E-Commerce Fulfillment Centers and How They Do Site Selection Curtis Spencer IMS Worldwide, Inc.

Transcription

1 E-Commerce Fulfillment Centers and How They Do Site Selection Curtis Spencer IMS Worldwide, Inc. NAIOP. Do not distribute or reproduce without permission.

2 Types of New Commerce E-Commerce = Electronic Commerce (Computer, Laptop, Desktop) M-Commerce = Mobile Commerce (Phone, tablets, readers, etc.) S-Commerce = Social Commerce (Emerging segment derived from Social Networks such as Facebook, Twitter, Groupon, etc.) NAIOP. Do not distribute or reproduce without permission. 2

3 Projected Impact of E-Commerce By 2025 it has been estimated that E-commerce will represent 30% of all Retail Sales and account for 2.7 trillion in total sales (Source: Dematic) Within 5 years, the percentage of sales closed at physical stores vs. alternative sales channels (E- Commerce, M-Commerce and S-Commerce) will drop from 91% (today) to 76% (Deloitte Study) NAIOP. Do not distribute or reproduce without permission. 3

4 New Commerce Sales Expansion NAIOP. Do not distribute or reproduce without permission. 4

5 U.S. Retail Sales NAIOP. Do not distribute or reproduce without permission. 5

6 E-Commerce Leaders Next to Amazon, E-commerce leaders are: Staples, $10.2b, 4.1% growth in 2010 Apple, $5.2b, 23.0% growth in 2010 Dell, $4.8b, 6.0% growth in 2010 Office Depot, $4.1b, 0.0% growth in 2010 Walmart, $4.0b, 17% growth in 2010 (internetretailer.com, Top 500 List, 12/2011) NAIOP. Do not distribute or reproduce without permission. 6

7 Global E-Commerce Sales Projections NAIOP. Do not distribute or reproduce without permission. 7

8 Supply Chain Structures NAIOP. Do not distribute or reproduce without permission. 8

9 Options for the E-Commerce DC Single DC supports national store replenishment and E-commerce order fulfillment Stand alone DC(s) for store replenishment and stand alone E-commerce fulfillment centers (in different locations) Third-party sourcing for all aspects of fulfillment and transaction support Third-party sourcing for selected goods to enhance product launch, seasonal products NAIOP. Do not distribute or reproduce without permission. 9

10 What Retail Tells Us National Retail Federation: retail growth for 2012 should be 3.4%, down from 4.7% growth in 2011 (GDP growth 2.1%-2.4%) and 2012 has held at 2%. Amazon growth in 2010 was 39.5%, revenue of $34.2 Billion. Today, Amazon is predicting $45+ Billion sales in Distribution Centers (DC)(s) exist 28 overseas order processing, fulfillment DC s 1/5/2012, Two new DC sites announced in VA, one in TN; 1/24/2012, new DC site announced in SC NAIOP. Do not distribute or reproduce without permission. 10

11 Amazon Overview Amazon in the US has $50 Billion in sales according to their financials, 2012 Direct sales of Amazon products = 50% Sales of other products to the marketplace = 50% Walmart in the US has $250 Billion in sales in the US, with 117 Million Ft of DCs. Amazon currently has 45 Million ft of DC s. However, when you add in the value of the transaction (the actual costs of the product), Amazon s sales are actually closer to $275 Billion to the market! Amazon sells more product to the World than Walmart! This E-Commerce stuff is HUGE! NAIOP. Do not distribute or reproduce without permission. 11

12 All Important Shipping 75% of consumers abandon their electronic retail shopping if shipping is not free! Membership to a lower cost shipping club increases orders and decreased abandonment Amazon Prime. Offer value to repeat customers to electronic sites Upgrades for faster services Free shipping on minimum purchases Bundle eligible products and limit purchase timeframes NAIOP. Do not distribute or reproduce without permission. 12

13 Strategic Site Selection Drivers Transportation Service Levels Cost What Drives Decisions? Operating Environment Transition of e- commerce NAIOP. Do not distribute or reproduce without permission. 13

14 Locations Where E-DCs Are Likely to Locate States that do NOT tax internet sales States with high levels of labor, full and part-time States with right to work laws States that house both air and ground UPS/FedEx hubs States where zone-skipping is available to major population centers States that offer real property or other tax incentives States with a robust FTZ program NAIOP. Do not distribute or reproduce without permission. 14

15 Mapping the Web: Amazon Seeks to Minimize Sales-Tax Collection NAIOP. Do not distribute or reproduce without permission. 15

16 FedEx SmartPost Hub Network NAIOP. Do not distribute or reproduce without permission. 16

17 UPS Supply Chain Solution Locations NAIOP. Do not distribute or reproduce without permission. 17

18 Locations where ECFC are NOT likely to locate States which tax E-commerce (starting to change) States with high levels of unionized labor States which do not have the FedEx, UPS ground/air ops hubs States with expensive labor NAIOP. Do not distribute or reproduce without permission. 18

19 New Developments in E-Commerce 2012 Amazon s recent agreement with TX, means that at least 2 DCs are coming to the Lone Star State. Amazon settled issues with CA, and 2 more E-DCs will be coming to Central CA. A National Tax Solution will be coming Decision Tree will shift to become more 1-day delivery by truck centric to population centers than the Tax Issue. Can WalMart really give same-day shipping? When does that start? NAIOP. Do not distribute or reproduce without permission. 19

20 New Developments-2 Buildings will have higher cube height, and mezzanine s get popular. Truck courts still need to include extra trailer parking or off-site, close-in trailer parking. States are making deals in front of the National Tax Issue. Off-site or near site parking for 1,000 to 1,500 employees will be common. Surge Casual labor is KEY. NAIOP. Do not distribute or reproduce without permission. 20

21 Case Studies 1. Target.com s Tucson Facility 2. Academy Sporting Goods conversion from a 400,000 ft DC to a 1Million ft E-Fulfillment Center in GA. 3. Carter s E-Commerce Multi-Chanel DC in Atlanta, GA. NAIOP. Do not distribute or reproduce without permission. 21

22 How Target Selected the new Fulfillment Center Why a new fulfillment center? Where should it be located? What are the key criteria for selection? What were the final 3 sites, and what made the decision? NAIOP. Do not distribute or reproduce without permission. 22

23 Where did Target look for an E-DC? Arizona California Nevada NAIOP. Do not distribute or reproduce without permission. 23

24 What were the key criteria for selection? Land costs Surge labor availability Sales tax nexus Local/state incentives Operating costs FedEx-UPS truck hub locations Rail/Air freight NAIOP. Do not distribute or reproduce without permission. 24

25 What were the final 3 sites and what made the decision? Buckeye, AZ Goodyear, AZ Tucson, AZ Why choose Tucson (FTZ guarantee, etc.)? NAIOP. Do not distribute or reproduce without permission. 25

26 How Target benefits What Target saved by moving to Tucson. Approximately $25 Million in local tax incentives over 20 years. Start up quickly given pre-entitled land and permitting assistance from the local County/City agencies. Guarantee of FTZ using it now. NAIOP. Do not distribute or reproduce without permission. 26

27 Academy DC in Jeffersonville, GA. NAIOP. Do not distribute or reproduce without permission. 27

28 Carters.com 1 Million Ft. Building Overview Requirements Size: 1,061,237 SF Parking: 1,000 auto spaces 400 trailer spaces Highway Access: I-85 exposure 1,000 Auto spots! Cross-Dock 32 Clear Height 175 Truck courts NAIOP. Do not distribute or reproduce without permission. 28

29 E-Commerce Fulfillment Centers and how they do Site Selection QUESTIONS? NAIOP. Do not distribute or reproduce without permission.