The decline of the high street has been widely reported over recent years and last year alone we saw further increases in store closures as retailers, under pressure have tried to restructure their businesses (7,500 net store closures in 2018, a 36% increase on 2017)*.
Uncertainty around ongoing Brexit negotiations, Global economic slowdown and the China/US trade war, all mean consumer confidence is at all time low and we remain extremely cautious when it comes to spending on the high street.
With margins being squeezed the retail industry is under real threat and retailers only way to deal with the pressure is to close down or re-structure. Part of the re-structure of some retailers has been to adopt a more ‘online approach’ where the demand lies and where there is a rise in a more ‘digital future’.
A more digital future means that storage and warehousing will be pushed to the max. Reports suggest that there are not enough warehouses in the UK to sustain the stock requirements needed by these retailers. Speculative development of warehouses has reduced by 75% over the last ten years and the need to build more housing means that competition for land is aggressive.
A good point to note is that only ’50% of business rates on warehouses are retained by the local authority, whilst 100% of council tax is retained’. Business rates could be a significant factor on the number of warehouses being approved by local planners – although, the Government is looking to increase local retention business rates which should have a positive impact.
With all of these factors combined and a huge boom in the e-commerce market (which can require up to three times more warehousing space) it is clear to see why there is a shortage of warehouses in the UK.
Brands like Amazon have quickly seen the issues arising around the lack of warehouse space and have started to look at how they can increase warehouse capacity by working with their ‘sellers’ warehouses. They have already started to work more with their smaller affiliates who participate in Amazon Prime, as the goods do not have to be sent to Amazon’s fulfilment centres but come directly from their own warehousing facility – by making their sellers warehouses an extension of their own warehouse. This enables Amazon to reduce the stock held in their fulfilment centres. The aim is for other sellers to eventually be able to hold their stock at these chosen warehouses, where space already exists.
This demand for space means that companies need to look at their warehousing strategies and space optimisation plans. Creating multi-story warehouses is not out of the question, we have multi-storey car parks, so why not? Tokyo, Singapore and Hong Kong already have very successful multi-story warehouses running effectively and for an already over-populated area like London, it could be the only answer to feed the warehousing demand.
So, what should businesses be looking at to ensure their warehouse strategies are met?
Get out of town!
Having a warehouse facility in the City is not always a good idea. London especially is not geographically central to the UK, routes are congested, it is costly and very difficult to recruit and retain labour. Just because your business may be based in London, does not mean having your warehouse located close by is the best investment.
Look at your current space.
It’s there, right in front of you! Sometimes businesses only look at current floor space and do not fully consider cubic utilisation. If used correctly, height in a warehouse can be a very valuable commodity, think storage of bulk products using racking solutions, these products can be picked effectively using the right manual handling equipment for retrieval. A mezzanine floor can also be an extremely effective solution for fast moving pick and pack operations with the use of simple gravity conveyors moving orders to ground level for dispatch. Remember too that business rates are charged on a square foot basis so effectively you don’t pay for height.
Outsourcing.
Third-party logistics providers, who already have the space, are a great option and are already set up to deal with product dispatch by using robotics and more traditional operation management.
Just make sure you work with an organisation that reflects your business requirements.
With the future look set to be heavily e-commerce, the time is now for businesses to become adaptive to the way they see their warehouse space growing and evolving to cope with the future demand – it’s now or never.
* https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-trends.html