Delivering on instant gratification, global style
The race to improve customer convenience by leveraging smart e-commerce logistics in the supply chain is heating up in the U.S. and internationally. So far, the U.S. is ahead of the pack in e-commerce sales, raking in $351.8 billion during 2012, a full 33.7% of all e-commerce purchases worldwide, according to the new Jones Lang LaSalle Global E-Commerce Report.
Responding to anticipated sales growth of around 11% every year through 2017, U.S. retailers are speeding up their dock-to-doorstep turnaround time by adapting both new and time-tested supply chain strategies — strategies that include adding super-regional distribution centers and entirely new facility types, like e-commerce urban pickup locations or urban logistics centers that act as smaller warehouse hubs closer to urban centers. Some of these strategies were developed overseas where e-commerce first picked up pace.
Supply chain logistics lessons from abroad
1. Lesson from Japan: Measure real estate cost versus value.
In Japan, the world's second largest e-commerce market, most warehouse demand is focused around Tokyo, despite its sky-high real estate costs. From here, retailers can accommodate same- and next-day delivery for the capital, which accounts for more than a quarter of the country’s population and therefore has the highest online sales figures. Additionally, Japan's active multichannel grocery market demonstrates value in a 'click-and-mortar' approach that leverages store and distribution networks while driving consumer convenience.
2. Lesson from France: Be dynamic.
France’s e-commerce sector has doubled in size in the last three years, making it Europe’s third largest market behind the U.K. and Germany. French e-retailers have had to be savvy with their logistics models. As mega-sites are scarce and expensive in Paris, large retailers are consolidating logistics into large facilities that are located outside the city, yet are still accessible by main roads. Medium and smaller retailers, on the other hand, are faring better in the city centers. This model extends to grocery retailers, which offer home delivery in the major cities as well as the option to collect online orders at hundreds of drive-up collection points nationwide.
3. Lesson from Australia: Think beyond existing infrastructure.
In Australia, early views were that the sheer size of the country coupled with a low population would make e-commerce a no-go. Not so, according to recent numbers, which show that e-commerce makes up 5% of the country's total retail sales. One success factor has been the efficiency of the national postal service’s infrastructure. But as the industry matures and automation increases, retailers are moving beyond the limitations of these existing hubs and using passcode protected parcel lockers and specialized real estate that can offer easier deliveries and returns.
4. Lesson from the United Kingdom: If you offer ‘click and collect,’ they will come…
As the fastest growing segment of the nation's online sales, the option to order online and then pick up is proving a popular alternative to home delivery. This same demand for convenience has inspired retailers to take more control over their supply chain, setting up smaller distribution facilities around major urban areas to enable same-day delivery services.
5. Lesson from Germany: Invest in dedicated e-fulfillment facilities.
Pure-play, aka Internet-only, retailers are driving demand for large e-fulfillment centers in Germany — Europe’s second-largest e-commerce market. The ability to stock and pick 24/7, coupled with new investments in parcel delivery centers, helps retailers achieve faster, more efficient delivery times.
Act globally by thinking locally
Retailers looking to expand their e-commerce platform will find growing opportunity across the board, but challenges will differ from country to country. It is especially important to distinguish between developed and developing countries’ needs, since they will vary significantly. By 2017, the highest rates of e-commerce growth are expected to occur in developing markets like Indonesia, China, India and Mexico, countries with variable existing infrastructure. Retailers looking to move into these emerging markets will be prudent to investigate existing local delivery options, as well as government policies and regulatory hurdles to effectively compete with local retailers.
In the meantime, U.S. retailers are still configuring their omnichannel strategies and working out where to locate their distribution centers and warehouses, and in some respects, playing catch-up with the large sophisticated e-commerce players. While initially opting for the ‘big box’ e-fulfilment centers, they are now experimenting with smaller urban facilities, close to the large population centers and to compete in the aggressive race to meet delivery promises. We may see some European models such as parcel collection centers and more in-store pickup and drop off points coming this way in the new too distant future.
For more information on local trends and successes, read the full report.
Craig Meyer is president of industrial brokerage at Jones Lang LaSalle. He is responsible for the leadership, growth and management of the practice group across all the firm’s business lines. During his tenure the U.S. Industrial Practice has grown by more than400%. The group consist of more than 235 professionals in 50 cities with annual volume exceeding 2,500 transactions and 185M SF. Meyer is a member of the firm’s Brokerage Executive Committee and is chairman of the firm's global industrial board.