1. COST VERSUS CUSTOMER EXPERIENCE: As retailers compete on customer experience throughout the omni-channel supply chain process, the type of real estate and where it is located is playing a major role. In fact, according to JLL research, seven out of 10 retailers are still shaping their omni-channel product offering and customer service commitments. Meanwhile, Boston Consulting Group data shows that only nine percent of consumers value same-day shipping above other factors. Despite choosing free shipping over instant gratification, retailers know there is still demand for shorter delivery times. To meet these demands, retailers must implement a hub-and-spoke real estate model which now comes in many forms.
2. MEETING THE DEMAND FOR MEGA-FULFILLMENT CENTERS: Traditional retailers and e-tailers have driven industrial real estate demand to peak levels throughout the country. More than 60 tenants are currently seeking big box distribution centers of more than one million square feet nationwide. Demand is outpacing available sites by nearly three to one, especially for mega-fulfillment centers close to population density with transportation links.
3. SET SIGHTS ON SECONDARY HUBS: Retailers are shopping for hyper-efficient warehouse space in secondary and tertiary markets to reach more consumers at a quicker pace. For example, smaller regional distribution centers in secondary cities like Indianapolis, Phoenix, and Seattle can replace larger centralized warehouses in more expensive locations. This is more cost-effective for retailers and means faster delivery times for consumers. And leasing less space in these secondary locations is a way to avoid the competition for highly-coveted real estate near major city centers.
4. PHYSICAL STORES INCREASE CUSTOMER FULFILLMENT: To eliminate e-commerce shipping costs and give consumers control over delivery time, retailers are increasingly using physical stores as fulfillment centers. Stores are developing infrastructure to expedite delivery, including installing lockers for secure pick-up, creating zoned ingress-egress for curbside pick-up, and dedicating salespeople to facilitate delivery.
5. SHINING LIGHT ON INVISIBLE SPOKES: Some retailers are looking to convert existing or under performing stores into fulfillment centers. This strategy gives retailers more control over ‘last-mile’ delivery. And in lieu of traditional 3PL offerings, some retailers are exploring alternative shippers or local couriers such as Deliv and UberRUSH to deliver from dock-to-doorstep. In this model, ‘dark stores’ – non-customer-facing mini-fulfillment centers – are springing up in retail locations for package sorting and for final deliveries.
By: Kris Bjorson, International director and head of retail/e-commerce distribution at JLL.