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E-commerce is Breaking all the Rules

Every session at NAIOP’s I.CON: The Industrial Conference has mentioned e-commerce, and the conference’s closing panel was no exception.

U.S. e-commerce sales increased 16 percent in 2017 and, according to research and advisory firm Forrester, U.S. e-commerce sales will rise by 9.3 percent annually over the next 5 years to top $523 billion. Amazon captures close to 50 percent of sales. Who else is at the top of the game? eBay, Walmart, Apple and Home Depot finish out the top five. The next wave of e-commerce in the U.S. is projected to be global sellers, like Alibaba, Zalando and Asos.

A CBRE report says that e-commerce requires three times as much space as other warehouse uses. In fact, every $1 billion in new e-commerce sales requires 1.25 million square feet of additional space. Given the forecast for growth, this translates to demand for 80 million square feet of new warehouse space by 2020.

E-commerce is breaking through borders in astounding ways:

  • By 2020, the U.S. will sell $486 billion of goods to the world in cross-border e-commerce.
  • By 2020, the U.S. will buy $140 billion of goods from overseas in cross-border e-commerce.
  • This will require 160 new e-commerce logistics centers of 800,000 square feet to be built in the top urban markets, and another 110 new or re-purposed facilities of 75,000-100,000 square feet necessary to support local delivery in key urban markets.

E-commerce is a future growth driver for the air cargo industry, as online shopping boosts demand for parcel delivery services worldwide. On aggregation, the industry’s parcel volume more than doubled over the last decade, growing at a rate far above economic growth. The challenge for air cargo is finding a location with low congestion and mature transportation routes that has close reach to dense population. This combination is ideal for high-volume single-package transactions processing for automated expedited processing and delivery. The top markets for air cargo are Chicago, Pittsburgh, Cincinnati and Greenville, South Carolina.

For 3PLs, whose operating margins have eroded by 2-3 percent over the last 10 years, top challenges include agility, visibility, flexibility, collaboration and consolidation of the supply chain. The supply chain is demanding its partners be a one-stop solution to positively influence speed-to-market as the new normal includes container bunching, smaller order quantities, less predictability, increased speed to customer and maximum flexibility.

Much of the talk around industrial centers around the first mile (goods coming into a port) and the last mile (goods getting to the consumer), but what about the mid-mile? Large distribution centers in markets like New Jersey are a critical connection between the two. Freight brokers and 3PL providers are tightening the mid-mile to optimize the supply chain, consolidating shipments to satisfy delivery expectations from everything from two days to two hours.

And no wonder they call New Jersey the “Supply Chain State:”

  • Over 450,000 workers in the state are employed in more than 1 billion square feet of transportation, logistics and distribution facilities.
  • 815 million square feet of that industrial space is in the North Jersey Transportation Planning Authority (NJTPA) area, with over 13 million under construction.
  • New Jersey is home to the largest port on the East Coast – 6.7 million TEUs were handled here in 2017.
  • The state is close to a robust rail freight network and an extensive roadway network.

What ports will compete with New Jersey and have the biggest potential moving forward? Houston, Savannah and Charleston, South Carolina, top the list. Miami will grow, but it doesn’t have the space the others do to expand. There’s been a big shift to East Coast ports away from West Coast, thanks to the Panama Canal expansion.

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