Demand for European warehouses is rising as e-commerce giants faucet into house

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Staff walk the aisles collecting items before sending them to the on-site shipping hall to be packed in one of the UK’s largest Amazon warehouses in Dunfermline, Fife.

Jane Barlow | PA pictures | Getty Images

BEIJING – Big investors are investing money in warehouses in Europe, while online purchases of goods – some from China – are increasing after the coronavirus pandemic.

E-commerce was already growing before Covid-19 forced people to stay home and close store fronts. Now the pandemic has likely sped up e-commerce adoption by about 12 months, real estate consultancy Savills said in a December report quoting the Center for Retail Research.

One of the biggest challenges for companies looking to capitalize on the trend is finding ways to get orders done faster. Companies that previously relied on globally distributed supply chains are faced with a shortage of shipping containers, resulting in high delivery costs and long waiting times.

The new strategy is to find warehouses near customers and store them ahead of time so customers can receive their orders in a few days or less.

This has spiked warehouse demand and pushed the vacancy rate in Europe to a record low of around 5% – and the rate is still falling, said Marcus de Minckwitz, director of the London Omnichannel Group at Savills.

“In the course of 2020, under the leadership of the UK, we have seen record storage space utilization across the continent,” he said. “The drivers for this were Amazon and then third-party logistics service providers.”

There is an Amazon warehouse in the Port of Belfast as the spread of Coronavirus disease (COVID-19) continues on April 6, 2020 in Belfast, Northern Ireland.

Jason Cairnduff | Reuters

Total investment in European logistics rose last year to 38.64 billion euros (46.5 billion US dollars). According to Savills, this is the highest value since 2013.

Now Europe expects more demand from Chinese e-commerce players entering the market under the leadership of Alibaba, de Minckwitz said.

Alibaba has grown its cross-border e-commerce business primarily through its AliExpress platform and Cainiao’s logistics arm.

The company spearheaded rapid growth in cross-border e-commerce, which helped Cainiao revenue jump 51% year over year in the final three months of 2020 to $ 1.74 billion at the time, according to Alibaba.

Some of the largest companies in the investment world are taking note of the trend.

E-commerce increases China’s exports

The Chinese authorities are also talking about the trade impact.

Cross-border electronic trade between China and other countries rose 31.1% to 1.69 trillion yuan last year, mainly in exports, according to the national customs authority. As a result, overseas warehouses rose 80% year over year to over 1,800 in 2020, the Commerce Department said in January.

Diane Wang, founder and chairman of Chinese e-commerce website DH Gate, said last month the company has 10 warehouses overseas and plans to add 40 more this year.

About half of the products are upstream abroad, so customers can receive their orders within three days, she said. Wang predicts that cross-border e-commerce will increase from around 5% of China’s international trade to 30% over the next decade.

Official data by country or region was not available, but anecdotes suggest that much of the foreign interest in electronic commerce with China comes from Europe. The region is already one of China’s most important trading partners.

“A lot of people buy Chinese products in Europe,” said Suresh Dalai, senior director of Alvarez & Marsal consulting firm, which focuses on retail operations in Asia. He expects more investment in technology for order tracking, same-day delivery and storing packages in central lockers so consumers can pick up packages when they want.

“There is a lot of demand. I don’t think (new Chinese players) are really affecting Alibaba that much,” said Dalai. “I think it helps because it only spurs additional investment in warehouses and technology and more and more consumers are getting used to shopping across borders and shopping on China-made websites.”

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