The Race for Space – E-commerce gets Physical at the Expense of Our Cities
E-commerce retailers are in a race against time and one another to find local, convenient spaces to provide speedy and cost efficient fulfilment to their customers. This race is heating up with COVID-19 accelerating e-commerce shopping. But the situation is complicated: not only is space hard to come by, it is also limited. And e-commerce needs a lot of it. According to a new report from Prologis, e-commerce requires three times the logistics space of traditional storefronts. Ironically this means that online shopping is way more physical than it is virtual. Who knew? Over the past few years, the struggle has resulted in many creative and somewhat unorthodox solutions, the Wall Street Journal, shares a few examples from the United States, including:
- Amazon’s makeshift tent distribution center set up on vacant land patches
- Recently demolished sites in New York converted within no time to viable work spaces
- Re-appropriating garage spaces and entire parking lots and converting them into fulfilment spaces
By far the most common trend is the conversion of deserted shopping malls and shuttered retail stores into warehouses. According to CNBC the real estate of many well-known brands that have shuttered local branches have quickly been bought out for these purposes by e-commerce and 3PL players who can afford it. This includes real estate from well-known brands such as Target, Walmart and Toys R Us. This trend can and will continue to be exacerbated by COVID-19. The expected closure and bankruptcy of hundreds of additional brands and malls is looming gloomily up ahead. There is no doubt that these closures are natural targets for the expansion of the warehouse space.
But while this re-appropriation may make sense at first glance, if you scratch the surface, it raises many questions that it would be remiss not to ask. The obvious one being – what about e-commerce players who cannot afford to rent or buy local space? Will they simply be forced to fade and die?
A more existential question is – is this the reality that we want to see? – our cities filling up with warehouses, lockers and storage units? Our emptying shops and malls converted to shelves? Our most prolific retail employment opportunity to be warehouse associates?
And what about the implications for our cities? According to CNBC, retail property generates income for the community in the form of property, income and sales tax. This income is now lost when these spaces are rezoned as warehouses. The spaces themselves render the local communities as less attractive, and take away from their residential viability. Ultimately, while these spaces may bring in one kind of employment opportunity, they also reduce the chances of success of local offline retail businesses to survive and thrive. What’s good for the online retail goose, is not good for the offline retail gander. So while this solution may seem like the obvious one, it is almost certainly is not the best one.
Two final assertions that are worthwhile considering:
Firstly, can we as a society challenge the “urgency” instilled in the practices of same day delivery and free returns? This is an unsustainable practice that is leading us down roads that could change the face of our cities irreparably. Same day fulfilment – not to mention same hour fulfilment – is not a right. If we treat it as such, we are on a slippery slope and something’s got to give. It can be viewed as a privilege: awarded when certain optimal conditions are met.
Secondly, while these local spaces are theoretically available and under our nose for the taking, a more forward-thinking and future-worthy approach would be to use these retail spaces before they are forced close: to drive traffic to these offline retailers, to leverage them for local storage, sale and resale; thereby bridging e-commerce and brick-and-mortar facilities and ensuring their mutual longevity for many years to come.