Focus: Challenges and Opportunities in Logistics Business

#Corporate

26. 03. 2019
E-commerce is making a major impact on logistics and warehousing. It’s now commonly known in real estate that an e-commerce supply chain requires up to three times more warehouse and logistics space than a traditional brick-and-mortar supply chain.

Growing online sales require more warehouse space to fulfil the consumer needs compared to growing traditional retail sales. E-Commerce, particularly pure players, do not have retail shops to store product. They also have a wider product offering and are pushed by the market to ever shorter delivery times, meaning larger fulfillment centres and more last-mile delivery stations nearer to customers. And then there are returns: making purchases online means a customer is not 100% sure about the product they are buying, and so returns it if its not what he or she expected. Then there are items like clothing, shoes etc where there is a trend for customers to purchase a variety of styles or sizes and return the ones that don’t fit or don’t like when finally tried on.

According to CBRE, e-commerce is the driver behind bigger and higher storage facilities. E-commerce users need the extra floor space and ceiling height for storage racks, conveyors, and other sophisticated equipment to quickly break down bulk shipments and prepare goods for distribution. Such warehouses may be the last place where goods are packaged before they reach consumers. It just takes more space to do that kind of work—more people, more machinery, and more racks for the actual stuff. It simply becomes more chaotic as breaking down large to small shipments.

What are logistics and e-commerce companies looking for in terms of locations, and the types of operations they do there?
There are many parts in the e-commerce supply chain with different requirements for types and locations of warehouses. But the one thing that all have in common is that the warehouses have to be well accessible to guarantee timely delivery to the next warehouse within the supply chain or the end consumer.

There is a significant difference compared to classical logistics hub-spoke models. The warehouses are bigger and higher with either more people working or higher capital investments inside of them compared to traditional warehousing. These impacts vary among the various CEE countries where we operate. We see higher levels of automation and less labour intensive operations in locations with higher costs and lower availability of labour and the other way around where labour is more available or lower cost.

CTP believes that e-Commerce, while still a small portion of our current portfolio, is a growth market. And we are making strategic investments into land for future A-Class projects, particularly around the major CEE capitals of Prague, Bratislava, Budapest, Bucharest and Belgrade, because we see the trend that e-Commerce clients will require more space.