E-commerce has created new expectations and shopping patterns requiring a different warehouse operations approach. In response, companies are optimizing their warehouse operations and relying on automation to meet consumer demands.

One major challenge is that e-commerce orders often come in smaller batches and sometimes as single items. This requires warehouses to implement inventory management systems that support a high volume of small orders.

Unpredictable Demand

Ecommerce has transformed the retail industry and, in turn, is reshaping industrial real estate. E-commerce growth is fueled by consumers’ desire for an endless selection of products, quick delivery, and convenient return policies.

The market’s “always-open” nature has prompted round-the-clock operations for most warehouses, requiring facilities to accommodate continuous orders and the ability to process same- or next-day delivery. This has resulted in the creation of smaller, urban warehouses that are strategically located to minimize the distance from fulfillment centers to consumers.

This shift towards last-mile delivery networks has also led to a rise in micro-fulfillment centers that provide faster, more efficient service for low-volume, high-velocity shipments. This requires warehouses to adapt their management systems and tap into automation technology. It’s a challenge that will only continue to evolve as consumer trends and expectations change.

Time-Sensitive Orders

In ecommerce, products must reach consumers as quickly as possible to meet customer demand. For this reason, commercial warehousing needs to be able to scale up operations rapidly during peak times or special promotions.

Customers also demand low shipping costs or even free shipping, which requires warehouses to be closer to urban centers. This also reduces warehousing expenses by minimizing transportation costs.

For these reasons, many companies are repurposing old industrial buildings or commercial spaces into warehouses, fulfillment centers, and last-mile delivery hubs. This type of flexibility helps to offset the inflationary effects on real estate by diversifying revenue streams, optimizing operations, and integrating technology. It also supports supply chain resilience and enables a more efficient response to market shifts. Ecommerce is transforming the commercial real estate industry and creating new opportunities.

Intense Competition

The constantly open nature of the eCommerce market has urged round-the-clock operational activities for warehouses. The same- or next-day delivery service facility also requires instant warehouse and distribution center solutions to operate and tend to the influx of orders.

With ecommerce players requiring efficient order fulfillment processes, the size of warehouses has increased. This has led to a reduction in available space and sparked rent growth.

With limited land availability in urban areas, e-commerce businesses are repurposing existing buildings to build last-mile delivery hubs or setting up micro-fulfillment centers to reduce shipping times. This is a growing trend that will continue to influence warehousing operations. Ecommerce provides an additional revenue stream for commercial real estate properties and offers flexibility to adapt to consumer demand.

Expansion of Last-Mile Delivery Networks

The speedy delivery expectations of consumers have caused a major shift in logistics. Where warehouse spaces and distribution centers were once designed to handle bulk orders, they must now process individual, smaller requests that require less storage space. The need for quick deliveries has also pushed warehouses and distribution centers to operate around the clock, even in industrial areas near residential neighborhoods.

To speed up their delivery times, e-commerce businesses are turning to cross-docking, a supply chain strategy that involves transferring products directly from warehouses into trucks for final delivery. They also utilize micro-fulfillment centers strategically located in or around urban areas to boost efficiency and reduce shipping costs. They also use a just-in-time fulfillment strategy that aligns inventory levels with actual customer demand, minimizing storage costs.

Increased Automation

Increasing consumer expectations have forced warehouses to streamline their operations and embrace automation. High-density storage systems and automated picking technologies have helped reduce fulfillment time and increase productivity.

In addition, the e-commerce industry has adopted cross-docking—the process of shipping products directly to consumers without first being stored in a warehouse—to minimize storage costs and fulfill orders more quickly. Data analytics has also become critical in inventory management, helping warehouses predict consumer demand more accurately and optimize resource allocation.

E-commerce has reshaped the retail landscape and is unlikely to go away anytime soon. However, it’s important for commercial real estate to keep up with these changes by diversifying revenue streams, ensuring flexibility and adaptability, and optimizing operations to ensure supply chain resilience. These efforts are essential to the future of commercial real estate.