A few days ago rumours of new e-fulfilment centres to be built in Poland for Amazon were confirmed by the etailer itself. Around 6,000 permanent new jobs and as much as 9,000 temporary ones at peak periods will be created across three centres of around 90,000 sq m each.
Certainly, this kind of news is creating a lot of buzz in the market – not least because of the immediate impact on local employment along with the dimension of the property. In my last post ‘big continues to be beautiful’ I actually talked about a significant rise in the number of occupier transactions exceeding 50,000 sq m. As a result, landlords and developers are keen to establish relationships with those retail companies playing in this category.
I am convinced we will see more mega-sheds being developed around Europe driven by continued strong growth in online sales. Meanwhile, a different yet related discussion on the web last week captured my interest. It evolved around news stories in the Wall Street Journal and USA Today about a battle for the leader position in the e-commerce market between Amazon and Walmart.
However, the essence of the news was not so much who will lead in e-commerce sales, but more about Walmart’s new strategy based on a ‘shir-from-store’ model.
By applying a ship-from-store distribution model a retailer is fulfilling online orders mainly through a store network. Quite simply put, items ordered online will be picked from store supply, packed and labelled in the store and dispatched by a courier service to the customer.
So what impact will this have on logistics real estate? Does it mean demand for large size distribution/e-fulfilment centres will diminish as shops are being converted into distribution centres?
Short-term, the ship-from-store model is not likely to show a significant impact on distribution warehouse demand as most of the logistics services around this model will be handled through an already existing network. Moreover, the development for large-scale units will by no means slow down due to a larger shift to ship-from-store models – as these centres will continue to be the backbone for large e-commerce players.
However, going forward, ship-from-shop and other new omni-channel retail models yet to emerge will drive a change in requirements for logistics real estate. This demand is likely to focus around smaller e-fulfilment centres closer to customer markets that will predominantly support online orders shipped to the customer through a store network.
In addition, a number of stores could be entirely converted to e-fulfilment centres. This would most likely involve those neighbourhood stores that see limited customer traffic along with low in-store sales – but offer a unique urban location in close proximity to customers. On the other hand, these properties have not been built to support high numbers of carrier movements during a day which would again emphasise the growing importance of urban/city logistics models.
One thing seems obvious, the logistics real estate landscape will continue to evolve rapidly driven by the need to respond to new requirements – and these requirements are likely to get more diverse than ever before going forward.