Amazon is both the poster child for efficient delivery and the object of ire for every other delivery company. Customers love it. Competitors want to be it. But Amazon’s newest rival comes from an unexpected place.
This week, American Eagle (NYSE: AEO) logistics subsidiary Quiet Platforms added sports retailer Fanatics as a partner, expanding the outfitter’s logistics network in a bid to compete with the massive marketplace. The partnership builds on Quiet Platforms’ radical last-mile delivery model, which pools the logistics assets of companies in its network for shared use by the entire network.
American Eagle bought Quiet Platforms for $360 million in December in what Executive Chairman and CEO Jay Schottenstein called a play to be the “anti-Amazon.” And with the outfitter expected to report earnings Thursday after the bell, the public could get its first glimpse into whether that acquisition has been as transformative as promised.
“We’re committed to collaborating and leveraging shared assets to offer more sustainable, scaled supply chain solutions that free innovators like Fanatics to focus on what they do best — providing a great customer experience all the way through fast, convenient home delivery,” said Shekar Natarajan, executive vice president and chief supply chain officer for American Eagle parent company AEO.
Unique among last-mile delivery providers, Quiet Platforms aggregates the transportation and logistics assets of individual companies in its network in what it describes as a “plug-and-play platform.” That means the assets of clients like Kohl’s, Peloton, Steve Madden and more than 50 others are unified in one network, open for use by all Quiet Platforms partners.
Earlier this week, Natarajan explained to Fast Company that the future of the supply chain is shared: “So many retailers have tried to build their own vertically integrated supply chains, but building more assets and buying more resources is not the answer to achieving hyper-scale efficiencies,” he said. “Sharing is.”
Natarajan pointed to a few other companies that have thrived using a similar model. Uber, for example, does not own any of its vehicles, and Airbnb doesn’t own a single hotel room, he said. He also mentioned another 2021 American Eagle acquisition, AirTerra, a company that pools packages from multiple shippers and delivers them through its transportation network.
Quiet Platforms does the same thing, but with the logistics network itself. The company’s “click to door” edge network allows companies to strategically position their inventories as close to the end consumer as possible, aggregating parcel shipments to limit the amount of capital its partners need to spend on their own supply chains.
Seeing this innovative model get snapped up by a clothing retailer like American Eagle is jarring. But it also makes sense, considering retailers’ growing emphasis on using logistics and transportation as a revenue driver rather than a cost base.
Watch: The Supply Chain Takeover
For many, the way to do that has been by leveraging services like Fulfillment by Amazon or Walmart GoLocal, white-label offerings that allow retailers to tap into their delivery networks. American Eagle, though, is building its own, and Thursday could serve as its first progress report.
The outfitter is slated to report Q1 2022 earnings after the bell, with analysts expecting a pullback on revenue from the last quarter of 2021. Consensus estimates anticipate revenue of $1.14 billion for the quarter, down from $1.51 billion in Q4 2021. That, however, is in line with American Eagle’s projections — the retailer said in its last earnings report that it expects continued freight pressures to cause an earnings decline in the first half of the year.
If this week’s earnings report from competitor Abercrombie & Fitch is any indication, though, American Eagle stock could take a hit regardless. The rival outfitter missed widely on Wall Street expectations, and shares of the company saw their biggest one-day percentage drop on record as a result.
The same pressures behind Abercrombie & Fitch’s less-than-stellar performance — supply chain disruptions, fuel charges and foreign currency headwinds — could plague American Eagle. But if the company’s earnings show that it was able to weather the storm, the Quiet Platforms acquisition is likely a major reason why.
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