Changing logistics in an omni-channel world: How we’re squeezing more out of tight urban spaces by Fred Schmidt
The consumers evolving behavior with regard to mobile technology and online shopping has retailers seeing the value in tying together their physical shops with their online offerings, creating a seamless customer experience that’s the best of both. This is omni-channel retail, and it is shaking things up for retailers and the logistics industry.
A very common example of this is the option to purchase an item online and then pick it up at a store location near you. This gives the shopper access to a greater variety of products and allows them time to browse and make a decision. This “reserve and collect” approach cuts out the physical checkout line and makes the in-store experience entirely hassle-free.
There are many different ways for retailers to integrate their online persona with the bricks and mortar location. Providing in-store barcode scanners, WiFi, and tablet kiosks empowers the consumer to find information independently. Mobile coupons and click to call links encourage online customers to make contact.
Digital tools create in-store traffic, making it easy to compare prices or check availability. Providing the option to return online purchases in-store often generates additional sales. With the push to offer ever-greater conveniences, such as same-day delivery, changes are being forced in the ways that distribution is handled. People still spend more money in-store than online, but the presence of omni-channel options increases spending overall.
The Impact on Commercial Real Estate
With many stores doing the job of online fulfillment centers, a challenge arises. Getting merchandise to stores in urban areas in a short timeframe is creating a demand for a wider network of smaller (under 200,000 s/f) warehouses and distribution points. This is a battle of the supply chains as much as it is a battle for the retail component.
This can be a tall order in New York City, where space is already tight. Bringing the “last-mile” distribution point closer to customers means establishing them in the city center. Economy demands that deliveries be accomplished using the shortest possible route, and with companies like Amazon offering same-day, and in some cases one-hour delivery, merchandise must be close at hand.
This is a huge logistical challenge, and is leading to a good deal of repurposing of existing “light industrial” properties in the city for use in last-mile distribution. The economics of the industrial properties are compelling as compared to the cost of retail rents and space in New York City. Retailers are looking for innovative ways to secure space in areas where building new facilities is not an option.
Amazon uses this approach in its Amazon Prime Now option, which offers a pared down selection of 25,000 items for quick delivery. The distribution centers for Prime Now are about 1/10 the size of the average Amazon distribution center, with its millions of products. This makes them a realistic option for center city locations. One of 20 nationwide, their facility in New York occupies just 40,000 s/f.
Omni-channel retail is making new demands on the logistics industry, and for commercial real estate, it’s changing the configuration and locations of the space our retail clients need. Smaller, leaner facilities help to solve the problem of urban distribution.
Fred Schmidt is president and chief operating officer of Coldwell Banker Commercial Affiliates, Madison, N.J.