What's Jones Lang LaSalle Telling Us to Integrate?

Jones Lang LaSalle is boosting its view of online growth to grow companies on the ground. 

The company is taking a long look at delivery systems based online in an expansive series of three white papers.  The new report focuses on logistics and distribution, as well global perspective and a view toward where these integrated markets will expand, country by country.

The company sizes up the examination in a press release:

"Global retail expansion once meant adding properties in some of the world's premier high streets such as New York's Fifth Avenue or the Champs-Elysees in Paris. Now it also means specialized big box warehouses and package pick-up or sortation centers," explained JLL's President of Industrial, Craig Meyer. "Now that 39 percent of the world's population has internet access, customer preference for online shopping has gone global. Retailers are using new types of facilities to keep up with deliveries and demand while staying in step with local cultures."

Invoking its “omni channel” approach to customer delivery—that is, an integration of stores and online experiences that allows multiple fulfillment options—the company in its press release invoked a You Tube video it posted earlier this year siting Macys characterization of its stores as the equivalent of local warhouses. 

The new white paper has a Macys case study noting that the retailer intends to extend online orders fulfillment with shipping from 500 of its stores by year-end, up from 292 shipping stores last February.

The white paper includes other cases studies and country reports in addition to its analysis.

Regarding its strength, the real estate part of the analysis, the report says that sales online of nonfood consumer goods in developed countries have resulted in demand for

Mega e-fulfillment centers where the merchandise is stocked and picked at item level. These facilities, which are either operated by the retailer or a logistics service provider, are typically 500,000 sq ft to one million sq ft in size, or even larger. They often operate 24/7.

Parcel hubs/sortation centers which sort orders by zip or post code so that they can be delivered to the relevant parcel delivery centre for final delivery to the customer’s home or designated collection point. [And]

Parcel delivery centers which handle the “last mile” delivery to the customer.

An example of the diverse delivery integration implementations used in the 28-page white paper, not surprisingly, is Amazon, which the white paper says has started to open smaller-scale U.S. distribution facilities to offer same-day delivery.

But Amazon UK has “a current requirement” for “some 20” smaller distribution facilities around major urban areas, while in France, the company remains focused on large units, with final delivery from third-party providers.

The close operations of online and on-the ground operations may force out parcel delivery services from the business’s sales supply chains, the white paper says.  “The key to omni-channel,” the report says, “is the integration of processes, information systems and infrastructure, including property, to enable the retailer to meet customer demand from whatever location is positioned to provide the best customer experience.”

Among the report’s conclusions:

As e-commerce logistics models develop, they will drive huge changes in physical distribution networks, comparable in many respects to previous changes generated by the rise of global sourcing, or the earlier “centralization” of deliveries to retail stores via retailer-controlled distribution centers. This will give rise to a new class of logistics and distribution properties including mega e-fulfillment centers, parcel hubs and delivery centers, local “urban logistics” depots for rapid order fulfillment and returns processing centers.

Retailers, property developers and investors that wish to gain maximum advantage from these changes need to understand and embrace both the dynamics as well as the complexities at play in different supply chains and in different countries.

The two subsequent white papers, the Chicago-based real estate and management consulting and firm says, will consider “what this evolving business paradigm will mean for the occupiers of this new class of logistics properties (part two) and the owners and developers of the same (part three).”  The release dates were not announced.

You can access the report here, with registration. A press release on the JLL project can be found here.

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