Starting with a suitable follow up from last issue’s focus of warehouses and storage, a recent logistics report has confirmed that the growth of e-commerce has simultaneously increased the demand for smaller warehouses. As the online retail frenzy only continues to intensify, the push for faster delivery services has resulted in smaller warehouses accelerating in the market. This seems to be affecting industrial space within regions populated by major stores and branches, raising the competition for renting and buying these warehouse spaces. According to the CBRE Group Inc., over the last five years rent for US warehouses between 7,000 and 120,000 square foot increased by more than 33.7%. This equates to an average of $6.67 per square foot. Despite the rise in these rates, the availability of warehouses has in fact dropped from 11.3% to 7.4%, which has been reported as the biggest fall in the storage market to date. It is becoming a noticeable trend that businesses with smaller fulfilment and distribution facilities are putting more money and resources into making sure they cater for customers who expect delivery schedules at two days or less. By opening small warehouse spaces in a variety of regions – not just major hubs – the facilities can be used as fast-paced inventories to move stock in and out, rather than for storage.
Moving onto the hot topic between Chinese and American trade, the cost of oil shipping has reached its highest levels in eleven years. The ongoing economic conflict between the U.S. and China saw president of the United States, Donald Trump, announce a tax increase earlier this year. The increase was targeted on import tariffs, and it is believed that China’s stock market suffered a drop of 25% in shares during 2018, causing a huge dent in the region’s overall economy. It looks as though the financial strain will cause a ripple effect, increasing the price of oil around the globe.
This is a result of the US blacklisting Chinese ships, causing American crude exports to hit record highs as the Chinese shipping industry is pushing for capacity. According to George Lazaridis, head of research and valuations at Athens-based Allied Shipbroking, ‘The market has gone bonkers by shock events like the Cosco tankers being blacklisted.‘ * The US blacklisting has caused Asian and European importers to prioritise finding crude carriers to ensure oil cargoes are secured and prepared for the winter months ahead. Although an already high-demand market, it seems as though this act of exclusion has tightened the industry even more.
As Christmas is approaching, the upcoming months are most crucial for the preparation of the busiest time of the year for retail and the supply chain. Robots and automation technologies are being introduced into warehouses to offer a helping hand for online picking, packing and delivery prep. Businesses are investing in extra robots (or as some call them, ‘cobots’), which use cameras, lasers and sensors to navigate the warehouses. The technology will be used to locate and signal to the workers where desired products are in the warehouse, featuring the ability to travel to the appropriate aisle. Many varieties of these robots are available for businesses to lease for those who only require them during the busy festive period. According to WSJ, XPO Logistics Inc. is set to hire 20,000 human workers over Christmas, as well as investing millions of dollars’ into robots with the intent to use them next year to help deal with the rising pressure of e-commerce orders. It is estimated that by 2025 nearly 30 per cent of warehouses around the world will implement commercial robots, which is a significant increase compared to three per cent in 2018.
After this year’s turbulent retail reality-check that e-commerce demands are booming, overtaking high-street shops, retailers are left facing more debt and problems than ever before. With the likes of Thomas Cook going into liquidation, Pizza Express’ £1bn debt pile and Boots and Topshop store closures, physical shops are struggling to make ends meet due to the popularity of online purchases. Fashion retailers such as ASOS, Pretty Little Thing and Amazon are just a few of the most popular places for customers to shop. Yet what do they have in common? There are no physical shops for customers to visit, and these retailers haven’t known any different. If marketed right and delivery expectations are met, online-only stores can benefit not only customers but the retailerthemselves immensely. Does incurring lower in-store running costs equate to a safe business? Perhaps it’s not as black and white as that.
Yet it’s worth considering the factors. Without the need to to rent or maintain physical shops, deliveries, POS (point of sale) or in-shop marketing resources, retail staff and more, online shops are able to prioritise elements of its produce, such as the supply chain, warehousing and delivery proceedings.
Department store House of Fraser is just another retail brand that has announced store closures earlier this year. Although there has been a threat to close further stores, the Chief Executive of SportsDirect.com (which bought House of Fraser back in August when it went into administration), Mike Ashley, has spoken out about the government’s lack of investigation into retail issues. According to the Retail Gazette and The Guardian, Ashley has voiced that the government isn’t ‘interested’ in the Debenhams collapse, and that politicians only seem to only be concerned with their own PR.
He further believes that the government is ignoring ‘cases which are just as bad, if not worse’ than Debenhams, and that there has been a significant absence in researching into corporate misconduct.
Where do you think high-street shops will be in five-to-ten years’ time – is there a future? Is the government doing enough to ensure retailers are supported when needed, and how will Brexit impact on retail in years to come?
Rachel Jefferies, contributing writer, FORWARDER magazine
* Source: WSJ.com