At the start of the New Year, it is a time-honored tradition to crystal ball gaze. Since we can’t claim to be soccer experts we shall leave prediction for the FIFA World Cup to those who know better and keep our piece to what we know best. Here’s our take on what we expect to see for our industry this New Year.
Retailers to adopt a multi-channel strategy
Driven by the change in the way consumers shop and eat, retailers are migrating towards to a multi-channel marketplace. As shopping has become a 24-hour activity using a multitude of devices, retailers are being forced to act – and act fast - lest they should become obsolete.
E-commerce behemoths are forcing the pace. Fuelled by strong growth forecast for South-east Asia, the fastest in the world, Alibaba is investing US$1 billion to ramp the capability of its regional online mall Lazada. Its main Chinese rival JD and American giant Amazon are also making inroads into the region, home to 600 million people. JD is making Thailand its point of departure, partnering with the country’s largest retailer, Central Group, while Amazon is using Singapore as its beachhead.
While the shift from shop-centric and geographically-focused shops to a multi-channel world will not be easy for traditional businesses, it has become necessary. Those who fail to make the transition successfully will suffer shrinking demand and revenues, given the explosive growth in online sales.
Even though the region lacks certain prerequisites for e-commerce, such as a good transport network and a developed payments infrastructure, forecasters expect online sales to hit US$85 billion by 2025 from under US$10 billion today.
Ramp up in warehouse construction
The exponential expansion of online sales will fuel the growth in the number and size of DCs, whether it is in America or Asia, as DCs are where the goods are stored and the orders are picked and packed for delivery to customers.
Already Los Angeles based CBRE has raised US$1 billion which it will invest in Asia’s logistics real estate At the close of fund raising exercise in November 2017, Adrian Baker, CBRE‘s chief investment officer for Asia Pacific, noted, “Forecasts of private consumption growth in Asia Pacific are notably higher than in other major regions. Additionally Asia Pacific e-commerce sales as a percentage of total retail sales are the highest of all major regions and are expected to continue to grow at a faster pace. These factors support the case for investment in modern logistics facilities across the region.”
We expect new DCs to be bigger and higher to accommodate the increasing number of SKUs as well as maximise the use of available land. In the US, DCs extend over a million square feet in size with average height of 33 feet, up from around 24 feet in the 1960s, and will probably push higher to 40 feet, generally recognise to be the upper height limit. Anything above that number can lead to possible architectural or structural issues.
Increased Automation for Higher Efficiency
DCs will become more automated even in countries where labour cost is low. As the performance bar is being set higher driven by customer demand and relentless competition, manual systems will not be able to deliver what consumers have come to expect. Easier access to technology – from a price point – will facilitate adoption.
For starters, we can expect greater usage of sensors, the tiny devices which can help to track just about anything, bringing real-time data to applications allowing companies to make better decisions, rather than depending on guess work. Sensors and related devices like RFIDs and barcode readers can be used for inventory tracking, receiving, put-away, cycle counting, picking, restocking and data entry. As these devices become smaller and cheaper, their adoption will become ubiquitous improving visibility across the entire supply chain.
We will also see early adoption of autonomous guided vehicles including self-driving vehicles (AGVs) as they become more comfortable in navigating dynamic, unstructured environments using laser and natural target navigation technologies.