Why Warehouses Are Falling Behind Ecommerce Demands

by Emily on January 8, 2019

in Articles

If you’ve ever been inside a modern ecommerce fulfillment center, you were probably amazed. A veritable symphony of interaction, there are people, robots, boxes, conveyor lines, forklifts and trucks, all functioning in synchronization.

There also acres and acres and acres of space.

However, purpose-built designs like the ones operated by Amazon are more exception than norm. Which is why warehouses are falling behind ecommerce demands.

Aged Infrastructure

According to the findings of a survey conducted by CBRE, the commercial real estate services and investment firm, the average warehouse in the United States is 34 years old. Designed well before the advent of ecommerce, these warehouses were configured primarily for B2B operations — as opposed to B2C.

This is a critical distinction, as customers want their products shipped as rapidly as possible, whereas the old-school wholesale model relied upon businesses placing orders well in advance. This gave warehouses more time to fulfill orders. As a result, automation wasn’t even considered in most cases.

This is particularly true on the east coast where facilities are even older. As of 2019, the weighted average age of a warehouse in Northern New Jersey is 58 years. Pittsburgh’s is 57, while Philadelphia, Cleveland and Boston are tied at 45 years.

Design Limitations

Today’s high-speed ecommerce warehouses have high ceilings to accommodate stacking goods to conserve space. This also affords them the ability to keep more floor space open for traffic. As result, forklifts and robots can move about more freely and at higher rates of speed. This enhances the potential for overnight and same day deliveries.

However, older warehouse often have uneven floors and narrower aisles, which makes it difficult for robotic carts to function efficiently. This too, can inhibit processes. What’s worse, retrofitting older warehouses to function in the contemporary environment is cost prohibitive. Tearing them down and rebuilding them is smarter than trying to renovate them in most cases.

Accelerated Volume

Meanwhile, ecommerce sales are skyrocketing and showing no signs of slowing. Ecommerce has forever changed the way people shop and is gaining more and more acceptance across the entire range of demographics.

Let’s say you use a platform like Shopify to sell electronics online, the advent of mobile devices has given people the ability to shop your store whenever and wherever the mood strikes them. This, in turn, has increased the stresses placed upon warehouses.

Building out of it is Tough

Over the past 10 years, more than one billion square feet of new warehouse construction has taken place. However, as big as that number sounds, it’s a mere 11 percent of the 9.1 billion square feet available in the United States.

Further, when it comes to building new facilities, you have to consider location. Most of the people craving rapid gratification are in urban centers. To meet this right-now demand, fulfillment centers need to built as close to the population as possible—which is also where the highest land prices are.

Even if you could find enough available space to build a gargantuan warehouse in a built-out city like San Francisco, the cost of acquiring the land could make the return on the investment in the project questionable.

Taken in totality, this is why warehouses are falling behind ecommerce demands. There is a ray of sunshine here though. Many of the traditional enclosed shopping malls are finding it difficult to keep tenants because of the decimation brick and mortar retail has suffered at the hands of ecommerce.

These spaces could well become tomorrow’s ecommerce fulfillment centers.

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