John Bell, Managing Partner of Glenny, contributed in today’s City A.M., arguing that on-demand economy is revolutionising consumer behaviour – posing a major challenge for e-tailers.
As demand for goods and services becomes ever-more immediate, deliver companies are racing to find new ways of enabling retailers to satisfy customer demand in increasingly cost-effective, scalable and efficient ways. And that race is something of relay; with logistics operators moving goods on from national to regional, and then local, distribution hubs to facilitate their ‘Last Mile’ delivery supply chain.
Balancing the needs of consumer and retailer presents logistics operators with a number of challenges; the most acute of which is how to establish financially viable local distribution hubs in or on the edge of traditionally residential areas with high land values.
Creativity seems key here, with a host of unconventional, at least for now, options being mooted. Underground and underwater warehousing are being examined as cheaper alternatives to traditional fulfillment centres. Amazon, one of the UK’s largest acquirers of warehouse floor space (having taken 20% of available stock in 2016) already holds patents for both these concepts.
A more immediate solution to land use intensification is the current trend topic of multi-storey warehousing solutions, particularly within Greater London, where in terms of viability, the need to maximise land value and density has never been greater.
Elsewhere progress is moving swiftly to accommodate drone delivery and robotic sorting. Whilst neither is currently fully integrated into the wider distribution process. A recent report from management consultancy McKinsey suggests that autonomous vehicles and drones will deliver 78% of all items in the future. Technology such as Amazon’s newly launched ‘Key’ could, if widely adopted, further automate the final stage of the delivery process by eliminating the need for the consumer to be present at point-of-delivery.
Despite these challenges the need to establish hubs in urban areas remains tangible. In the last year Glenny has let units to some of the UK’s largest logistics operators including DPD, Amazon, DHL, P2P Mailing and UK Mail – examples of a wider trend that has seen occupier demand for urban logistics hubs in the eastern M25 region rise by 26% over the last two quarters.
Research in Glenny’s Q3 2017 Databook indicates occupiers are striving to find efficiencies at all stages of this consumer-driven supply chain with recent lettings in Enfield, Belvedere, Bexley and Basildon clearly establishing those locations as strategic regional distribution hot-spots within the Glenny region.