We are a nation which loves online shopping, with online sales estimated to make up more than 20% of UK retail by 2020. In order to meet the soaring demand of the e-commerce sector, and demand from parcel couriers, the UK is predicted to need more than 18 million square feet of new warehousing space over the next 12 months to house online retail, parcel delivery and logistics companies. However, only roughly 3.5 million square feet of warehousing is due to be built in 2017.
The impact on companies and consumers
The predicted shortfall of over 14.5 million square feet of space could result in consumers having to pick up the tab for the higher cost of industrial space, driving up prices of goods, says the report from law firm Addleshaw Goddard, entitled “How soon is now? The future of logistics”.
The study argues that the rise of e-commerce and related services is putting extra pressure on supply chains and further straining the sector’s “notoriously thin” profit margins. It says the growing need for online stores and delivery companies to have distribution hubs in expensive urban locations has had an impact on warehouse property, whilst larger retailers are able to elbow out smaller competitors.
“Aggressive acquisition of warehouses by the likes of Amazon has eaten into property supply in the UK, with vacancy rates nationwide at a low of less than 4%,” said Addleshaw Goddard.
Another area driving demand for space is the amount of goods which consumers return, which then need to be processed. Ian Worboys, chief executive of logistics park specialist P3, said: “In Britain shoppers generally return about 7% of what they buy from physical stores. When you look at online shopping, returns are far higher – 40% for fashion and 27% overall. As a result, a huge amount of extra space is needed.”
Warehouse space is not the only challenge the industry faces. The report also found that the road haulage sector faces a shortage of 60,000 drivers alongside an ageing workforce, whilst congested roads and rail systems could also cause delays to deliveries and incur late fees.
Is the answer in the Cloud?
The report suggests that big data and cloud-based software platforms could help to reduce the impact of warehousing challenges by saving warehouse costs and speeding up delivery times. It recommended that fashion retailers especially could benefit from this.
Out of town retail parks could be a potential source of land for logistics hubs – near enough to urban locations to ensure quick delivery, but cheaper than their inner city counterparts, whilst other potential solutions include incorporating deliver hubs into mixed used or multi-storey developments in cities to save on space and rent.
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