Powered by the success of Amazon Prime, e-commerce has become a convenient alternative to shopping at brick-and-mortar stores. The introduction of last-mile delivery centers, which promise customers same and next-day delivery, further impacted traditional retail in a way that was popularly (or not so popularly) described as the “retail apocalypse.”
While there’s no denying that Amazon and other online merchants have cut heavily into the traditional retail market share, the notion that brick-and-mortar stores will become a thing of the past been grossly overstated. Instead, retailers were posed with a challenge: adapt to the changing market or become obsolete – and many of them are adapting at lightning speed.
Here are some ways that last-mile delivery changed the industrial and retail markets:
- 1. There’s been an increase in demand for warehouse space
As more fulfillment centers open up outside big cities across the country, there will be a huge demand for warehouse space near major metropolitan areas. Nationwide vacancy rates in the warehouse sector were around 5.2% at the end of the third quarter in 2017 – that’s almost three percent lower than the average rates were for the previous decade.
- 2. Traditional retailers are embracing online shopping
One of the ways that big box retailers are competing with Amazon is by expanding their online presence. Target took a unique approach to online shopping when they rolled out their Target Restock program, a next-day delivery service available in a number or major metropolitan areas across the country. This service uses online shopping and in-store storage space to turn participating stores into mini distributing centers which deliver products directly to customers’ homes.
- 3. Last mile is expected to bring growth to major American cities
Before same and next-day delivery services were introduced, many of the warehouses were located in rural areas where land was plentiful and property costs were lower. Now that last-mile promises quicker delivery times, warehouses have to operate near the cities they service in order to ensure purchases reach their destination on time.
For commercial real estate, this means an increase in demand and value for urban industrial property. In the Bay Area alone, warehouse prices have increased by almost 10% over the past two years as the demand for urban shipping hubs increased due to e-commerce.
- 4. There’s a bigger push for automated vehicles
The implementation of last-mile delivery centers has created a huge demand for around-the-clock shipping. As a result, there’s been a lot more research going into integrating driverless vehicles into the logistics industry. Originally expected to become widely available in 2030, advancements in self-driving technology may bring automated last-mile delivery much sooner than expected. In fact, testing for some of this technology is expected to take place in the near future in parts of Nevada and Oregon, in addition to Singapore.
As we can see, Amazon has played an instrumental role in shaping the retail and warehousing industries. And as a result, many other retailers are starting to follow suit and turn parts of their retail buildings into their own fulfillment centers.