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E-Commerce And The Need For Local Distribution Centers

December 20, 2017

E-Commerce And The Need For Local Distribution Centers on morrissegroup.com

The retail e-volution will be localized

The revolution in retail has been Amazonian. Because of the growth of that online mega-merchant, all aspects of commerce have changed. As a result, other retailers have had to wade into the e-commerce pool in order to remain competitive.

The question facing many e-commerce retailers – especially those trying to get a toehold in a land ruled by two giants, Amazon and Walmart – is how to bring goods to consumers rapidly and efficiently. The answer, it turns out, is to bring the distribution centers (DCs) closer to home.

In the e-commerce beginning

When the first online shopper clicked the purchase icon on a shopping cart icon, that order was most likely fulfilled at a very large DC located in a remote location. There, land, taxes, and labor were cheap, and the centers could be large enough to manage an overwhelming logistical operation.

Today, though, retailers and supply chain and logistics experts are rethinking that equation. Since the e-commerce explosion – and all predictions point to an even greater share ($4 trillion by 2020) of the market in years to come – many retailers have been forced to close stores. When anchor stores fold, malls do poorly.

At the same time, consumers have become accustomed to online shopping, and their expectations have grown. At one time, they were thrilled to receive their online purchase within a week. That expectation now stands at overnight delivery, and increasingly, that delivery time has been shortened to same day.

Selling electronically, thinking locally

Rather looking outward for space to build massive warehouses, more and more e-retailers are bringing their operations closer to the consumers. Locating DCs in urban centers may be more expensive. Rents and taxes, for example, may cost more, but this is often preferable given a speedy last mile delivery and lower transportation costs.

In some urban markets, demand for space has outpaced supply and commercial leasing is at an all-time high. Los Angeles and Seattle report that 95% of total warehouse space has been leased.

Thinking creatively to remain competitive

The demand for DC space in urban centers is giving birth to a creative use of space. Retailers that closed their brick-and-mortar stores because of e-commerce competition are now holding onto those spaces and refitting them as DCs. This allows them to respond more readily and quickly to the remaining stores in their family, and to fulfill online orders at a local level.

Properties that were once considered obsolete are being reclaimed and reborn to meet the retail challenges of the 21st century and the demands of the digital-savvy shopper. Businesses entering the e-commerce field are happy to let the giants have their DC palaces, while they lease anywhere from 300,000 to 500,000 square feet, located close to consumers, to stock small amounts of high velocity products.

Just like businesses have started to share space, e-retailers are looking to do the same in order to share costs of a more localized DC. Co-locating is based on varied peak sale times for two companies. An electronics company, for example, may peak between Thanksgiving and Christmas, while a chocolatier may peak during the weeks leading up to Valentine’s Day. Another retailer with a third peak time could also join.

E-commerce and South Florida

While traditional retail certainly isn’t dead in South Florida, the area is in a unique position when it comes to e-commerce. Thanks to the Everglades, there’s only so much space available on which to build massive DCs. West only goes so far.

At the same time, the region has plenty of empty warehouses and underutilized properties that can be reclaimed at local DCs to provide efficient and timely deliveries to local and international consumers. Finding new purpose for these spaces re-energizes neighborhoods, provides jobs, and strengthens the local economy.

Morris Southeast Group can help you find the commercial real estate property you need for your e-commerce or brick-and-mortar business. For a free consultation, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

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