Hardly any other industry is currently undergoing more drastic changes than the retail sector. The corona pandemic has accelerated this process even further in 2020. What this means for the world of logistics, the managing director of P3 Logistic Parks Germany, Sönke Kewitz, explains in an interview.
Mr. Kewitz, the Corona crisis rapidly accelerated the development of e-commerce from niche to mass market. How do you think the retail industry will develop in the future?
I am certain: The future of shopping is online – and that applies to non-food as well as to food products. For consumers who have become accustomed to the convenience of shopping flexibly from home, physical stores are becoming rather unnecessary. During the Corona crisis, buying food online has become a model for success.
Do you see signs that this trend will continue in the coming years?
Yes, I see encouraging signs. The management consultancy EY Parthenon expects the segment's revenues to grow from today's EUR 1.8 billion to EUR 4.3 billion by 2024.[1] Established players such as Amazon Fresh and Rewe are working on increasing existing capacities and expanding their supply infrastructure. Other competitors will follow, new suppliers will enter this promising market. In the medium term, I therefore expect that many representatives of the retail and wholesale trade will want to take advantage of the opportunities offered by online business - and in the future will establish their own structures or cooperate with delivery services and logistics companies.
So, the online supermarket will also establish itself among German consumers?
The Corona crisis has made the traditionally rather conservative German consumers aware of some of the advantages of buying food on the Internet: Digital shopping saves time – and in many cases also stress –, the choice is often greater than in the small supermarket around the corner, and so is the currently so important protection against infection. The best providers also ensure that the cold chain is not interrupted until delivery to the front door. However, the current boom is pushing even established retailers in the food retail sector to their limits. Delivery times of up to two weeks are therefore currently not uncommon in supermarkets – and in drugstore chains as well.
What contribution can the logistics industry make to support retailers?
What we are currently observing in the retail sector are growth pains that many industries are suffering or have already suffered in the course of digitization. The opportunities offered by online commerce are calling into question principles that have been valid for a long time. With regard to retail, for example, the stationary store as a traditional business model is coming under pressure. In the food sector, the changes in Germany have been very moderate to date. However, the Corona crisis has also made the change in this retail segment considerably more dynamic. However, only a few players were prepared for this sudden change. We at P3 have long understood the logistics industry as an essential part of retail and are convinced that we can provide retailers with important support in the short and long term – along the entire supply chain.
What does this mean in concrete terms, especially with regard to the central criteria for online shopping from the consumer's perspective?
In online retailing, the parameter time is a central factor in the competition for customers. More and more consumers are getting used to the concept of same-day delivery, which Amazon already offers for many product categories. The next step is same-hour delivery, which will play a more important role in the future, especially in the food sector. In addition, there is the desired flexibility with regard to the place of delivery: Consumers can now decide whether the goods are to be delivered to their home, office, packing station or to the physical store. Amazon is currently increasingly introducing "Amazon Locker", its own pick-up stations with self-service lockers. Here, logistics becomes visible as the most important success factor. The importance of logistics for the success of retail companies will continue to grow, because in the long term, those retailers will be successful who convince their customers with flexibility in terms of delivery time and location. From a retail perspective, now is the right time to rethink logistics processes and to optimize and coordinate the areas of procurement logistics, warehouse logistics, distribution logistics and store logistics.
What role does "Urban Logistics" play in this context?
"Urban Logistics" is a very exciting topic that is very relevant for the retail industry. After all, logistics areas in inner-city locations will become increasingly important as factors critical to success in the future. Short distances are an enormous advantage for retailers to be able to supply consumers quickly and punctually. In addition, the shorter the final transport section of a supply chain, the lower the overall costs of the delivery process. These are the findings of a study we conducted together with Cushman & Wakefield at the end of 2019 under the title "Last Link. Quantifying The Cost". The study analyses cost aspects of the "last mile" and breaks them down in detail. One key finding: around half of all logistics costs are incurred on the last link in the supply chain to the customer. Investments in urban logistics centers can be very worthwhile for many retailers. The higher rental costs, especially in large cities, are very often already compensated by savings from shorter transport distances.
What does this mean for logistics real estate developers like P3?
We see a great opportunity in this development and want to support the retail sector with innovative offers. This also requires logistics real estate developers to be willing to change and develop new, convincing concepts. The greatest challenge is the shortage of space in cities. The conversion of abandoned retail space is therefore one of the most promising trends for us. Empty shopping centers or so-called ghost malls have the essential building equipment and are well connected in terms of transport. They therefore offer ideal conditions for avoiding further land consumption due to increasing logistics requirements and for optimizing logistics processes for the last mile.
P3 recently announced that it is expanding its German portfolio with 33 retail logistics locations. Is the acquisition related to this trend?
With the Matrix portfolio we were able to expand our German real estate portfolio by 33 inner-city METRO locations. The assets are in excellent locations in major German cities such as Berlin, Dortmund, Nuremberg, Hamburg, Hanover, Cologne, Dresden, and Leipzig. As a first step, we want to understand METRO's future strategy and needs. Asset management on a par with the tenants is very important to us. We look forward to exchanging ideas with METRO and working hand in ha