UPDATE ICSC New York: From E-bay’s one hour delivery service to Amazon’s futuristic proposed drone delivery, retailers are battling to gain competitive advantage by appealing to their customers’ need for ‘insta-delivery’.
As the retail industry transitions its supply chain to an omni-channel model, demand is soaring for the real estate that supports this new paradigm. A distinct real estate asset class tailored to e-commerce delivery has evolved. JLL has identified six newly-defined primary types of facilities that retailers are relying on to win the delivery war and reach consumers faster and more efficiently:
- Mega e-fulfillment centers – where merchandise is stocked and picked at item level.
- Parcel sortation centers (hubs) - parcels are sorted before being forwarded to local parcel delivery centers.
- Local parcel delivery centers - for ‘last mile’ fulfillment, these represent a new type of facility and consumer destination.
- Local urban logistics depots - to ensure rapid-order fulfillment, particularly to service major cities, these destinations may be integrated or separate from retail store locations.
- Return processing centers – to process returned items. Often, they are located within mega-fulfillment centers, but are typically centralized, requiring specialized inventory and materials handling needs.
- Online food e-fulfillment centers - with appropriate refrigeration and cooling, typically for grocery delivery and similar functions.
With seven out of 10 retailers still analyzing and defining their omni-channel strategy for 2015 to 2017, demand for these facilities are set to increase. In the next five years, we expect e-commerce space to reflect the consumer’s need to receive their purchases not only when but where they want. We also expect retailers to make the returns process just as easy. Omni-channel strategy will drive a brand new class of distribution real estate, such as return processing centers and watch out for more urban logistics centers on the outskirts of our nation’s cities.