The rise of eCommerce has done much more than change the way consumers shop (which, in turn, has helped to change the way consumers think about payments). Online retail has had a tremendous impact on logistics, further evidence of which emerged on Monday (June 3).
Blackstone Group reportedly is paying $18.7 billion for what Bloomberg calls “179 million square feet of urban logistics properties – the warehouses used by Amazon.com Inc. and other retailers to fulfill orders from online shoppers.” Blackstone is making the deal with Singapore-based GLP, according to the report. That company stands as the “second largest owner of U.S. logistics real estate, (and the deal) will almost double Blackstone’s U.S. industrial footprint.”
“The rise of Amazon and other eCommerce companies has increased the need for warehouse space by retailers seeking to expand their digital operations and cut delivery times,” Bloomberg said. “The shift toward online shopping is reconfiguring supply chains and shaping the fortunes of industrial landlords, with demand especially high in and around large cities, where eCommerce has taken off fastest.”
Warehouse Trends
As PYMNTS has covered, it’s a good time in America to have a retail space ready to rent out, as eCommerce merchants are on the hunt and signing large contracts. According to a recent report from CBRE Group, 56 of the largest 100 warehouse leases in the first half of 2018 were with eCommerce firms and third-party logistics providers.
“The supply chain arms race is as competitive as it’s ever been,” said Adam Mullen, CBRE’s senior managing director of industrial and logistics, Americas.
Of those leases, 30 were for very large spaces – warehouses larger than 750,000 square feet. According to CBRE, high ceilings, high modernization and automation-ready spaces are particularly prized features among eCommerce tenants. It’s all about the ability to move large amounts of inventory – and fast.
By category, the biggest lease signers were manufacturers with 14 percent of the market, followed closely by beverage providers (11 percent), retailers (7 percent) and tech firms (4 percent). The remaining percentage was placed in the “other” category.
It’s not only a race for space when it comes to warehouse and logistical needs by eCommerce operators. It’s also a race for the best technology – in large part, a race to deploy the best, most efficient robots in eCommerce fulfillment operations. That race, like so much in eCommerce and its logistical needs, is being dominated by Amazon – but that company does have rivals.
Take Ocado, a U.K.-based online supermarket operation. Ocado has a market value that is roughly 100 times smaller than Amazon’s, but it has gone from being Europe’s most shorted stock to one of its best-performing. Shares in the online-only grocer have grown about 72 percent in 2019 so far, after jumping almost 50 percent in 2018.
Ocado has automated warehouse agreements with a few major supermarket chains, including Kroger and Coles Group. According to some analysts, its warehouse operations top Amazon’s, at least in terms of robotic speed. Ocado reportedly has warehouse robots that travel three times the speed of Amazon’s.
Ocado also started a joint venture with Marks & Spencer Group in an effort to outpace Amazon in delivery. The service, called Zoom, aims wants to deliver within major British cities in less than an hour, which would beat Amazon by 60 minutes.
On-Demand Warehouses
On-demand warehouse space is an area that is also on the rise. Fresh evidence of that comes from Flexe. The Seattle-based startup, which manages an on-demand warehouse marketplace, has raised $43 million in a Series B funding round, according to reports.
Flexe, whose clients include Staples, Toms, Walmart and P&G, has found a niche that will help its efforts to wrest marketplace control away from Amazon and to provide customers with an alternative to the logistics giant. The company offers software that connects retailers and warehouses with extra space that would otherwise not be used. Flexe also has a network of 1,000 warehouses across the U.S. and Canada, up from 370 three years ago. It provides a pay-as-you-go model, which precludes the need for warehouse leases – an incentive for companies trying to avoid those particular fixed costs.
As deliveries become even faster – and more proactive, shipping items to consumers before they even order them (such as household supplies) – the warehouse and fulfillment side of the eCommerce industry is set to take on even greater importance.