18.01.2018

How last-minute online shoppers are increasing the need for small, urban warehousing to fulfil the ‘last mile’.

The onset of companies offering next day deliveries saw a huge increase in the number of warehouses being built across the UK a few years ago. But now, the new demand for British shoppers to have same day delivery of goods from retailers such as Argos and Amazon (both offering 2 hour deliveries from placement of order) is putting significant pressure on the availability of warehouse space.

 

According to the National of Office Statistics, specialist online-only retailers, Amazon and ASOS accounted for half of last year’s entire online sales; with other traditional retailers making up the rest.

 

We have also seen the Click & Collect service grow rapidly in popularity in the past 12 months, with over one third of customers choosing this type of delivery for their online shopping. Halfords, retailer of car parts, camping equipment and bicycles, reported that over 90% of its online orders were collected in store. This is becoming a preferred method of shopping for both consumers and retailers, who often gain additional sales from the customer buying a few extra items, when picking up their order.

 

With this change in consumer demand for almost-immediate deliveries, comes a significant need for a change in warehousing.

 

Figures released by the British Retail Consortium in March, confirmed that online sales of non-food products in the UK grew just over 10% in February compared to the same month a year ago; this is expected to rise dramatically. And even with the significant rise in warehouse construction that we’ve seen in recent times, specialists predict the pace just isn’t quick enough or diverse enough to meet consumer’s needs.

 

Experts predict that for every £1bn spent online, the size of warehouse space needed to meet demand is more than 900,000 square feet (The Daily Telegraph). One of the most significant changes we are seeing, is that different types of warehouses are being built right across the UK. There are still the Mega-Sized Regional/National DCs – but we’re now seeing more small, flexible urban warehouses/access centres being built to accommodate the ‘last mile’ of the delivery process.

 

This part of the delivery is almost the most complex, requiring manual pickers to select specific products to be delivered to customers living within a close radius to the warehouse – enabling a rapid delivery for thousands of products.

 

In recent years, Amazon has added a network of smaller regional hubs to its fulfilment centres in the UK, allowing the retailer to carry out same day deliveries. In 2015, Amazon introduced their one-hour delivery on selected items for customers in east and central London, a move which would not be possible without a closely located warehouse.

 

And now, almost two years on, we are only seeing this trend grow. Smaller warehouses are being built right across the UK, not just in London. Urban warehousing and other forms of ‘last mile’ options are on the rise, so at a time when shoppers are prepared to pay a premium for an almost-immediate delivery service, the potential for growth in this area is huge.

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Harnish Patel, Associate Director, Hughes Ellard

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