Purpose

Diversifying to provide third-party logistics (3PL) is an emerging trend among retail companies to benefit from underutilised warehouses and automation enhancing productivity. This paper investigates the resources and capabilities retail companies need to diversify by leveraging economies of scale.

Design/methodology/approach

Preliminary interviews with two logistics consultants helped inform the design and content of the interview guide. Semi-structured interviews were conducted with three retail companies before their diversification into 3PL services. The sample includes only retail companies specifically communicating intentions to diversify in press releases or news articles.

Findings

Retail companies diversifying to provide 3PL services strategically select 3PL customers in accordance with the retail companies’ predefined logistic limitations. This enables the retail companies to provide 3PL services to leverage their niche expertise for scale advantages. The benefits of selling competing products as their 3PL customers serve as enablers through the already existing product knowledge, investments in automation and established business networks. Therefore, diversifying contributed financially to logistics investments, which were difficult for the retail company to cover on their own, thereby mitigating risk.

Original/value

The paper contributes to understanding 3PL in the retail business landscape. The paper explains what resources and capabilities companies with underutilised warehouses need to maximise their space usage through diversification to provide 3PL services.