John Lewis warehouse, Milton Keynes

'Click and collect' drives need for more storage

The run up to Christmas saw many retailers adapt to the new phenomenon of Black Friday which put huge pressure on the supply chains of retailers and parcel delivery companies alike.

John Lewis saw like-for-like sales over the Christmas period increase 4.8 per cent on 2013. Online sales were up 19 per cent, with 'click and collect' accounting for 56 per cent of the orders.

In preparation for the increased demand, John Lewis took an additional 650,000 sq ft of warehousing from IDI Gazeley at Magna Park, in Milton Keynes. But it wasn't all good news for the logistics sector. The same period also saw parcel delivery company City Link appoint receivers. Initially 51 depots will close, and though they will presumably be brought back to the market, they won't be the jolt of supply the market needs as the majority are small units (10-30,000 sq ft) on multi-let estates close to major population centres.

Does the surge of click and collect at John Lewis and the failure of CityLink indicate that the days of traditional home delivery are numbered? Some believe so. One broadsheet recently referred to the 'Amazon-isation' of the delivery industry, with online consumers expecting quick, trackable and conveniently timed deliveries without paying more for them. For its part, John Lewis believes that the market will become more sophisticated, with opportunities to pay a little more for certain delivery guarantees.

In the meantime, the good news for the logistics and industrial property sectors is that the uncertainty will drive either expansion into smaller units nearer conurbations or consolidation into larger units in the traditional logistics hot spots.

As the KPMG/Ipsos Retail Think Tank recently pointed out, while online ordering works wonders for turnover, it eats into profits, and that means retailers are likely to be pushing for a click and collect model. And, for now at least, click and collect orders still require a delivery to store from a main warehouse.

In 2013 Savills research predicted that 50 million sq ft of industrial property will be required to match the needs of the sector and ProLogis have stated that for every €1 billion increase in online sales requires an additional 72,000 sq m (775,000 sq ft) of warehousing space.

While the potential for increased growth in click and collect may blur the boundaries, the case for logistics real estate remains strong. The market is still in its infancy and one way or another, the product has to get from the manufacturer to the consumer via the retailer – and that requires warehouse storage of some description.

 

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Kevin Mofid

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