The 5-year building boom in new warehouse and DC construction is expected to continue in 2020. But supply may finally be catching up with demand. According to a recent report from Cushman & Wakefield PLC, developers are expected to deliver over 300 million square feet in new warehouse space in North America this year. On the other side of the ledger, tenants are only projected to lease 240 million ft.
According to the head of logistics and industrial research at Cushman, the change in the supply and demand balance may potentially help tenants bargain down prices, but landlords still hold a lot of leverage. Vacancy rates are at historic lows, despite continued development. Cushman’s forecast predicts that rents will rise to $7 per square foot by the end of 2021. This is a 7 percent increase from 2019’s $6.51 per square foot. So don’t expect to see any bargains for new space.
Amazon Business Scores 60% Growth
Amazon Business, the ecom giant’s business-to-business marketplace, increased sales to $16 billion last year, according to Wall Street analysts. This represents a fraction of Amazon’s total revenue of $280 billion, but it is also one of the company’s fastest growing business segments. Traditional distributors need to take steps to respond to the Amazon threat.
Amazon Business operates in the U.S., Canada, the U.K, Germany, France, Italy, Spain, Japan and India. It is already larger than many traditional B2B leaders like W.W. Grainger in industrial supply and Essendant in office products. Many observers expect Amazon Business to continue to grow quickly as it seeks to grab an even bigger share of the $1 trillion B2B market. Among other things, it is expanding its Amazon Business Prime subscription service to new markets, which offers perks like same-day shipping.
Amazon has not disrupted B2B distribution the same way it transformed book selling and other retail sectors, but it is becoming a major force in many industrial markets. Similar to the consumer side, it also offers opportunities for smaller companies to get a piece of the market through its marketplace. Some distributors are wary of joining the Amazon Business marketplace, and many have already responded by improving their online channels to supplement traditional sales networks.
In the long run, no market may be safe from Amazon, so all distributors will have to continue to up their ecommerce and supply chain game by accelerating order-to-ship times and improving DC efficiency.
One of the nasty downsides of ecommerce is that it makes life easier for counterfeiters seeking to rip off brand owners. According to a forecast in a Frontier Economics study, counterfeit goods will displace over $1 trillion in sales for legitimate companies. Unscrupulous third-party merchants can hide in ecommerce marketplaces and use third party fulfillment companies to move fake goods. Tracking down the source for these products is a tremendous challenge, and legitimate fulfillment providers may now get caught up in the mess.
The U.S. Department of Homeland Security has started to hold large ecommerce platforms more accountable for what is being sold and distributed across their platforms. It is now proposing new rules that would allow it to take legal action against warehouses and DCs that ship fake products. When it comes to counterfeits, in addition to buyer beware, it’s becoming “shipper beware.”
Distribution centers are experimenting with robotic solutions to reduce warehouse labor by eliminating travel. Lucas has introduced an AI-based tool that reduces DC travel 30-70 percents in picking operations, at a fraction of the cost of robotics. Several customers using this tool have more than doubled productivity.
If you’re interested in learning more, we have a new whitepaper that explains how Lucas DWO complements tried-and-true travel reduction strategies and robots. It also includes a detailed ROI analysis for autonomous mobile robots. Check out the whitepaper here.
Visit Us At Modex Booth 9619
Learn more about reducing DC travel, new wearable technology, and using machine learning in workforce management and slotting. Learn more about the show here.
We are also hosting an invite only happy hour. Contact us to get an invitation. Space is limited and filling up quickly so don’t miss out!
Lucas Happy Hour
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