MFCs: macro versus micro

THE PHENOMENAL and unexpected growth of rapid delivery companies in 2020-21 got everyone very excited about micro-fulfilment centres (MFCs). But then the slowdown in e-commerce sales, the collapse of a number of rapid delivery grocers and the cost-of-living crisis seem to have taken the wind out of micro-fulfilment’s sails. So, what does the future hold for MFCs?

Micro-fulfilment is a strategy that uses small-scale storage and fulfilment facilities to prepare orders for rapid delivery or pick-up by consumers. MFCs can be housed within an existing retail store or a dedicated warehouse and are typically located in densely populated areas to assist with last-mile deliveries. They are usually under 10,000 sq ft and warehouse automation can help to reduce the required storage footprint.

Following the hype around micro-fulfilment a few years ago, rapid growth in the q-commerce market led the traditional grocers to hold back with investment because the market seemed to be evolving so quickly and unpredictably. Some of them decided to partner with rapid delivery firms – such as Waitrose with Deliveroo and Uber Eats, and Iceland with Just Eat – while others have established their own q-commerce services, such as Tesco’s Whoosh and Ocado’s Zoom. Meanwhile Amazon has been striking deals with multiple grocers to sell their products on its platform.

The big challenge for the rapid delivery market has been the fall in real disposable incomes experienced since late 2021. Inflation has tipped the scales away from convenience in favour of in-store shopping to avoid delivery costs and higher q-commerce prices. In this marketplace, where the economics of delivering relatively low-value orders at speed are already extremely difficult, the effect of rising costs has been to make margins thinner or even generate losses.

However, the micro-fulfilment market is still growing and the latest research gives it a bright future. Market intelligence firm, Research and Markets predicts that the MFC market presents a cumulative opportunity worth $36 billion by 2030. Compared to its size in 2022, the market is projected to double by 2025 and increase by 12 times by 2030. It is also expected to generate more than $5 billion in revenue from micro-fulfilment automation by 2030, primarily for omnichannel grocers and pure-play q-commerce companies.

With automation helping to reduce operating costs, mitigate labour shortages and enable faster order processing, it seems clear that automated logistics system providers will play a crucial role in tapping the full potential of micro-fulfilment. 

Dave Berridge, secretary, AMHSA

For more information, visit www.amhsa.co.uk