The global retail industry is undergoing a revolution. The retail supply chains of today, traditionally consisting of large distribution centres (DCs) will have had to shift to accommodate a reimagined customer with much greater expectations.
Long before the Covid pandemic began, DCs were being built in major South African cities to deliver products to retail stores where customers shopped. This often meant big box warehousing with well over 100 000 square metres to provide warehouse space for retailers such as Shoprite, Woolworths, Foschini and Dischem where they could stock sufficient inventory to meet surging customer demand. In a world of increased online shopping and disrupted supply chains and delivery times, many DCs are filled to the brim and some are running out of space. The question of whether this is a cyclical trend or a structural trend is perplexing warehouse owners.
A recent announcement by the online retail giant, Amazon, that it has too many sheds after doubling its warehouse space during the pandemic has prompted a challenging new reality, hand wringing and sharp reaction from investors. When Amazon informed the market that it intends to reduce its footprint of leased industrial space by as much as 3 million square metres, the share prices of many logistics warehouse owners tanked. For many real estate investors, the question is whether Amazon is the only user with excess warehouse needs in the current environment?
Another trend that distribution centre owners need to deal with is an environment where a higher prevalence of e-commerce shopping, higher customer expectations regarding delivery speed, and the delivery of goods to end-user consumers are forming part of complex logistics challenges far beyond what central DCs are currently set up to deliver on their own.
Retailers are increasingly thinking outside the (big) box to reimagine supply chains that can serve customers directly and rapidly. This means new models for retail-fulfilment operations that include using space within shops and smaller last-mile delivery depots in the neighbourhood. In the US real estate logistics suppliers are changing their logistics strategies to follow end-user online consumer demand. suit. For example, logistics real estate giant Prologis’s offer to acquire a portfolio of more than 1 700 last-mile logistics warehouses held by Blackstone’s Mileway for $23.1 billion is a shift in strategy to own the full logistics real estate ecosystem.
Logistics in a South African context
In South Africa, where e-commerce has also boomed since the Covid-19 lockdown period, many retailers have used their existing retail locations to build operations that serve omnichannel customers better. But using current retail space as mini-DCs comes with the high cost of retail rental space and far higher operating costs than warehousing. This is often the only option because this space allows retailers to remain closer to customers demanding decreased delivery time at a lower price.
Although there is a wide spectrum of operating models that retailers can choose from to build fulfilment capability in-store, for example, repurposing the back-of-house or dedicating space to house a packing and shipping room with lean operations, the challenge for retailers using their stores as mini DCs is that they need to keep a lot more products in-store to fulfil the customer’s need for immediate delivery. This means retailers must be able to analyse market data to improve forecasts for stock keeping units (SKUs) with strong omnichannel demand, be able to determine the optimal cadence for replenishing products to mitigate the need to redirect inventory at the end of a life cycle and build rules to route customer orders to optimal store nodes.
Other challenges include hiring more staff for in-store fulfilment with specific fulfilment-focused profiles or automation experience and major adjustments to the store’s operating hours based on a revised fulfilment model. Fulfilment from the sales floor occurs during business hours and has the added benefit of having more associates present to interact with customers during busy periods. An expanded mini-DC operation may require extended operating hours (for example, 16 to 24 hours) depending on the volume of orders being filled.
The rise of last-mile fulfilment
For retailers that cannot meet the requirements to set up an in-store fulfilment operation, there is a pressing need to move beyond the four walls of retail stores and find solutions that allow them to continue operating in today’s retail landscape. This is where last-mile real estate comes into play.
Last-mile delivery real estate has become increasingly important since the pandemic’s start due to the explosion in e-commerce resulting in the exponential growth of business-to-consumer (B2C) deliveries.
Although pandemic booms have slowed down across the economy, including sectors such as food delivery and fintech, corporate scepticism around the need for more large DCs is growing and major retailers are considering whether they overestimated how quickly their first-mile warehouse needs will increase. This is a bad combination for big-box warehouse shares. Prologis shares have been down about 37% since late April, and they fell another 8% recently.
According to the Wall Street Journal, Ikea, the Swedish furniture giant is doubling down on its fulfilment capabilities by investing over $3 billion to revamp the company. This overhaul will include transitioning up to 40% of its existing big-box suburban locations into smaller last-mile distribution centres for online orders. By redistributing how their space is utilised, the company hopes to optimize their real estate portfolio and bolster their delivery capabilities instead of increasing the footprint of existing stores.
The last mile of the delivery chain is proving to be the most valuable one for industrial properties. Facilities that can accommodate the ever-evolving demand of retailers for much quicker deliveries are proving to be the downfall of the big-box warehouse and opening new doors of opportunity for reimagined last-mile logistics solutions.
Road Freight Association revs up for annual conference at Arabella Hotel, Golf & Spa
The Road Freight Association (RFA) is gearing up for its annual conference, which this year takes place in the picturesque town of Hermanus in the Western Cape. The three-day event, held from May 24 to 26 at the Arabella Hotel & Spa, will bring together key stakeholders, thought leaders, and professionals from the road freight industry for networking, innovative ideas, learning, and relationship-building.
Promising to be a melting pot of knowledge and collaboration, attendees can look forward to a dynamic conference agenda featuring engaging panel discussions and insightful presentations. “The conference is a highlight on our calendar,” says RFA CEO Gavin Kelly. “It offers a pivotal platform for industry to come together to share and create dialogue that propels our sector forward.”
With television presenter Jeremy Maggs anchoring the event as MC, the keynote address at the conference is traditionally delivered by the Minister of Transport – and this year the address will centre around the conference theme, “Changing the Rhythm of Trucking.” Joining the Minister is a line-up of distinguished speakers including political analyst Ongama Mtimka, logistics expert Professor Jan Havenga, and Athena Executive Director, Devon Palanee. Additionally, RFA CEO Gavin Kelly and RFA chairman Penwell Lunga will give insights into the RFA’s vision for the year.
Adding an extra spark to the proceedings, attendees can look forward to the enlightening presence of self-proclaimed political activist Evita Bezuidenhout as she shares her unique perspectives on South Africa’s political and social realities.
In addition to the conference programme, delegates can explore an exhibition and truck display, providing interactive engagement with cutting-edge technologies, industry advancements, and innovative solutions. Golf enthusiasts are invited to bring their clubs for a round at Arabella’s esteemed golf course.
“We look forward to welcoming industry at the conference as we celebrate the backbone of our nation’s economy – the road freight sector. Without Trucks, South Africa stops. Let us convene, robustly discuss issues affecting the industry, share insights, and propel our industry forward together,” says Kelly.
Registration for the conference is now open on the RFA website. Take advantage of the opportunity. Look out for the early bird offer.
Affordable, Reliable & Highly Tailored Overnight Road Services Delivers With Superior reach & in Record Time
In a world where businesses demand swift and dependable logistics solutions, Seabourne Logistics is leading with its innovative ONR (overnight road service), setting new industry standards, delivering goods punctually and rapidly expanding its reach to cater to a rapidly growing clientele.
Designed to provide quick and efficient deliveries throughout South Africa, reaching destinations typically accessible solely by air, the overnight service gives clients a competitive edge in today’s fast-paced market.
“The success of our overnight road service can be attributed to our dedication to quality, reliability, and cost-effectiveness,” says Garry Harris, Director at Seabourne Logistics ZA. “We understand that our clients’ success depends on their ability to have goods delivered on time and within budget, and we take that responsibility very seriously.”
Transporting goods overnight by road presents numerous benefits. The foremost advantage is its cost-effectiveness, offering potential savings of up to 50% compared to airfreight services. Moreover, it excels in cargo handling, boasting greater space and flexibility than airlines. This facilitates the transportation of hazardous materials and liquids, which may be subject to stricter airborne regulations.
“While road transport does have its limitations, it is considerably more accommodating, permitting the carriage of items like aerosols or lithium batteries that may be restricted on flights. Importantly, our service consistently upholds high quality standards, ensuring minimal disruptions,” continues Harris.
Seabourne have created distribution hubs and fulfillment centres which are strategically positioned across the country to cater to the growing clientèle. Not only has it increased the service’s reach, but also allows for more efficient transportation networks.
The company has invested heavily in the development of this service. All linehaul vehicles are equipped with long-range tanks and anti-fatigue cameras that are consistently operated by a double crew, whose activities are closely monitored by a 24-hour control room.
Iveco Turbo Daily 50C 70 vehicles with reinforced heavy-duty tow bars and 1.5-ton trailers are operated within their warranty period on the overnight road service – ensuring reliability. The fleet is subjected to bumper-to-bumper service checks every second to third day, depending on the rotation schedule.
The vehicles have dimensions measuring 4500 (length) x 1700 (width) x 1900 (height), with a carrying capacity of 2.5 tons and 16 cubic metres of space. The trailers have dimensions of 3300 (length) x 1600 (width) x 1700 (height) and can carry 1-1.5 tons with 9 cubic metres of available space. To enhance their robustness, the rear sections of the vehicles are equipped with aluminium cladding walls and Marley-type floors, complete with sunken securing points.
“Businesses, driven by price sensitivity and competition in service delivery, are increasingly opting for this intermediate service that ensures next-day delivery,” explains Harris. “It holds great value in industries like the automotive sector, where the quick movement of parts is crucial. It offers convenience and flexibility, allowing for multiple deliveries in a single trip to remote places often left out from next-day delivery. Moreso, we’re constantly working on expanding our service reach and footprint across the country, providing our clients with a cost-effective solution,” concludes Harris.
The growing logistics company moved to a new and improved facility in November, doubling their warehousing space and preparing to further enhance their reach and maintain their excellent personal service.
Landsdowne Property Group, Where Real Estate Dreams Become Reality.
Back in 2006, Landsdowne Property Group took its first steps into the world of real estate. It all started with a spark of inspiration from the company’s founder and current CEO, Jonathan Kohler. Fast forward to today, and this South African gem has blossomed into a national sensation with offices spanning across Gauteng, Western Cape, and KwaZulu-Natal.
What sets Landsdowne apart isn’t just its impressive portfolio; it’s the human touch it brings to the real estate game. You see, at Landsdowne, the Directors and Shareholders are not distant figures in a corporate hierarchy – they’re right there in the thick of things, day in and day out. When a service hiccup pops up, it’s not a faceless entity handling it; it’s the owners themselves who dive in headfirst, ensuring that issues are sorted, pronto.
With a whopping 15 years in the industry, Landsdowne Property Group isn’t just experienced; they’re seasoned pros. Their vast wealth of knowledge, a web of invaluable industry connections, and the tools of the trade make them your ideal partner to nurture and grow your real estate investments.
So, if you’re on the hunt for a real estate partner with personality, a dedicated team, and a CEO who sets the gold standard, look no further than Landsdowne Property Group. Your real estate dreams are about to become reality, courtesy of this remarkable human-centric enterprise.