A space race, but not as we know it....online retailers could be hit by warehouse space shortage

According to a new report by property consultancy LSH in International Business Times, Amazon, Tesco, Argos and other online retailers could be hit by shrinking warehouse space. In fact, logistics space fell from a peak of 360 million sq. ft. in 2012 to 200 million sq. ft. in 2015 (Reuters).

Lambert Smith Hampton (LSH) predict that demand will exceed supply by 25 million sq. ft. by the end of the decade.

Given these retailers use a network of warehouses to ensure faster delivery of goods to customers, the shortage of storage space will affect their delivery capabilities.

Knowing that the retailers involved - and their online shoppers - don’t do waiting, it is unlikely that they will await the 1-year construction time of new-builds, and will instead race to buy available space.

Ironically, given the planning legislation, and different prices/rentals for retail vs. industrial usage, those B&M retailers with redundant large-space cannot simply switch some of their outlets over to online warehousing, although some may compromise, and ‘make do’ in the short term...

More likely we are probably going to see more consolidation/takeovers of any source of suitable warehousing, and even inter-retailer collaboration as stakeholders demonstrate their determination not to compromise the potential of the only growth-channel in town…

For suppliers, this means more complicated and rapid response logistics arrangements in a fast changing logistics landscape.

It is hopefully obvious that they will not be allowed to compromise online retailers’ ability to meet online-shopper need, as speed and availability become the only real differentiators in the online race… 

Making more of existing traffic in supermarket convenience….

With more than 1-in-20 shoppers are leaving supermarket convenience stores having failed to spend all they intend, according to him! research & consulting, it follows that improved availability will optimise existing traffic, without adding another shopper...

At a time when every little helps, it seems a no-brainer to respond to the 5,000 shoppers surveyed at supermarket convenience stores, including Tesco Express, Sainsbury’s Local, M-Local and Little Waitrose, that report the main reason for these failed purchases is poor availability. Moreover, failure to buy one product in smaller format stores, when shoppers only need two or three, means a significant proportion of a shopper’s needs are left unfulfilled.

Losing business in the aisle
As you know, a brand’s consumers exhibit different need-sets as they shop different store formats, and retailers need to tailor both the offering and layout to suit, or suffer business drift…

In the current climate, suppliers and retailers invest heavily in presenting the offering to the consumer. It seems a pity to discard that consumer as shopper when they respond via a more convenient store of their choice…

Moreover, any additional traffic arising from more satisfied shoppers ‘telling a friend’ will be truly incremental..