Warehousing, Mark Twain and the great retail land grab
The great American author Mark Twain once wrote “buy land, they’re not making more of it”.
This seems a particularly apt sentiment in light of the frenzied land grab for warehousing that has exploded during the COVID pandemic.
Retail has seen established high street names sadly fall by the wayside as lockdowns and social distancing measures meant stores were shuttered or forced to reduce the numbers of consumers they could get through the door.
Of course, the one ‘winner’ here – if one may use such a seemingly inappropriate word in this situation – has been online retail as shoppers stayed home by choice or government decree.
And as traditional retailers swiftly pivoted to becoming online pure play retailers (at least for the moment) it meant the rush for warehouse space to service all those deliveries became something of a bun fight as everyone was looking to service loyal customers under the unprecedented circumstances.
Indeed, more than 50.5 million sq ft of new space was leased in 2020 – 12 million more than the previous record year in 2016. No prizes for guessing who the main mover was here either (give you a clue it begins in ‘A’ and ends in ‘N’).
Yes, Jeff Bezos and his online juggernaut swallowed up some 25% of that newly leased space.
In addition, property consultants Savills said short-term leases of five years or less accounted for 12% of all new warehouse space taken.
And while some sort of course correction is inevitable as things return to that horribly overused phrase ‘the new normal’ the effects on retail warehousing, like so many changes driven by the pandemic, are unlikely to be transient.
Which is why drop ship is a key option for retailers looking to reduce the inventory they have to hold while ensuring they can keep customers happy.
Sometimes a strategy comes of age due to necessity and many retailers have turned to drop ship during COVID to boost fulfilment capacity, service more orders quickly with less legwork and without vast areas of extra warehousing and the associated costs.
It can also give you the flexibility to simply switch it on during a sudden spike in demand as a temporary measure or be used as a long term change in strategy to meet evolving demand and growth.
Better fulfilment with less logistics? You can see why it has taken hold during the pandemic.
It’s been a crazy time for warehousing in retail in a crazy time for the world but there is a route out of the big COVID land grab and the lessons learned today will serve retailers long after the pandemic.