• Americas

E-Commerce Erupts: Connectivity, Consumption and Cell Phones

By John Morris, Jason Tolliver, Ben Conwell & Elisabeth Troni

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E-commerce sales are expected to reach $1.6 trillion globally in 2016. Furthermore, forecasters expect global online sales to continue growing by 20% annually, driven by strength in China and India, and double-digit growth in North America, Western Europe and the rest of Asia.

Additionally, the proliferation of mobile technology is helping to drive the growth and globalization of e-commerce. The World Bank estimates that close to three-quarters of the world’s population – including much of the developing world – has access to a mobile phone.

In the United States, activity on smartphones and tablets account for more than one in four e-commerce transactions (28% in 2015). Analysts agree that, with improvements in mobile payments and a growing propensity by younger consumers to make purchase from mobile devices, this tally will rise. In China, 73% of internet giant Alibaba’s first-quarter 2016 sales came from mobile devices. Meanwhile in Europe, roughly 65%-70% of online sales originated from mobile devices.

Smartphones and other mobile technologies have penetrated every aspect of daily life, including how consumers shop. As such, companies that provide customers with a seamless and engaging mobile platform via e-commerce are likely to have more sales than companies that don’t.

E-commerce growth is, in turn, driving demand for logistics real estate. While the vast majority of sales occurs among retailers with a brick-and-mortar presence, savvy retailers understand how each customer touch-point supports sales. These retailers are developing omni-channel strategies and improving the “bricks-to-clicks” experience. Inherent in this strategy is the need for additional logistics real estate. Basically, yesterday’s warehouse is today’s distribution center.

E-commerce occupiers are consolidating fulfillment activities into spaces once used solely for storage and warehousing. For example, a larger number of stock-keeping units (SKUs) stay in an e-commerce facility as point of sale shifts from retail sites. Individual order-picking, packing and shipping activities take place in these logistics centers. Additionally, some e-logistics facilities accept product returns, necessitating even more floor space for processing and restocking. As such, e-commerce distribution centers require buildings larger than a standard warehouse.

However, in the world of e-commerce, one size does not fit all. E-commerce business models vary, depending on the size of the operation, product focus and retail model. These dimensions affect the size, location and building strategies of logistics facilities.

In the near term, e-commerce real estate requirements in the U.S. and portions of Europe should continue to move toward four distinct categories:

  • Large fulfillment centers located outside major metropolitan areas
  • Mid-sized distribution/fulfillment centers close to populations
  • Medium to large sorting centers located within major urban centers
  • Small depots throughout urban cores serving as “last-mile terminals” to satisfy customer service expectations for instant delivery

The final leg of delivery also provides options for in-store pickup of items ordered online, as well as pickup from kiosks.

The globalization of e-commerce and the proliferation of multi-market, multi-channel shopping, has been and will continue to be transformational for the retail and logistics industries. Changing customer expectations that require the presence of products where they want them and when they want them, require more capacity and flexibility from supply chains.

The continued evolution of service expectations, the rapid growth in mobile technology and connectivity, and further development of infrastructure in emerging markets will continue to drive demand for logistics facilities, and affect occupier requirements for industrial real estate.

The above is an excerpt from our Fall 2016 edition of the Occupier Edge. To learn more about e-commerce, download the full report here.

 

116-morrisJohn Morris is the Executive Managing Director of Logistics and the Industrial Lead for the Americas region at Cushman and Wakefield.

 

 

 

116-conwellBen Conwell is the Senior Managing Director, E-commerce Practice Lead, for the Americas region at Cushman and Wakefield.

 

 

 

116-tolliverJason Tolliver is the Head of Industrial Research in the Americas region for Cushman and Wakefield.

 

 

 

 

116-troniElisabeth Troni is the Head of Research for the EMEA region for Cushman and Wakefield. 

 

 

 

 

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