more experience. But, after constantly tuning and finding the right proposition offline, that’s still evolving, we realized that we were a little bit wrong about what type of customers would go there.
Ivana Karhanová: A little bit or a little bit more?
Jan Klička: A little bit. I don’t think we were completely wrong. It’s not completely 180 degrees different, but we have been gradually looking for ways to be closer to our customers or future customers who may not know Bonami.
Ivana Karhanová: When you said that you were a little bit wrong or positioned it a little bit differently, can you give some specific examples?
Jan Klička: It’s very simple. Our first thought was that we would make these stores somewhere in a retail park, and our current customers would somehow find us. So, firstly, by making our store a point of sale and secondly, by attracting them. But, unfortunately, that turned out not to be a broad enough proposition.
And so we expanded it by taking the last of those retail parks and opening those stores in shopping malls. That is, for customers who are just walking by and seeing Bonami. They may not even know it’s an online store, but they see that Bonami has interesting pieces on the shelves, they sell sofas, and there’s a lot of stuff for the whole household. So they look at it broadly. So we started recruiting those types of people.
Ivana Karhanová: And the data shows that’s working for you?
Jan Klička: It’s working for us according to the data. Well, it’s paid off for us to change or expand the proposition a little bit for people who go shopping at the bigger malls, and they think of us as part of that offline because they just don’t know online.
Ivana Karhanová: And you also focus a lot on omnichannel. It’s still a bit of a buzzword because many things fall into it, depending on how one thinks of it. But what is it specifically in your example or in your case?
Jan Klička: The way we see omnichannel is that our core business is simply online business. Some time ago, Bonami transformed from a shopping club into a classic e-shop. That’s, let’s say, some three years ago, when we started to change the composition of the assortment and its stock.
So today, a large part of our assortment is in stock. And what customers want is also some ninety percent in stock, which is great. But at the same time, we have seen that customers want advice because of how specific the business is. They want to try the product somewhere. So we decided to start building the offline part, but in a way that they don’t work side by side, that it’s not multi, but you come to the store, and they tell you: If you want this, just order it from us like an e-shop, and it will come to you somewhere.
Yeah, but we’re connecting those worlds. So that means that if somebody is used to shopping online at Bonami and they come to our offline store to pick up their order, or they just get there because they see that we have a store in, say, Chodov, they go there, they get the service that was actually in the online store. So that means that we try to project in that store the online world on the breadth of that assortment, on all the possibilities it offers online.
Ivana Karhanová: How do I imagine that?
Jan Klička: You come in there, and you don’t have to buy just what’s on the shelf, but you can buy anything on our e-store, and we’ll either deliver it to your home or you can pick it up there. Or we’ll offer you some advice on whether it’s interior design for your apartment or just an extra service. Maybe we’ll bring you a new sofa home and take the old one away. So it’s extended with this service that doesn’t separate the two worlds but connects them. And even passers-by are quite often surprised that we have 50,000 products online.
Ivana Karhanová: I was going to ask you where you think the future of e-commerce is, but I feel like you started to describe it even without question. Maybe it’s just the interconnection of the brick-and-mortar and the online world and the processes behind that.
Jan Klička: I think so – especially in our business. For example, when you buy a new mobile phone, you very often just need pictures of it because you’ve been using it for a lot of years, and there’s not much that surprises you about it because nothing major changes. But, of course, technologically, it does, but in terms of shape and use,, it’s more or less the same, whereas a sofa or a chair or a new kitchen table are very often designed original pieces we offer. And those people want to see that.
And that’s why we put our bestsellers in the stores so that people know how the products are made, the quality, and how comfortable they are to sit on. And where there’s just no space, because the store would have to be huge, of course, to present everything, we try to have swatches, primarily swatches of fabrics, where the customer just wants to try the material by touch, which is a very important thing.
Or they just want to see the quality, and they want to see the color. Very often, what happens to us, similar to fashion, is that the photo on the website is just not exactly what the material is.
Ivana Karhanová: Well, and especially on every monitor, it looks different.
Jan Klička: Exactly. And you don’t calibrate that across that customer experience. So that’s what the offline leg is for.
Ivana Karhanová: What do you think today’s customer wants from an e-commerce store?
Jan Klička: Well, I used to believe it was speed, but then it evolved into reliability combined with speed. And I would add to that the quality of the product itself. Now I don’t mean that it’s going to arrive on time and the customer will be happy with the service, but the quality of the product they’re buying.
Ivana Karhanová: Do you think there are enough customers for the size of an e-shop like Bonami? And now I think it’s really big because of the Czech population and the customers who can appreciate and pay for that quality.
Jan Klička: It seems like, yes, a lot of people are willing to pay for that quality, but it seems like more expensive doesn’t mean better quality. That needs to be mentioned. It gets confused often, but a more expensive product doesn’t necessarily mean a higher quality product.
And it depends on what one considers quality, whether the quality of the material in our business or the construction of a seat. How long is a product like that supposed to last? Everyone has slightly different expectations. The visual experience on the website is supposed to align those expectations as much as possible or give the customer that information in a very objective way. That means having the product photographed well and having the right parameters.
We’ve done much over the last while to parameterize those products, and we’re still expanding them in some categories because those were the most common product queries. Customers just wrote or called us: Hey, are the legs on this chair really wood, or is it just some veneer or something? They’re asking about things like that, so it’s important to accurately describe that product, including the structured parameters.
Well, then, it’s important for those who want to try the product out to be able to go offline, try it out there, and then order online. Or you can take it directly from the store.
Ivana Karhanová: You mentioned customer experience a few times. How do you measure it? How do you quantify it?
Jan Klička: It’s classic metrics. First of all, we get feedback from our customers in any form, but that’s usually when something goes wrong when customer service is activated the moment something goes wrong.
But to prevent that, we send our evaluation form based on the whole order, product, or shipping. We build some form of net promoter score (NPS) customized for us. It’s not a classic NPS. We see it as a scale of one to four or something from one to ten. It varies. But when I came to Bonami, I was pleasantly surprised that there are an awful lot of customers who rate our products.
Ivana Karhanová: What is the percentage?
Jan Klička: It’s in the higher tens of percentages, which surprised me.
Ivana Karhanová: Generally, the last mile is the most important thing that is evaluated or mentioned in shipping. You have three ways of delivery: either a third party, your own in case of over shipment, or customers can pick it up at your stores.
Jan Klička: Yes.
Ivana Karhanová: Which of those do customers choose most often or prefer?
Jan Klička: It depends a lot on the region where it is. Where we’ve become available directly with our stores, we’re already somewhere around maybe twenty to thirty percent where customers come to our store, which is great.
Ivana Karhanová: Which is what you want?
Jan Klička: This is exactly what we want to do – to introduce them to our operations in general, to the principles that we believe in and want to build. The popularity of pickup points has increased significantly; their representation is already massive.
Ivana Karhanová: Do you think it’s harder to go from offline to online or from online to offline?
Jan Klička: I think it’s harder for an offline player to go online than for an online player to go offline. I think my opinion is that when an e-commerce store builds physical stores, it’s a little bit easier.
I say this as an independent observer of the previous few months, and maybe that’s my burden because I’ve been in e-commerce for over a decade.
Ivana Karhanová: How so? Because I would guess it’s exactly the opposite.
Jan Klička: I thought so too, but I find quite often that the brick-and-mortar players, by the way, have built all their warehouses and stores on some principles for a long time. They are not that dynamic for that change.
What I’ve always seen in e-commerce is that we’ve always been able to or tried to adapt very quickly to whatever the situation was. So whatever we were facing, we could somehow turn it into something hopefully successful, or we learned from it and just moved on.
I would say it’s like moving rocks with companies that are stone-age. It’s just harder.
It may be because of the history of that company that it’s been around for a long time and has some very ingrained structure of how they do things. So it’s probably a lot harder for them to do a quality e-commerce store just because of the very robust and established structures than for smaller players who are online but are more dynamic and can adapt more.
Ivana Karhanová: Says Jan Klička, director of logistics and sales at Bonami, an e-shop for furniture and home accessories. Thank you for coming into the studio and sometimes for being heard.
Jan Klička: Thanks for having me.