Mytheresa Poised for Growth With State-of-the-Art Distribution Center – WWD

Mytheresa is aiming for faster deliveries to customers around the world thanks to its new distribution center at Halle/Leipzig Airport in Germany, which it hopes will lead to further growth.

The 600,000-square-foot state-of-the-art distribution center has the advantage of being located a mile from the DHL international air freight hub at the airport, enabling speedier processing of incoming merchandise, outgoing orders and returns.

The luxury website’s unique partnership with DHL is resulting in 20 percent of orders being shipped a day ahead thanks to its air hub late-night direct injection. That means Mytheresa will be able to ship one day in advance a minimum of 20 percent of all orders. Also, returns can be processed faster since they will be delivered directly by DHL to Mytheresa’s distribution center, without intermediary processing at DHL’s warehouse. Consequently, Mytheresa will be able to process refunds faster through lead time reduction of up to 24 hours, plus make return deliveries on Saturdays.

Mytheresa will further provide same-day delivery to Munich and next-day delivery to other German cities and most European destinations. The new facility is rigged with an automated pick tower, conveyor and packaging systems, enabling the retailer to handle larger order volumes with greater efficiency and consolidate the packaging to reduce labor and packaging materials.

“This certainly is a big step for the company,” said Sebastian Dietzmann, chief operating officer of Mytheresa.

Mytheresa’s Leipzig airport distribution center is the company’s second, with the other being in Munich, where the luxury platform is based.

“From a infrastructure perspective, we are in a great position,” Dietzmann said. “Earlier this year we relaunched our tech platform, and last September we launched this new warehouse. We needed to scale our infrastructure to be ready for future growth — and we were looking for quite significant scale.”

At 600,000 square feet and four levels, the center is quite large by German standards. “I know in the U.S. warehouses tend to be even bigger because land obviously is much cheaper. So we build higher and have more levels.”

In the following Q&A, Dietzmann outlines the advantages, the capacity, and the advanced operations of the new distribution center.

WWD: Why did Mytheresa decide to build another distribution center in Germany rather than in the U.S. or elsewhere in Europe?

Sebastian Dietzmann: In 2008, DHL relocated their biggest air freight hub globally from Brussels to Leipzig. This ignited logistic companies to go there. Also, we clearly understood after analyzing the data of our assortment that there is no benefit in building another big facility in the United States or even in Asia, but rather have it close to the existing one The distance between the two warehouses is not big, five hours by truck. We split the merchandise across the two locations. The plan is to have womenswear and jewelry in Leipzig, and menswear and kidswear and potentially in the future the lifestyle department (largely home decor and travel) in the Munich facility.

Labor availability played into the game. The labor market is tough everywhere in Germany and most likely toughest in the Munich outskirts by the warehouse there. It’s definitely not easy where our second center is, but it’s much better than other areas in Germany and much more future proof in terms of the availability of labor.

WWD: How long did it take to build the new center?

S.D.: A bit more than two-and-a-half years, but you can imagine starting at the end of January 2021 was not the easiest timing. We were still in lockdown, coming out of lockdown and going back into lockdown. We actually started the construction in early February 2022, just three weeks before Russia started the war in Ukraine. That was quite a shock, and would impact our timeline and the availability of materials. Ukraine was one of the major steel producing countries in Europe. Just imagine — we have 4,000 tons of steel in the pick tower. Considering all that, we finished with only a couple of weeks’ delay. I’m very proud that our teams and everybody involved made it happen in such a short timeframe.

WWD: What’s the capacity for processing items at Leipzig?

S.D.: The maximum is 27,000 orders per day. It’s a lot. Our old facility can pretty much hit the roof at 11,000 to 11,500 per day. These two add up to quite some scale.

WWD: Aside from DHL, do you work with other carriers?

S.D.: We also work with FedEx and UPS and some special European carriers like the Swiss Post. There’s lots of chalets in the Swiss mountains which the Swiss Post is more familiar with than FedEx.

WWD: How fast can orders be delivered from the new center?

S.D.: With a 3:30 p.m. Saturday cutoff, you have a high likeliness in New York City of getting it Monday in the a.m. In Hong Kong, you could order as late as 10 p.m. local time on a Saturday, and we would deliver Monday morning. We have also some specific processes designed with DHL Express for the Asian market.

WWD: Tell me about the digital photo production studio at the Leipzig center.

S.D.: It’s also for speed considerations. It eliminates transportation, or transit delays with products. We still do all the model photography in Milano. But for stills, it’s obviously much, much faster if we do it directly where we receive the new product from our brand partners. We want to be able to put the product online onto our website as early as possible. Sometimes we wait a couple of days, because we always orchestrate the products going on the site. But the faster we go, to have newness on the site, that’s an advantage.

WWD: What phase is the new center in?

S.D.: It’s fully operational. Obviously we are still ramping up. So the main driver in speeding the ramping up is basically the speed of transferring items from the old warehouse to the new one and also receiving new merchandise from our brand partners into the new one because we started operating the new center in early September. By now we have increased the stock to around 250,000 items. So last week on average, there were 1,200, 1,300 orders that we sent out on a daily basis from the new center. We are all busy receiving a lot of new spring-summer 2024 womenswear merchandise into the new center and the momentum will pick up in terms of what we sell on the website.

WWD: What are some of the challenges of processing and shipping luxury products?

S.D.: It’s as simple as you need to take much more care. So using robots, for example, for the picking just doesn’t work. Some of those gowns are very fragile. The entire packing process is a completely different one from handling a T-shirt from Amazon. That would take, let’s say five seconds, which makes total sense to be that efficient. But if you ordered with Mytheresa, of course you are expecting and deserving a totally different experience. We take the time to nicely wrap the merchandise in silk paper, then nicely place it into our iconic box with the handmade ribbon and with the hand-signed thank-you card. And that all plays into that experience. To give you a sense of how much care we actually invest into that, even if somebody is very experienced on what we call the gift wrapping team, then on average, you would do around 12 pieces an hour. An experienced person for us will take four to five minutes to conclude one pack.

WWD How many people work at the Leipzig center?

S.D.: We are just south of 300. At year’s end, we anticipate to scale further to around 475 and up to a north of 1,000 people when we are fully leveraging the facility.

WWD: How much did Mytheresa spend to build the facility?

S.D.: We did not build the building itself. Basically, we designed it. We were part of the production process, but we didn’t pay for it. An investor paid for putting up the building. We are renting it long-term. But for the technology and everything we put in there from an infrastructure prospective, we spent around 35 million euros.

WWD: Talk about any unique features at the Leipzig center.

S.D.: We are using proprietary, in-house built apps for the shipping team, the returns team and warehouse team. We are fully rolling out these and it basically just makes the work much more efficient for those teams…It’s a highly modern and energy efficient facility. We have floor heating which is very unusual in a 600,000-square-foot setting. It is actually really warm; it’s a great climate. During winter, it’s not like the typical warehouse where you would wear a big down vest. Also, heating coming from the floor contributes positively to the air quality. You have much less dust because there’s less ventilation. The air doesn’t move as much.

We are also finalizing the plans to have solar panels up and running in March next year. There’s actually a funny anecdote. We had to get the allowance from the German air control, because we are only 10 yards away from the airfield. So they were afraid that a reflection from the solar panels could disturb the pilot. So that was a pretty long process to get the allowance.