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E-Commerce and Logistics: how is technology changing the sector?

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The expansion of e-commerce has had a significant impact on many aspects of the real estate property sector in the past two years. Here Anita Simaza, the Global Head of Logistics Investment for BNP Paribas Real Estate explains how new trends are affecting the market

Consumer habits and logistics

The logistics sector is experiencing a change as consumer habits continue to evolve, in part because of the increasing expansion of online shopping. This shift from shopping in physical retail locations to shopping at online-only retailers is causing a transformation of the logistics sector, in which warehouses are gaining in importance and having to adapt and evolve more rapidly than ever before.

In recent years, there has been a visible wave of technological change that has come not just to logistics, not just to property, but to the global economy as a whole. The introduction of communal Wi-Fi and smart phones and their increasing usage for a multitude of tasks, has had a significant impact on consumer behaviour. It is this change that has ultimately driven forward the e-commerce offering and impacted the logistics and retail sectors. This change presents new challenges and forces the supply chain to readapt and reinvent itself to offer a new kind of relationship between itself and its customers.

Infrastructure and technological advances

Recent improvements to infrastructure and technological advances are without a doubt influencing the online retail sector. This in turn has led consumers to completely alter their purchasing habits and behaviours. Consumers are now used to shopping online from the comfort of their own homes, without having to visit brick and mortar retail locations, which cost far more for the occupier. Consequently, there has been a noted shift in retail real estate occupation, moving from classic retail locations to the use of warehouse space to answer the needs of e-commerce retailers.  Given the price difference between these two different types of locations, it’s easy to see that more, larger warehouses are going to be required in order to continue to supply consumers with the shopping experience that’s now become a part of their daily lives. Retailers are going to have to continue to adapt their response to evolving client needs by continuing to successfully integrate online offers into their business. The long-term result is that this requires an increase in warehouse spaces as opposed to increased retail locations, which is of course going to have a significant impact on the future of the retail real estate market.

Warehouses: The future of logistics

Where we are seeing a particular adjustment in the logistics sector, in terms of retail, is with warehouses. Warehouses are generally seen as the workhorses of commerce, and are completely essential to economies that produce goods. Warehouses have always been used by manufacturers and retailers, with the end user ultimately being the consumer. It is however the development of e-commerce that has changed the consumer’s needs, which is affecting how warehouses fit into the retail supply chain.  Consumers, because of an increased use of technology, now have greater expectations in terms of the speed of delivery and range of products. This demand has been met by the logistics industry as it has expanded its offering, coveting larger warehouses spaces and cutting the supply chain down by linking the consumer to the warehouse rather than the shop.

Robotics and automation industries are also evolving faster than ever, helping to meet the demand of users for faster delivery. This has resulted in the proliferation of several subcategories including, logistics warehouses, fulfilment centres, cross docking, last mile/city distribution facilities, production warehouses and robotic facilities that are primarily used for e-commerce.

Warehouses: why location is so vital

To achieve successful warehousing, the most important factor is invariably the location. The right location is vital for the occupier in order to ensure that client’s needs are being met but also in establishing that the warehouse functions day-to-day at a high level.

Moving goods is a crucial component in the supply chain, with transportation accounting for almost 50% of the total cost. A warehouse therefore needs to be strategically located in order to ensure the moving of goods is as economical as possible, so therefore in close proximity to good infrastructure. This ensures that good are transported as quickly and as profitably as possible. 

Location also plays a huge part in terms of employees. In order to attract and source highly skilled staff who will ensure the smooth running of the warehouse, it must be well located. By this, the ease of access must be considered and the proximity to areas where such skilled individuals may be found.

Added to this are factors including how the building is organised to permit new-technologies to be optimised, the various business services needed to make the warehouse function, the consideration of local usage regulations and the location of the different suppliers.

The sourcing of warehouses therefore depends on many factors, and the increasing need for space and the integration of technology means this is having a bigger and bigger impact on the real estate sector.

E-commerce: Warehouses are adapting in line with new technology and consumer habits

In conclusion, it’s easy to see the profound impact that e-commerce has had on logistics and warehouses. Changing consumer habits in regard to internet shopping and online retail have resulted in a need for more warehouses. Warehouses have also had to adapt, becoming larger, smarter and more in-line with new technologies. The streamlining of various supply chain processes thanks to technological advancements in the field has had a notable impact on the different types of warehouses that exist. Recent subcategories of warehouses have emerged as a response to these changing conditions, and will without a doubt continue to evolve in the future.