Ecommerce changing retail distribution landscape in Europe

The growth of internet shopping is transforming the way goods are distributed to customers. With online sales predicted to almost double in the first half of this decade and expected to exceed 10% of all sales in Europe by 2016, e-tailing is creating new demands for warehouse space, including mega sites of over 1 million sqft, specialist distribution centres and smaller, local delivery depots, according to US-based financial and real estate services company Jones Lang LaSalle (JLL).

The rapid growth in ecommerce is changing the way goods are distributed and delivered by retailers. A new report by JLL has identified the following trends indicating this change: growing demand for mega e-fulfilment centres coupled with increasing demand for parcel hubs to handle delivery; increased use of robots in warehouses to pick goods, normally working alongside exiting staff rather than as a replacement; and greater use of ‘dark stores’ to service online food orders.

The JLL report indicates that European retailers will need up to 269 million sqft of additional logistics space over the next five years. Around 32 million sqft of specialised space is going to be needed for dedicated e-fulfilment centres, dealing solely with online demand. Another 236 million sqft is needed for store replenishment, though retailers are increasingly moving to a fully integrated ‘omni-channel’ customer offer, where customers buy in-store, online or via mobiles and either have their purchases delivered to their home or pick-up from stores or dedicated delivery centres.

There’s demand for massive e-fulfilment centres of over 1 million sqft – such as the 1.3 million sqft building by e-tailer Zalando in Erfurt, Germany. These giant centres will typically be built to suit facilities requiring significant plots of land and good access to a large labour supply due to have high staffing levels. JLL also predicts an increased use of robots, which in some cases have been able to improve the efficiency of order picking in warehouses by as much as 500%.

“While traditional retailing is still driving demand for retail infrastructure, the growth of online is fundamentally changing the size and shape of distribution centres and where they are located. Many retailers have outgrown their existing supply chain infrastructure and are having to work out the best logistics model to service the growth of multi-channel retailing. Their strategy will depend on the type of products, the volume of internet sales handled and the speed at which these are growing,” says Paul Betts, head of EMEA-logistics & industrial, Jones Lang LaSalle.