The E-commerce Obsession

By Gary Forger

How obsessed we all are with e-commerce. 

If we’re not buying something with our phone then we’re waiting for a delivery or comparing prices before we make our next online purchase. We are consumed by how little effort it takes to have all of life’s necessities delivered to our door in few as two hours. Little of this online world existed just 10 years ago. But does e-commerce actually warrant so much of our attention? Good question since so many of us not only focus on it personally but professionally, too. 

We have all seen the carnage of the retail store. In 2017, there were 26 major (sales in excess of $50 million) retail bankruptcies including Toys R Us. Last year, only 16 filed but that included Sears, very large even in its shrunken state. Just in January of this year, Shopko filed, Gymboree for the second time in two years and Payless announced plans to shut down 2,500 stores throughout the US and Puerto Rico. The hits just keep on coming despite strong retail sales.  For a point of comparison, there were 20 major retail bankruptcies in 2008 at the depth of the recession. Additionally, retail sales in December dropped the most since September 2009.

That said, just how big is e-commerce, anyway?  

According to the NRF, online and other non-store sales were up 11.5 percent this past holiday season, while the group had been calling for growth of between 11 and 15 percent. Web retail purchases in 2017 hit $453.46 billion, a 16% increase over 2016. So, e-commerce in 2017 accounted for 13.0% of retail sales in the U.S. According to Internet Retailer, e-commerce sales grew 15.5% through the first three quarters of 2018. Just this week Walmart announced e-commerce sales grew 43% in Q4. 

WOW! Clearly, online is having an outsized impact on the retail scene. And the story is still being written. In fact, the tsunami that retailers will continue to experience is on its way to changing your distribution scheme. In early January, the Wall Street Journal reported that “availability of industrial space fell to 7% in the fourth quarter” of 2018. It went on to say that the U.S. market has tightened “as the growth of e-commerce has boosted demand for warehouse space, especially for large sites located near major population centers.” According to real-estate brokerage CBRE Group, demand for industrial facilities exceeded supply by 29 million square feet for all of 2018. The problem is sufficiently acute that something new – on-demand warehousing – is gaining traction. 

Furthermore, e-commerce is bringing pressure within the four walls too, according to Internet Retailer. “Warehouse operations must keep up as customer demand grows” says a headline at the end of January. 

Key trends cited in the article include: 
•    High-density storage
•    Goods-to-person autonomous robots
•    Order fulfillment software, and
•    Shipping automation technology. 

In addition, the article talks about the need for “new warehouses, warehouses in new locations, or new physical layouts – as well as system changes in the form of cloud solutions or automation.” Most of that should sound familiar to regular readers of this blog. But the question is what are you going to do about all this change?

Next week we’ll tackle the labor shortage challenge and preparing for peak season.

Gary Forger is the former editor of Modern Materials Handling magazine and the Material Handling & Logistics U.S. Roadmap to 2030.  

 

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