Interviews, insight & analysis on Ecommerce

Glynn Davis: logistics, supply chains and the collapse of 

Back in August 2012, I made a visit to Notting Hill in West London to visit the offices and new showroom of to meet with its co-founder Ning Li who was pretty buoyant about his new company shaking up the market for designer furniture products.

What he regarded as the weak point in the system was the antiquated supply chain that consisted of a multitude of middle men, traders, importers, retailers, and random other characters who all took their cut. The result was the end consumer was paying a far higher price for their sofa or table than Li felt should be the case.

The new model involved going straight to the manufacturer, with mainly exclusive designs for a range of large homeware items, and shipping them back to the UK for sale on the website. He viewed the company as a pioneer in inventory and told me that it was operating on such low margins that it was not possible to simply lower the price of a sofa when it was on its way to the UK from China so managing demand incredibly carefully was the primary aspect of the model he created. 

This required that everything in the shipping container was sold at full price ahead of its arrival on these shores. Often the containers would leave China with only half the cargo sold but Li and his team would ensure all items were assigned to customers before they eventually arrived.

From these early days in 2012 many things changed at the company over the following years including European expansion, a much larger range of homewares that broadened the offer way beyond large-item furniture, and the increasing use of physical showrooms. But the fundamentals of the business – with its careful inventory management – largely remained intact. This was the case around the time of the company’s successful IPO in June 2021 when it was valued at £775 million and enjoying the boost given to all online businesses by Covid-19 when the various lockdowns closed off physical retail.

But the pandemic was also sowing the seeds of the company’s ultimate downfall because it was impacting on its inventory management prowess. Supply chains were universally ravaged – with the cost of shipping a container from the Far East jumping as much as 10-fold in some cases and the time taken for goods to cross the globe significantly increased because the pandemic had left ships and containers scattered almost randomly around the world while shortages of employees through Covid-19 compounded the problem.

The solution for was to bulk up on the amount of goods it ordered and to stick them in its warehouses in the UK. Holding stockpiles of goods was a long way from the model Li had put in place and needless to say it had a serious effect on cash-flow. When the lockdowns ended and stores opened up again the demand for products online severely declined. The post-Covid-19 inflationary environment leading to the current cost of living crisis sadly pushed into hands of the administrators who earlier this month sold the brand name and IP to Next for a mere £3.4 million. 

The management at Next know all about deftly handling supply chains so they will no doubt ensure the new back-end operations of avoids any of the mistakes that have been made in the last year-plus of the business’ life. The failure of and others like Eve Sleep as well as the online fashion brands including Boohoo and Asos to handle stock levels has been a feature of the post-pandemic retail landscape. It has either led to total collapse or massive stock write-offs (over £100 million in the case of Asos).

Yet again we have seen the logistics and supply chains of retail play such a massive role in the success or failure of companies. Regardless of the backdrop of pandemics the reality is that the management of inventories remains absolutely paramount for all retailers now and into the future. 


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