E-commerce is changing the logistics landscape

With e-commerce growing at a pace of some 15 percent a year, logistics operators and delivery firms are scrambling to meet the market demands By Beata Socha The e-commerce consumer sector in Poland has been expanding at an impressive rate over the past few years. In 2014, it grew by 15 percent, reaching a total volume of PLN 27.3 billion, according to research firm PMR. Apart from the sheer increase in volume, the market is experiencing far-reaching changes, with the digital and the traditional channels becoming increasingly intertwined. It’s long been established that every brick-and-mortar store needs a website and preferably an online store. “Even entities that have thus far not been associated with trade are [launching online sales], including energy suppliers, museums and airlines,” said Artur Wojtaszek, CEO of Cursor, part of OEX Group, an outsourcing company. Going omni-channel Now, the digital revolution is coming full circle. This time it is e-commerce firms that are setting up physical stores. Both giants, the likes of Amazon and Google, as well as fashion retailers, such as Zalando, are trying out brick-and-mortar concepts. Zalando opened up a pop-up store in Warsaw in November 2014 for a trial run of four days, albeit mainly as a marketing feat. Even retailers that have thus far shunned the physical form and built their image on exclusivity and direct sales are finally giving in. Less than a year after opening an online store, Avon decided to launch its first brick-and-mortar store in Warsaw’s Złote Tarasy shopping mall in December 2014. “Nowadays, clients aren’t satisfied with only one shopping channel, they expect an omni-channel approach to better understand and experience the brand,” said Oksana Zharkova, head of Avon in Poland, the Baltic States and Finland. The B2C market is only part of the picture, though. There is another growing cake to slice. “It is estimated that the value of the B2B e-commerce market in our country exceeded PLN 140 billion in 2013 and continues to grow,” said Patrycja Gawarecka, marketing and sales director at logistics firm AB SA. Drop-shipping and outsourcing Retailers are not the only ones who are experiencing the digital transformation. The logistics market is going through major changes as well. “E-commerce is increasingly varied – to meet client demand, online stores offer virtually all categories of products these days. The increasing range of products is followed by a growing variety of needs in terms of shipping and additional logistics services,” said Tomasz Szczekowski, head of parcel shipping at DB Schenker Logistics. “There are two key market segments now: courier deliveries (parcels up to 30 kilograms) and groupage shipping (of over 30 kilograms, usually non-palletized),” he explained and added that the company is also recording an increase in the number of shipments to internet stores from large electronics, tools and cosmetics wholesalers. Some say it is only the first step and as the digital channel develops, retailers will outsource more and more processes to logistics firms. “Shipments of large batches of products to our partners are being replaced with ‘drop-shipping’ services, which consist in direct delivery of goods to the end-consumer. We include invoices and our clients’ marketing materials in the parcels,” said Gawarecka. Awaiting same-day deliveries With an increasing part of everyday shopping being done online, consumers re expecting ever shorter delivery times. Some logistics operators are already testing out their same-day delivery capabilities. For example, AB SA introduced a pilot same-day delivery program within Wrocław in late 2014. “What matters to the end-consumer is not only how fast goods can be delivered but they also want a wide range of delivery options. That’s why we’ve included e.g. deliveries to parcel lockers which are very popular among customers of online stores,” Gawarecka explained. The growing demands of the retail market are fueling the rapidly expanding warehouse real estate market. Logistics base Over 2 million sqm of warehouse space was leased throughout 2014, the highest figure in the history of the Polish warehouse market. Last year saw a 6 percent increase on 2013, despite a lack of spectacular entries (such as Amazon in 2013), real estate consultancy JLL wrote in a report. “Total demand reached 2.06 million sqm, of which 1.4 million sqm was attributable to new leases and tenants enlarging the leased units,” the report reads. The bulk of the demand for new warehouse space comes from logistics firms as well as the e-commerce sector. New supply delivered in 2014 stood at 1.02 million sqm, the third highest in the history of the Polish industrial market. With 8.54 million sqm of modern commercial A-class warehouse and production stock, Poland is the largest warehouse market among CEE countries. Developers have been optimistic about the outlook for the sector as evidenced by a significant increase in speculative space delivered in 2014 and under construction. “Last year, the share of warehouse space built speculatively stood at 27 percent, while in 2013 it accounted for a mere 6 percent,” said Tomasz Olszewski, JLL’s head of the Industrial CEE department. While the majority of the space being Polish agglomerations: Warsaw, Łódź, Poznań and Wrocław, certain parts of the country, most notably eastern Poland, still lack a substantial logistics base. “For consumers from smaller cities and towns, internet shopping is an attractive alternative to brick-and-mortar stores. Carrying out a delivery outside a major agglomeration is a challenge for logistics operators, because the high quality of service that customers expect requires an extensive network of facilities and transport routes,” said Szczękowski. Whether warehouse developers choose to keep their investments in the safe confines of western Poland or perhaps venture further east remains to be seen. But as supply always follows demand, one can assume that once e-commerce takes a stronger hold across Poland, logistics facilities will eventually pop up even in remote and hitherto untouched areas.