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Explosion of demand for online retail leads to scarcity of warehousing spaces

ecommerce
Reading Time: 2 minutes

Due to the outbreak of the pandemic, and heightened increase in demand for the online retail segment, a boost in the warehousing sector was already anticipated. However, the explosive demand from the e-commerce companies has superseded all expectations and has instead led to a scarcity of sorts in the warehousing space.

To meet the increased demand for online retail, e-commerce companies have to resort to leasing out non-conventional spaces. It has been observed that many such companies had to utilize malls, marriage halls, auditoriums and high-street stalls that had shut down amid the pandemic as their storage units.

Earlier in July last year, e-commerce giant Amazon, anticipating the need for storage units, announced a 20% increase in its warehousing capacity to 60 fulfilment centres (FCs) in India, covering 32 million cu. ft. across 15 states. It also launched ‘receive centres’ that act as product collection points, where sellers ship their products for further distribution across the Amazon FC network.

With companies promising same-day or one-day deliveries with quick easy returns and rising omnichannel retail, the biggest drivers of warehousing demand are the e-commerce segment.

With a complete focus on customer satisfaction and last mile or express delivery, grocery players like D’Mart are using spare real estate like malls or their own retail stores as dark warehouses, to concentrate on two-four hours or same-day delivery to customers.

To cater to the demand, Reliance Retail, in February, announced that it is building its own supply chain by converting its Reliance Market stores into fulfilment centres, to further the reach of its new commerce venture, JioMart, and expedite deliveries.

“To enable new commerce expansion across cities, Reliance Market stores transitioned into fulfilment centres,” Reliance Retail said on 22 January.

As per reports, amid the pandemic, the share of e-commerce and third-party logistic companies in the demand for warehouses has changed manifolds.  Once contributing equally, has now been captured by the e-commerce segment, which is taking a major share of nearly 45-50% of warehouse demand.

According to real estate research and advisory firm JLL, the warehousing and logistics market, which began gaining impetus in the fourth quarter of last year, is expected to reach close to 35 million sq. ft. of absorption this year, almost similar to 2019 levels.

Apart from e-commerce, the other segments contributing to the increasing warehousing demand are third-party logistics and express logistics companies that are growing at a massive pace with a focus on tier-II and tier-III cities.

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