The last time I placed an online order, the products arrived on my doorstep in less than 18 hours. Five years ago, same-day or next-day delivery would have seemed incredible or even impossible. Now it’s expected.
To meet rising consumer expectations – delivery and otherwise – retailers need warehouses. And lots of them. There’s probably a fulfillment warehouse located near you right now.
As e-commerce continues to account for a greater share of total retail sales, the demand for warehouse space is increasing.
“The real estate footprint of e-commerce fulfillment centers is only going to grow in complexity in the years ahead,” according to Ryan Phillips, a director for real estate firm Transwestern. In a column for REJournals.com, Phillips wrote,
“One recent study showed that square footage of warehouse real estate needed for online retailing fulfillment is three times greater than that for traditional stores, where merchandise is delivered in bulk compared to the one-off nature of internet purchasing.”
When there is a demand in real estate, high prices always follow. Warehouses are no different.
Cushman & Wakefield estimated that industrial rents increased in 68 of 79 major U.S. markets, rising at an overall rate of 4.1% since the same period last year, according to a report in the Wall Street Journal. Firms in those markets have leased 132.2 million square feet this year while developers have delivered 99.9 million square feet of new space, the real estate firm shared with the newspaper.
Even with all the efficiencies of the internet, business algorithms, and new supply models, the basic rule of real estate still applies: location, location, location. A successful business still has to be in the right location to move goods in and about final destinations to make a profit.
So once the right locations have been secured, how do companies combat rising warehouse rents?
By using every square foot to make money.
One of the ways to accomplish this feat is to reconsider secondary packaging – the materials used to protect e-commerce orders along the journey to the doorstep.
When it comes to secondary packaging, most warehouse operators have 2 choices:
- Stockpile packaging materials (flats of corrugated boxes, rolls of inflated bubbles, molded polyethylene)
- Create packaging on-site as needed
The former takes up valuable square footage that could be used to house more SKUs and deliver more orders. The latter – solutions created on demand such as those inflated with air or shaped by foam – can drastically increase throughput speeds and reduce the amount of space needed to store packaging material by as much as 40:1.
Not only does on-demand packaging enable faster processing it also means more time can be spent shipping product out the door, and less time handling and assembling stock packaging. The employees who would have been refilling packaging stations are able to be re-deployed to the direct tasks of packaging sold goods that drive revenue for the business directly.
Now, companies can even do away with stacks of various-sized flat boxes that must be constructed by hand and instead use automated solutions that cut or fold corrugated material to fit each individual order. Those who want to eliminate stock boxes altogether can even have boxes created on demand.
Automated machines outpace what individual labor could achieve by as much as 20% while also opening up floor space for sales inventory or implementation of new packaging stations to handle an increase in demand.
By switching to packaging solutions that maximize every inch, companies can avoid the crush and cost of continually outgrowing existing space and being forced to hunt for more square footage at a premium cost.
Growth should be the reward for a business well earned – not a drain on profits.