Sent Items #147: Thursday, December 28, 2023

I hope everyone is enjoying the holiday season celebrating Chanukah, Christmas, Kwanzaa, or Festivus, and are ready to begin 2024, a New Year!

I am writing this final issue of Sent Items of the year on my flight back from Tokyo. I have been in Japan these last two weeks (+ Seoul for 2 nights) enjoying my belated honeymoon. Japan is a beautiful country. It is clean, orderly, peaceful, safe, efficient, and kind. 

These last two weeks are the longest I have spent away from North America. I am amazed, and enthralled by the unique culture of Japan. Tokyo is the largest city in the world (pop. 40 Million) but you barely hear a peep while walking throughout the city. Tokyo feels very much like New York without the homeless, trash, crime, and noise. So basically very different. 

The subway system throughout Japan is remarkable. There are hundreds of lines and thousands of stations throughout the country. You can’t walk 10 minutes without stumbling across a subway station. Not just in Tokyo. Throughout the country. You can get pretty much anywhere via subway. Tickets generally cost between $1-$1.50. We didn’t wait more than 3 minutes for a train, ever, and public transit is faster than a car.

That’s not even their bullet train system (“shinkansen”). That is awe-inspiring. We traveled from Hakata (Fukuoka) to Tokyo, a 750 mile trip, in 5 hours, for $100. This trip would take 14 hours by car.

Any municipality looking to study subway and public transit should use Japan as an example. It has been and will continue to be a huge source of competitive advantage for the country. Parcel delivery too. I did not see a single Japan Post, FedEx, UPS, or DHL vehicle. I did see many Sagawa Express couriers but they were all pushing large carts and on cargo bicycles. It all felt very Jetsons-like, but ironically, a world within grasp, but one that we don’t seem to want to embrace.

A few additional social observations from Japan:

1. People do not jaywalk

2. Streets are litterless. Which may be a result of people not eating on the street (it is culturally rude). Ironically, there are very few public trash bins.

3. Despite the population, business, and construction, it is remarkably quiet, everywhere.

4. I may have seen 4 homeless, but even they had brooms to keep their spaces tidy.

5. Japanese (and Koreans) love to shop! Shopping is everywhere, particularly luxury.

6. Public transit is extensive, inexpensive, and functional (see above)

7. People are nice

8. Taxicab drivers wear suits

9. Napkins really aren’t a thing, but you get wet-nap looking things everywhere (link)

10. Toilets are automated everywhere, with auto-open/close, seat warming and bidet

Here’s a pic from our bike ride to a lookout point of Mount Fuji:

Onwards…

As we near the end of the year I will keep the news short and just to touch on a theme or two I believe will accelerate in 2024:

1. While I despise much of what the New York Times has to say these days, I did appreciate this headline “From Unicorns to Zombies: Tech Start-Ups Run Out of Time and Money” (link). 

The article discusses how some startups have fended off failure (i.e. bankruptcy) by pursuing mass cost-cutting over the past two years. However the cutting has been done and they are now on the verge of running out of time and money. They face a harsh reality: Investors are no longer interested in promises.

Unfortunately logistics isn’t safe from this reality. This year has seen several high profile failures, and others that have waffled, including Convoy, Shopify/Deliverr/Flexport, Uber Freight, and many others.

Unfortunately many more logistics companies - logistics brokers, 3PLs, carriers - many who self labeled as “tech startups” to garner rich venture valuations, will also suffer a similar fate. I’ll avoid name-specific predictions as “loose lips sink ships”, but many have much to be concerned with. This feels less a story about a global recession (side note: ain't happening!), and actually a story of a healthy, working, capitalist economy. 

2. Returns are a big problem (link).

Americans are estimated to buy more than $5 trillion of goods this year. Yet shoppers last year returned 16.5% of items they purchased online and in stores, valued at nearly $817 billion and double the percentage of goods returned in 2019, according to the National Retail Federation. 

Optoro projects U.S. consumers this year will return $173 billion of goods between Thanksgiving and the end of January. With the added shipping, warehousing and labor costs, costs to merchants are estimated about $27 to handle a return for a $100 online order. Companies lose some 50% of their margin on returns when accounting for the cost of initially selling the item plus processing the return. 

The estimated volume of returns this holiday season are 28% higher than last. The costs of processing those returns, including shipping and warehouse labor, has also risen more than 20% this year. 

An accelerating competitive advantage and key to a successful eCommerce brand - and 3PLs who support them - are those who are investing in returns management strategies, including incentives to exchange, and improving restocking and disposition processes. It’s not just about offering a simple, easy returns process - though that’s important - it’s what happens once those items get back to the warehouse. Most products sold online are perishable … that is, they have a merchandise shelf life. Processing quickly, effectively, and accurately is important to maintain as much margin possible. 

I have personally gotten to know the team at Two Boxes as an Advisor. They are focused on helping brands get more inventory back to stock, faster, while identifying high priority returns and improving customer service. I am happy to connect those who are interested.

My final thought heading into the new year: Donate more to charity (separate from political advocacy). Do something nice. 

I will be in Savannah for much of the next two months. If you find yourself there please reach out. 

I can not wait for 2024. Much is in the hopper. Happy New Year!

- Matt

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