At Matalan, revamping its supply chain, particularly logistics, is becoming central to how the business is rebuilding.
The fashion and homeware retailer has secured fresh backing from investors, including Invesco and Man Group, with a further £25m announced in March 2026 to support store upgrades, product investment and operational improvements. That follows an earlier £25m round in 2025, which also included supply chain investment.
Recent performance suggests momentum is building, with refurbished store outperforming the wider estate by 14%, while like-for-like sales rose 2% in Q3 FY26 and EBITDA climbed 38% to £27m.
For director of logistics operations Tom Palombella, the focus is on making sure the supply chain keeps up.
Running and rebuilding at the same time
Much of that effort is centred on Matalan’s Knowsley distribution centre, where automation has been rolled out over several years.
What in particular makes it stand out is that the work has been done without stopping the operation.
“We’ve done it whilst simultaneously fully operating the site and going through peak periods over a number of years,” Palombella says.
The shift has been significant, with the business partnering with logistics solutions company KNAPP in 2020, and moving from single order picking to batch picking and goods to person systems, where products are brought to workers.
By 2027, it is understood Matalan’s omnichannel fulfilment hub will feature an eight shuttle system and, over 20 pick stations servicing ecom and retail, as well as 16 decant stations.
“We used to pick to order. One picker would be working on one individual customer’s order at any one time.”
The original goal was to improve both throughput and storage density, but the even bigger test came later, when demand patterns changed.
Like many retailers, Palombella says Matalan’s early automation plans were built around strong e-commerce growth during the pandemic, but that growth did not continue at the same pace.
This gave the business a chance to adapt. “We were the first in the UK to convert that system that we had designed for e-com to make it retail friendly.”
The same infrastructure is now used to support store replenishment as well as online orders, helping the company secure a retail supply chain award in 2025.
However Palombella warns getting there was not straightforward. “Integrating our legacy systems with our new technology in a fully functioning live warehouse was a challenge from a software point of view,” he says.
There was also a people challenge. Automation often raises concerns about job losses, something the business had to manage carefully, however Palombella argues “automation doesn’t always replace roles. It changes roles.”
Some warehouse colleagues have moved into engineering roles, supporting and maintaining the new systems. “On a people front, the way we lent into them and communicated were pretty strong.”
From returns to next-day service
For a value retailer, cost still matters. But Palombella says the focus has shifted.
“If we do the right thing by service, then our costs, in most cases, should look after themselves.”
Before automation, next day delivery cut off earlier in the evening, around 5 to 6pm, and was often suspended during peak trading. Now, customers can order up to 10pm, with a “flexibility” to push that deadline further back if needed, and the service has remained available even during Black Friday.
“We haven’t suspended our next day service at all, even during our peak period. I think that’s a really strong service message for us.”
“A lot of that enablement came through the fact that we were able to put that automation into Knowsley”
Returns are another area of focus. While some fashion retailers see return rates of up to 40 to 45%, Matalan’s are lower. A strong store network helps, with many customers choosing to return items in person, allowing for exchanges rather than refunds.
At the same time, the retailer is expanding alternatives through its partnership with InPost.
“We clearly know that we’ve got to cater for more than just customers that want to take it to store.
“And part of our returns process was around accessibility and having further available options for our customers and moving in line with what the market expects”
The appeal is convenience. Locker returns are simple, label free and widely available, with InPost predicting to have 19,000 locations by the end of 2026, giving customers more choice while reducing friction.
And how will Matalan know the partnership with the locker service is successful? Palombella says the retailer is closely watching customer behaviour to judge performance.
“I think from a participation point of view, customers will shop with their feet and they’ll also return with their feet.
“So based on the participation of what we see from our customer base, in terms of utilising that service, that will give us the indication of whether there’s an appetite and whether our customer base is used to using lockers or not.”
And “early signs have been positive”, says Palombella. “We’re already seeing a really great participation across our returns process.”
“Utilisation of InPost has gone from 0 to 50% of our returns that were previously postal returns.”
“This is slightly higher than we thought it would be. So we’re looking forward to continuing to work with the team at imposts around advancing those services even further”
Simplifying, scaling and what comes next
Not all of Matalan’s supply chain work is high tech. For example, one recent project has focused on simplifying and standardising inbound packaging. At one point, the business was using more than 200 different packaging types, despite some competitors using less than 15.
“We challenged ourselves to say, why are we different from any other retailer?” says Palombella. “When you lift the bonnet on some of those things, you’ve got to retest whether the ways that we’re operating are still right.”
The project, delivered with logistics partner EV Cargo, is nearing the end of its first phase. Focusing on 80% of volume through 20% of suppliers across China and Bangladesh, Palombella says it has performed “phenomenally well”.
Alongside this, Matalan is beginning to explore AI in logistics, particularly in planning and transport routing, although this is described as in the early stages.
“We’re just on the start of that journey.” But the director adds the wider context is one of constant disruption, and, with volatility in recent years spanning from the pandemic to geopolitical tensions, supply chains have had to become more resilient.
“We had a meeting, joking about how complicated it can be to put projects into a live operation, but it actually feels the norm now.”
He says, “The team, and the wider supply chain sector, has long forgotten a world without delay, such as shipping delays or disruptions from the Middle East, or other areas of the world. The UK supply chain is a lot more resilient because it is so used to dealing with some level of crisis, it has become second nature.”
“Back in the day you would roll out a BCP plan because something had gone wrong,” he says. “Whereas now this is just kind of part of everyday planning.”
While the retailer stresses it has not experienced any material disruptions to its supply chain as a result of recent disruption in the Middle East, like many in the sector, it has felt the impact of rising fuel costs
“Fuel increases have expanded into our transport operations which has caused us [all retailers] some pain… but we see as short term at the moment.”
Despite the progress so far, Palombella is clear that the work is ongoing. “We’re not standing still.”
“We’ve got a great pipeline over the next couple of years of really exciting transformation across our supply chain – which is really exciting.”
Looking ahead, Matalan’s logistics team already has a roadmap that they are working through, but as Palombella says, for Matalan, the ambition can be described quite simply; make sure the right product is in the right place when the customer wants it.
Click here to sign up to Retail Gazette‘s free daily email newsletter
