Question: what have Germany’s answer to ASOS, Zalando, quality fruit and veg specialist Charlie Mash and ‘outbound-to-rebound’ logistics group iForce got in common?
Answer: they are all playing a part in a radical reshaping of the logistics supply chain that we will be discussing on a panel at MAPIC in the south of France next week.
On Thursday, along with experts from world-famous French retailer Groupe Galeries Lafayette, supply chain experts Chainalytics and CBRE, I will be on the MAPIC panel for: ‘The ecommerce battleground: building the logistics supply chain of the future’, in what will be a fascinating debate.
Because in truth, no one can be 100% sure how the logistics supply chain of the future will look — but we can certainly start by sifting through the clues provided by Zalando, Mash and iForce.
Firstly, let’s look at occupier trends: some pure play retailers such as Zalando and Amazon are leasing sheds of up to 1m sq ft. Zalando has grown to employ 7,000 people inside six years.
Such mega sheds look to be an unmissable opportunity, but we have been generally wary of investing in distribution units of this size in some locations and with the specifications and configurations required. The question is whether these warehouses have longevity of income and would they re-let to others? We forecast a widening polarity between the best and less well located and the generic and more bespoke.
Next, let’s examine the relationship between in-town and out-of-town distribution property. The best urban logistics developments are now in vogue, as retailers and parcels groups seek to solve the ‘last-mile’ challenge of home delivery.
One issue driving demand for urban logistics is displacement from traditional industrial facilities. This is where Charlie Mash’s company Mash Purveyors comes into the picture, having last month signed a 15-year lease for a 53,000 sq ft unit at Segro’s Origin development at Park Royal in West London, after its Nine Elms home was re-zoned for residential use.
With 850 acres of industrial land soon to be lost in London at Nine Elms, White City and Old Oak Common, we will see more constrained supply driving up values in other urban locations, as occupier demand also grows.
And what about the largest conundrum of e-tailing, returns: iForce’s returns processing system for clients ranging from John Lewis to Sainsbury’s has become crucial.
The growth of iForce and its competitors make it inevitable that we will see the growth of returns centres in urban locations needed to process the millions of items bought and sent back to retailers each year.
With lifestyles changing so much, in part driven by what CBRE estimates will be a 12% to 15% annual rise in online retailing across Europe, ecommerce will pose huge challenges to the supply chain.
The winners will be the best located large distribution sheds, combined with smaller urban logistics properties on the edge of large cities and towns. Let’s see if the conclusions of our MAPIC debate concur!
Andy Gulliford is chief operating officer at Segro.