The UK, which currently has one of the most established e-commerce industries in the world, will require an additional 60 million square feet of warehouse capacity, which is comparable to 14% of current warehouse space. E-commerce transcends all regional boundaries, reaching the vast majority of consumers all around the world. This opens the door to increased overall sales. In exchange, e-commerce brings a few logistical problems. E-commerce firms require more than three times the amount of logistics space required by traditional brick and mortar establishments.
What influenced the demand for more warehouse space?
The Amazon Effect refers to the occurrence of e-commerce and the digital market expanding at the same time. The rhythm of customer purchasing behaviour, as well as their expectations, has been fundamentally altered as a result of this influence. Consumers nowadays anticipate quick delivery, competitive product prices and the option of free shipping. Traditional logistics and supply chain methods are challenged by such stringent delivery constraints. Consumers want on-demand, low-cost delivery services, therefore businesses are now compelled to adapt.
The increase of e-commerce and its impact on warehouse space:
In January of this year, online spending as a percentage of overall UK retail sales reached a new high of 36.3 percent, nearly double pre-pandemic levels. With stores reopening, however, internet shopping accounted for 27.3 percent of overall spending by May. In the long run, CBRE predicts that e-commerce in the UK will level at just above 40%, but warehouse space will continue to be in high demand. Customers are demanding speedier delivery, according to logistics providers, which necessitates more facilities in or near town and city centres.
This increase in e-commerce has prompted businesses to seek for even more industrial warehouse space. The real estate market now has to decide whether the unprecedented e-commerce growth of 2020 will continue, what effect will it have on future demand for warehouses? and how can investors profit from this trend? Because of the convenience and flexibility that e-commerce affords, people will continue to make more online purchases long after the pandemic has passed.
As a result of this shift in consumer behaviour, many stores are rethinking their logistics supply chains — including the requirement for greater warehouse space — to accommodate the additional inventory required to deliver an integrated shopping experience that incorporates both online and offline retail (omnichannel). As retailers pursue online customers, they are investing in warehouse space that can efficiently handle reverse logistics (or the supply chain of processing returned merchandise) — which necessitates up to 20% more warehouse space and a completely different infrastructure where last-mile warehouses can accept, sort and either dispose, recycle, or refurbish returned merchandise.
Many retailers may outsource return processing to third-party logistics (3PL) providers if they are unable or unlikely to build out an in-house logistics network. 3PLs specialise in product distribution to consumers in the midstream and reverse logistics services and have become the most frequent users of big bulk industrial warehouses, particularly older and unrenovated warehouses such as Class B or C properties.
What does this mean for logistics?
To meet consumer demand, flexible, customised and even bespoke solutions may be necessary. Economists have long forecasted the death of the high street in the United Kingdom, and it may finally happen this decade. As a result, there is a higher demand for commercial space. A more competitive warehouse commercial landscape is likely to emerge because of this transformation. Costs will rise as a result of this in global industrial markets. Why? The greater the demand for things on the internet, the more space will be required to meet it.
Warehouses near transportation hubs, for example, will be in high demand. Customers will expect online shops to be able to deliver things more quickly. This is only one of the reasons why supply chain companies will fight for warehouse space.
Storage mobility, on the other hand, may become crucial to operational efficiency. Retailers will require supply-chain flexibility to get their items to customers swiftly and seamlessly in order to fulfil consumer demand. What can't be said, is that any significant changes to supply chains weren't on the horizon; It's been a long time coming, in fact all Covid-19 and to some measure, Brexit has done is hastened the transition.
In the end, thousands of warehouses will be required across the United Kingdom and Europe in the coming years. To keep up with the surge in e-commerce, supply chains must be properly managed.
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https://www.ft.com/content/1ddf26ac-6bf5-4fb0-bdec-8ab70d61197f https://blackcreekgroup.com/insights/acceleration-of-ecommerce/ https://www.builderfly.com/how-is-ecommerce-changing-logistics-a-complete-analysis/ https://www.chaseequipment.co.uk/industry-news/thousands-of-new-warehouses-will-soon-be-needed-across-the-uk-and-europe/