A new wave of retailers is driving up competition for logistics space as e-commerce growth leads to battle for market penetration. PropertyEU's Jane Roberts picks 14 e-commerce companies to watch, all hungry for space.
Today’s e-commerce retailers are locked in a battle for logistics space just as surely as their bricks-and-mortar predecessors once were for physical stores.
The stakes are high as some astonishing figures from Savills show. Last year retailers or the third-party logistics (3PL) companies servicing them gobbled up 80% of all 3.16 million m2 of logistics and industrial space that was leased in Europe’s most mature internet market, the UK.
It could easily be a sign of things to come. Online purchases reached 16.4% of all sales (E-commerce Foundation) in the UK last year. But Savills research director Kevin Mofid points out that the stratospheric surge in take-up by retailers in the UK began in 2012 when internet sales reached 11%.
France, Germany, the Netherlands and Sweden are just below that tipping point now and industrial and logistics take-up has already doubled across Europe since 2012 to around 25 million m2 pa. ‘If the UK is a good case study to use then many countries across Europe are about to see very strong demand for warehouse space,’ Mofid says.
Jack Cox, head of EMEA industrial and logistics capital markets at CBRE, says today’s race to fulfill demand reminds him of the ‘supermarket wars’ in the UK. ‘Whether through build-to-suit, pre-letting or the classic sale-and-leaseback route, real estate is being used to win the battle for market penetration, and it is akin to the battle of the 1990s in the UK between Asda, Safeway, Sainsbury’s and Tesco. It’s about scarcity of land; optioning the right sites,’ he says.
A fascinating question is which retailers might turn out to be the winners in this new battleground for space in the coming few years.
Some e-commerce retailers are already big ‘and will continue to grow’, says Paul Graham, chairman of logistics investor Clarion Gramercy and a former executive at DHL. ‘The Amazons, the Alibabas, the Zalandos..they will be expanding into different countries. They realise that logistics is a differentiator in terms of service provision.’
Logistics developers and investors will be attempting to stay close to these giants. At the same time they must continue to follow the traditional retailers as this cohort reconfigures their distribution chains to service omni-channel sales. Finally, the real estate industry needs to spot the winners among the e-commerce-driven start-ups.
Understanding start-ups
There are tricky covenant issues here for the investor community. ‘We will see lots more start-ups needing a distribution network,’ says Mofid. ‘They might be well-funded but landlords will have to get to grips with their accounts, their business model and their future’.
It is a hard call for the 3PLs too, Graham says. ‘If a rapidly growing start-up begins investing in its own fulfilment centres, then wants to monetise the asset, then that is a challenge for the property investor. But at this stage in the e-commerce revolution, it’s more one for the logistics providers....investors would much prefer to invest in a DHL or the like than an e-commerce start-up.’
Andy Gulliford, CIO at Europe’s largest logistics REIT Segro, suggests online food as an area to watch because it is currently the most under-represented retail sector in the logistics world. ‘Grocery penetration is probably about 5% and if it grows, it is going to massively increase overall online penetration.’
To understand future space requirements, JLL’s EMEA chief research officer James Brown says the firm is tracking 200 retailers globally which were formerly pure-play online businesses. ‘We have been very binary and referred to sales moving online’, he says. ‘However, online sales can be fulfilled through multiple channels. The click-and-collect model might be at the front of some retailers’ minds. It solves the last-mile challenge and potentially losing money on it’.
As Rob Brook, senior managing director and head of logistics at Patrizia, says: ‘Every retailer is on a different journey. I’m sure there will be more purely online retailers set up but I think the story about the next iteration is where retailing premises and the logistics process start blending into one.’
Here, PropertyEU picks 14 e-commerce companies to watch, all hungry for space.
1. Alibaba
China’s largest online retailer is working on a vast 220,000 m2 logistics hub at Liège Airport in Belgium as its bridgehead. Air traffic is supplemented by a dedicated train that recently started running between China and Belgium. JLL is an adviser in Europe and in the US.
European logistics facilities, including Liège are handled by 4PX Express, China’s leading cross-border e-commerce services company. It operates a 68,000 m2 warehouse for Alibaba in VGP Park Jenec in Prague which stores goods for the German market. 4PX took two warehouses for the retailer in the UK, at Prologis’s Dunstable Park and Goodman’s Leicester Park. 4PX’s adviser on both UK sites was agent Altus.
2. ao.com
A specialist in household appliances and electricals, the company was founded in 2000, floated in 2014 and is located in Bolton, Greater Manchester. Distribution in Europe is via a big warehouse in Cologne; Savills acts for them.
3. ASOS
British online retailer, selling over 850 fashion brands and its own range, which it ships to 200 countries. It has expanded from the UK adding fulfillment centres in the US and two in Germany, first in Grossbeeren and most recently its 44,000 m2 Berlin Eurohub 2 which currently fulfills 85% of its ex-UK European orders. ‘Knight Frank did some early stage work for Asos in Europe last year’, says a KF spokesperson. Tipped by some as a possible collaborator in the logistics tech/space race: ‘They are active. People may want to JV with them, because there’s a capability that’s already there.’
4. Bol.com
The Netherlands’ leading online platform selling the products of more than 20,000 companies and owned by Ahold Delhaize. The retailer built its first own fulfillment centre in Waalwijk in 2016 and began an expansion this year to 100,000 m2, to be operational in 2021. Some of its retailing customers outsource outsource their logistics to bol.com.
5. Boohoo Group
Another UK pure-play online fashion retailer specialising in own brand fashion and aimed at 16-30 year olds. Started in 2006 in Manchester with logistics operations centered in Burnley, and opened in Sheffield after acquiring PrettyLittleThing brand in 2017. Sales are rocketing, especially overseas.
6. Cdiscount and Casino Group
Food giant Casino’s subsidiary Cdiscount is the leading online retailer based in France, distributing a wide range of household and technology products from 500,000 m2 in its 10 warehouses. The company is said to be in talks to to almost double its 60,000 m2 Cdiscount distribution centre in Saint-Etienne.
7. Deichmann Group
Family-owned shoe retailer Deichmann distributes to its store network from centres in Bottrop, Feuchtwangen, Soltau and Wolfen in its domestic German market and is about to open another centre in Germany, operated by a 3PL group. It also has logistics centres in the Netherlands, Switzerland, Slovakia, Poland and the UK.
8. IKEA
The inventor of flat-pack furniture retailing in giant blue boxes is reinventing itself again. This year it opened a 50,000 m2 multi-storey warehouse on the edge of Paris, partly to service smaller stores it is trialling in the French capital. It plans to roll out the concept to London next.
9. Inditex
Spain’s famous retail group boasts that it refreshes all stores and online collections twice a week, serviced by 10 Spanish logistics centres including the 500,000 m2 ‘Cube’ in Zaragoza. It continues to expand, taking a large Segro-developed facility south of Milan, operated by 3PL FIEGE, while a new logistics hub next to Lelystad Airport opens in the Netherlands this year.
10. Ocado
The online supermarket company also calls itself an e-commerce technology business. Its new £1.5 bn tie-up with traditional British retailer Marks & Spencer launches in 2020 while it entered the French market in November 2017 when Casino signed up to take Ocado’s ‘OSP’ smart platform. The pair are developing a new fulfillment centre to serve ther Greater Paris and northern France regions.
11. Wayfair
The American e-commerce furniture company operates six branded retail web sites. This year, it became the latest etailer to begin expanding from clicks to bricks. It has a UK warehouse at Magna Park where landlord Gazeley is now building an additional 120,000 m2 facility. Another distribution centre is underway at Gazeley’s Germany Magna Park in Kassel.
12. YOOX Net-a-Porter
Last year Richemont acquired this e-commerce group which has proved that luxury retailing works online. Italy is its main focus for its high-tech logistics operation in Milan and Bologna for both Net-a-Porter selling the products of hundreds of top designers and YOOX which sells previous season luxury merchandise.
13. Zalando
Germany’s hugely successful online shoe retailer continues to expand from its German hubs. Next month, its first facility in northern Italy reaches practical completion, 140,000 m2 developed for the group by Segro in Verona. Segro’s Andy Gulliford says the Verona area is becoming a ‘honeypot’ logistics location for expanding German retailers.
