When American Eagle bought a pair of logistics start-ups last year, it was widely seen as an ambitious — if expensive — attempt to get ahead of the shipping delays and warehouse shortages that have dogged the fashion industry since the start of the pandemic.
The plan worked: the company, which also owns intimates brand Aerie, says it’s shipping out online orders faster and cheaper than before. Now, it’s betting it can sell logistics services to rival retailers, just like it sells jeans, T-shirts and swimsuits to teens.
American Eagle’s logistics ambitions centre around Quiet Logistics, the e-commerce services provider it acquired for $350 million last November. Quiet fulfils online orders and handles returns for brands such as Outdoor Voices and Peloton out of nine warehouses spread across the US. American Eagle wants to use that platform to build an “open marketplace” where retailers share warehouse space, delivery trucks and more. By pooling resources, small and mid-sized businesses would pay less for logistics, making them more competitive with giants like Amazon and Walmart.
Convincing rival retailers to cooperate won’t be easy — many have already invested in their own warehouses and delivery networks and won’t want to share. But new logistics models are gaining traction as e-commerce fulfilment costs rise: Shopify has its own end-to-end fulfilment platform that promises two-day delivery and fast returns, and FedEx partnered with Salesforce last year to offer a similar service.
Quiet could, over time, be more valuable than our retail business.
A mall retailer with a $2 billion market capitalisation is an unlikely contender in a race against logistics and e-commerce giants. But whichever fulfilment network scales first could become a multi-billion-dollar business for its operator.
“Quiet could, over time, be more valuable than our retail business,” said Michael Rempell, American Eagle’s chief operating officer.
Putting the Pieces Together
American Eagle’s open marketplace concept was the brainchild of Shekar Natarajan, a veteran supply-chain executive the company hired in 2018. Natarajan, who held logistics roles at Target, Walmart and Anheuser-Busch InBev, among other companies, pitched his idea to Rempell and American Eagle CEO Jay Schottenstein at the time, Rempell said.
“He laid out his vision on how he could transform our supply chain, and even at that time, we believed there was an opportunity [to disrupt] the industry,” Rempell told BoF. “But our first priority was establishing and providing capabilities for American Eagle.”
American Eagle started working with Quiet Logistics in 2019. The provider’s client list included fast-growing direct-to-consumer brands, such as Bonobos and Glossier, but its network proved capable of handling a traditional retailer juggling the needs of an e-commerce operation and hundreds of stores.
We need a complete reset in terms of supply chain.
Since working with Quiet, American Eagle has been able to save $1.50 for every package it shipped, and the number of shipments overall dropped 18 percent due to better consolidation. Inventory productivity improved 18 percent, and the time it took for merchandise to arrive in stores fell by 80 percent.
When the pandemic hit, throwing even many sophisticated logistics networks into chaos, American Eagle saw an opportunity to accelerate Natarajan’s grand plan. “The world is very bifurcated between the Davids and the Goliaths,” Natarajan said. “The rest of the market is fragmented — and we need a complete reset in terms of supply chain.”
In 2021, the company bought Airterra, which pools packages from multiple brands to reduce carriers’ shipping costs, and four months later, bought Quiet Logistics.
“I felt that we were in the early stages of a market that was about to explode because there was a tremendous unmet need in retail for logistics capability and distribution,” Rempell said. “We wanted to make sure to secure that for American Eagle.”
The Shared Supply Chain
American Eagle’s pitch to retailers is that a shared network will significantly cut costs. Most retailers have a mix of supply chain bottlenecks and unused capacity, whether that’s labour or warehouse space. In today’s market, they compete with one another alone, as siloes. This results in a waste of capital as well as resources. “The real power is in collaboration,” a promotional video says.
By consolidating shipments at one warehouse, for example, retailers will need fewer delivery trucks, and can likely secure a lower per-package rate from a carrier such as FedEx or UPS.
“A [shared] supply chain at scale that’s going to allow for a multitude of players to coexist and get greater efficiencies and economics — that makes sense,” said Kenneth Barry, a retail and logistics expert at Infosys Consulting. “No one else is doing this.”
So far this year, Quiet has signed on nine new brand partners, including Steve Madden, Saks Off Fifth and Fanatics, a sports merchandise e-tailer that’s on track to post $4.5 billion in sales this year. In May, it partnered with Pitney Bowes, a logistics services company, to offer more shipping options. It’s also lost some clients, Rempell said.
In January, American Eagle tapped industry veteran Charles Griffith to oversee Quiet and Airterra as chief technology officer. Other key hires include three Amazon supply chain alums: Sekhar Boddu as Quiet’s chief platform officer, Ajendra Taneja as VP of product engineering and Neeraj Sharma as VP of infrastructure engineering.
New technologies unveiled this year include Tag Along, a packaging system that allows multiple purchases to be stored in one modular container, as well as a feature called “universal label,” a last-mile sorting function that assigns each package one of Quiet’s 42 carrier partners at the last moment possible to ensure the most efficient and informed delivery.
Ultimately, reaching critical mass and monetising its network requires scale. And American Eagle is nowhere near the finish line.
“My question is, what’s next?” said Barry. “Do we now look at them as this multi-dimensional player that’s moving the needle in the market?”
Not quite. The Quiet acquisition closed only months ago, after all. But soon, Rempell and his team expect their supply-chain segment to generate profits, not just cost-saving measures.
“We’re placing a bet on something that’s a bit unconventional but Jay, myself and Shekar — we all believe and are convicted that this will be successful,” Rempell said. “This business is fulfilling a massive unmet need in the market that over time will prove to be a very large, very profitable business.”