What makes something a game-changing, money-making idea for the best and brightest real estate professionals, based on the best and brightest retail firms doing e-commerce? James Tompkins, Ph.D., CEO, Tompkins International, tackled this trillion-dollar question during his keynote address, “E-commerce Driving Industrial Opportunities,” at I.CON ’16: Impact Projects.
Game changers see something that others don’t, in an actionable and transformational way, Tompkins said. It cannot be the same old, same old – it needs to be beyond transformational to the point of metamorphosis. He identified cross-border commerce, “get local” e-commerce and delivery strategy, and omnichannel as three key game changers.
Cross-border commerce – for example, when the customer is in China but the seller, brand and parent are in the U.S. – provides not only more shoppers, but shoppers who spend on average twice as much as your typical shopper.
Cross-border purchasing power:
- 48 percent of cross-border commerce purchases will come from the Asia-Pacific Region.
- China will buy the most cross-border commerce:
- 200 million customers in 2020.
- $245 billion in purchases in 2020.
- Europe will be second in cross-border commerce purchasing with North America in third place.
- The U.S. will be a leading destination for cross-border commerce at $485 billion in 2020.
- Clothing and footwear represent 39 percent of online cross-border commerce purchases. Electronics are second at 26 percent. Wide selection is key.
What does this mean for commercial real estate?
- $485 billion in 2020 of e-commerce orders from U.S. companies – many of which will be picked, packed and exported in U.S.
- $140 billion in 2020 of e-commerce orders from non-U.S. companies – many of which will be picked, packed and shopped from non-U.S. locations and shipped into the U.S.
- Most cross-border commerce export and impact orders will travel by air.
- There will be a substantial increase in e-commerce fulfillment centers (FCs) around major international airports.
- For cross-border commerce orders filled from within countries there will be a significant growth of FCs around container ports.
Amazon has changed the game for e-commerce and delivery expectations, Tompkins said, putting the customer in charge and establishing a remarkable supply-chain network. This revolutionary retailer – with 300-500 million SKUs and 75,000 more added every day – embraces a “Get Local” strategy that emphasizes the instant gratification of “click to doorbell;” addresses increasingly speedy delivery expectations; and focuses on customer personalization, service and loyalty: I want it, when and where I want it – once you tell me the price.
Historical view of e-commerce delivery expectations:
- Fast for 2013 was 4 days.
- Fast for 2014 was 3 days.
- Fast for 2015 was 2 days.
- Fast for 2016 is next day.
- Expectation often in 2017 is same day.
Business as we know it has changed forever with the advent of omnichannel commerce, but are companies prepared for the impact?
- Only 5 percent of companies has a fully executed omnichannel strategy.
- 83 percent of CEOs believe supply chain not optimized to meet omnichannel.
- 94 percent of retail decision-makers felt their company faced significant barriers to becoming integrated omnichannel operators.
- 71 percent of shoppers regard in-store stock level information as being critical to their purchase decisions, but less than a third of all retailers are able to provide such information.
“Logistics real estate is going to be a wild ride for the next five years, driven by: cross-border [commerce], get local and omnichannel,” Tompkins said. “I recommend you hang on to your hats.”
Marie Ruff is Communications Senior Manager at NAIOP.