Ti noted the growth of ecommerce in the August 2, 2011
brief, “E-commerce sales drive US warehousing and distribution projects”. Since then the growth of specialized
warehousing and distribution facilities specifically for ecommerce has
increased immensely. Why the growth for
such specialized facilities? The retail industry is undergoing change and
thanks to the
increasing use of smartphones, free shipping and the
ability to research product reviews before making a purchase has resulted in
increasing e-retail sales. In fact, according to Forrester Research, US
e-retail sales are anticipated to grow 10% a year to $279bn by 2015 and will
represent 11% of all retail sales.
The placement of ecommerce facilities varies among
companies - depending on their growth strategy. Some such as retailer Macy’s
has opted for a regional approach and has four fulfillment centers devoted to
ecommerce. These facilities are large and are in excess of 1m sq ft. Instead of
a regional approach, however, Amazon.com has a different method, choosing
instead to build facilities closer to its customer base and as a result has
quite a few facilities.
When deciding upon a location for such a facility, key
factors are considered such as sales taxes and state incentives, close
proximity to major markets, a good labor supply to utilize in normal and peak
seasons and close to transportation hubs.
State taxes have been a major issue for e-retailers
for years. In particular, Amazon.com has been a focal point as it has refused
to locate a facility in such states that enforce sales tax on online purchases
and has in fact pulled out of states that have imposed such a tax. However, as
more states begin to implement sales tax on online purchases, Amazon.com is rethinking
their strategy and as such announced plans to build facilities in California
for example.
Locating facilities close to transportation hubs is
another important consideration – particularly as many e-retailers operate in a
2-5 day delivery time frame. In order to achieve this delivery time, many
facilities are locating to states such as Tennessee, Virginia, Ohio and
Pennsylvania as these states are close to both UPS and FedEx primary hubs as
well as to intermodal hubs. While many ecommerce orders are delivered via small
parcel providers such as UPS and FedEx, regional small parcel providers, US
Postal Service, trucking companies, rail and intermodal services are used as
well depending on service level and cost.
As ecommerce continues to grow, demand for new
warehousing and distribution facilities will increase. Information on
additional trends as well as on major logistics hubs in the US, Canada and
Mexico is available in Ti’s latest report: North American Warehousing andDistribution Market.
