Retailers Must Adapt Infrastructure to Compete in the Global E-commerce Race
Real estate plays crucial role in rapidly-evolving retail strategies, says
report by Jones Lang LaSalle
CHICAGO, Nov. 12, 2013
CHICAGO, Nov. 12, 2013 /PRNewswire/ --As online retail sales are expected to
exceed $1.2 trillion globally this year*, retailers are under pressure to
decide where, when and how packages should travel from dock to doorstep. The
first of a series of new white papers on global e-commerce by Jones Lang
LaSalle (JLL) reveals how different global markets are building their delivery
infrastructure to suit cultural and consumer demand.
"Global retail expansion once meant adding properties in some of the world's
premier high streets such as New York's Fifth Avenue or the Champs-Elysees in
Paris. Now it also means specialized big box warehouses and package pick-up or
sortation centers," explained JLL's President of Industrial, Craig Meyer. "Now
that 39 percent of the world's population has internet access, customer
preference for online shopping has gone global. Retailers are using new types
of facilities to keep up with deliveries and demand while staying in step with
Skyrocketing market share
Global online sales currently account for four percent of total retail sales
and are growing at a rapid pace. In fact, global online sales grew 14.8
percent per annum from 2007 to 2012 compared to total retail sales, which
increased by just 0.9 percent during the same period*.
"Although developing economies currently lag behind developed economies in
their e-commerce infrastructure, they may see stronger e-commerce sales growth
in the future," added Meyer. "As a result, the global e-commerce landscape
will change rapidly over the next five years and beyond."
By 2017, the highest rates of B2C e-commerce sales growth are predicted to
occur in Indonesia, China, India and Mexico. In contrast, growth rates in
mature markets will be measured, although markets such as the U.S. and UK are
still expected to post annual double-digit growth rates.
"Retailers are in a quandary about their international e-commerce expansion
plans," said Kris Bjorson, Head of Retail E-commerce Distribution at JLL. "Do
they invest resources into developing countries with poor logistics
infrastructure knowing that they may not see ROI for five years, or
concentrate on mature markets, where there is already strong competition for
both e-commerce users and premium industrial space, but an established
Mature market e-commerce: convenience drives supply chain evolution
For developed countries, omni-channel retail strategy is driving major changes
in e-commerce logistics models. In an omni-channel strategy, which seamlessly
integrates sales channels such as the store, web and/or mobile, consumers can
choose the most convenient way to order, receive and return their purchases.
Models differ across the globe:
oIn the United Kingdom, and other developed markets, 'click and collect' is
the fastest growing component of many retailers' online sales, driven by
consumer preferences for the convenience of collection over home delivery.
oGermany is Europe's second-largest e-commerce market by turnover after the
UK. E-commerce growth has led to significant new demand for large
e-fulfillment facilities, driven by pure-play retailers.
oAs the Australian e-commerce sector matures and automation increases,
'specialized' or 'purpose-built' real estate will become common. Parcel
lockers are becoming more widespread, as well as companies offering easy
deliveries and returns using existing infrastructure for drop-off points.
oIn the U.S., it is estimated that 30 percent of industrial big box
warehouse demand is correlated to e-commerce. Retailers continue to open
large e-fulfillment centers in close proximity to major markets; they are
also opening mid-sized warehouses operated by third-party logistics
providers in secondary markets to meet same day delivery needs across the
"Convenience is king. Customers expect an integrated omni-channel experience,
yet today's real estate was designed to support silo-driven delivery models,"
observed Bjorson. "In the next five years, we'll see real estate transform to
become channel-agnostic, and to support near-instant gratification. We also
expect real estate to support returns more organically over time. Large
centralized return processing centers will serve as hubs, supporting local
package centers offering both pick-ups and returns."
Emerging markets, emerging e-commerce trends
In emerging markets, e-commerce supply chains are evolving in highly divergent
ways, influenced by regulatory, economic and cultural factors:
oIn China, the first wave of e-commerce warehouse space was concentrated in
tier-one cities such as Beijing, Shanghai and Guangzhou, but since 2011
major e-commerce firms are setting up distribution centers in emerging
inland retail markets too.
oWith more than 100 million internet users in Brazil, the boom in
e-commerce has created new demand for warehouses, particularly in Sao
Paulo, Brazil's main logistics hub. Logistics clusters are emerging on the
major roads that lead to the city in locations such as Barueri, Cajamar
oIn India, online retail accounts for less than one percent of total retail
spending. E-commerce-related warehousing is designed to serve tier-one
cities. The country's multiple tax structure has encouraged decentralized
warehouse networks with small state-based facilities. However, the
soon-to-be implemented Goods and Services Tax (GST) will encourage
consolidation of distribution networks and will fuel demand for larger
"Eventually emerging markets may surpass mature markets in pure volume owing
to the size of their population," said Bjorson. "We believe that e-commerce
gives retailers the potential to reach new customers that physical locations
cannot, particularly in remote, rural locations. As more and more consumers
embrace e-commerce as a safe and convenient way to purchase goods, retailers
in developing countries will invest in logistics models exposing new products
to new populations."
*data from Emarketer
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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE: JLL) is a professional services and investment
management firm offering specialized real estate services to clients seeking
increased value by owning, occupying and investing in real estate. With annual
revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more
than 1,000 locations worldwide. On behalf of its clients, the firm provides
management and real estate outsourcing services to a property portfolio of 2.6
billion square feet and completed $63 billion in sales, acquisitions and
finance transactions in 2012. Its investment management business, LaSalle
Investment Management, has $46.7 billion of real estate assets under
management. For further information, visit www.jll.com.
SOURCE Jones Lang LaSalle
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