As e-commerce pushes retailers and shippers to shorten their delivery windows, many are turning to strategies such as multistory warehouses, pick-up lockers, and infill service centers to get deeper into the dense population centers they are serving, according to a new report from CBRE Group. The study, Last Mile/City Logistics, examines the market forces compelling retailers to overhaul their supply chains to penetrate urban markets, as well has their strategies for doing so.
A primary factor is that Millennials, many of whom live in downtowns and central business districts, widely prefer to have their online purchases delivered to their residences rather than to their office or for in-store pickup, according to a recent CBRE survey. In the Americas, 76% of respondents prefer home delivery, more so than their peers in Europe and the Asia Pacific region.
“The drive to deliver more products faster to consumers in urban markets is generating tremendous innovation in that last leg of delivery to customers, which we call the last mile,” says David Egan, CBRE’s head of Industrial & Logistics Research in the Americas. “Industrial users are enlisting a resourceful combination of facilities, technologies and services to tackle this challenge, but well-located real estate remains a critical part of that equation.”
Across the globe, the most common methods used to address this challenge are small, infill service centers, which hold and distribute inventory within just a few miles of the customer; multistory warehouses in markets with scarce available land; and pick-up lockers in dense areas where the service is convenient.
Some retailers are using their stores as a ready network of small distribution centers already deployed across many markets. Others are using technology such as real-time, driver-tracking systems as well as crowd-sourcing tools that allow them to operate large pools of on-demand drivers.
Such strategies are likely to come into more demand going forward. According to CBRE research, U.S. Millennials do more than a third of their non-food shopping online, and that figure is expected to exceed 40% by 2019. The U.S. is second only to the U.K. in that regard.
In Europe, the restructuring of supply chains has led to a growing need for efficiency, resulting in a smaller warehouse network with larger but fewer facilities. Due to population growth and urbanization, land suited and zoned for industrial use is becoming increasingly scarce. For example, the amount of industrial land use in Greater London has declined from 8.3 thousand hectares in 2001 to 7 thousand hectares in 2015.
Vertical logistics facilities are already well known in East-Asian markets, where densely populated cities and lack of available land make them a viable solution. As e-commerce grows and continues to impact the market, the use of vertically structured warehouses will become a virtually inevitable factor for the growth of city logistics in dense European hubs and heavily populated U.S. cities.