CBRE considers innovations shaping retail logistics to 2020

With e-commerce expected to comprise 20% of all retail sales in the next three years, predictive ordering, 3D printing, personal outsourcing, ‘your home as a store retail' and cherry picking will be the most critical innovations for the industry to embrace in order to meet accelerating consumer demand.

CBRE's Retail Logistics viewpoint highlights that 12.8 billion consumer devices will be able to connect to the Internet of things by 2020. The data will enable household appliances to learn habits of homeowners and place predictive orders. This technology will take away the pressure brought by next day or same day delivery demands for a huge amount of household products. As a result, logistics providers will be able to plan more efficiently and won't need to focus as much on being as close to the consumer as possible. This will alleviate the costs usually undertaken by purchasing assets in the last mile.

CBRE predicts the increase in ability of 3D printing and reduction in cost will result in household penetration of circa 25% in the next decade, making it another key innovation for the retail logistics sector. It will result in an increase in the distribution of raw materials but could mean a significant reduction in the number of deliveries to consumers. As the number of deliveries reduces, the role and form of the logistics companies will continue to evolve

The ‘your home as a store' approach is the developing solution to the growing rate of online returns, which has drastically affected profitability for a number of retailers in the last decade. The shopping concept encourages returns. The retailer sends out a selection of items and allows the consumer to select what they want and send the remainder back. This means that consumers have even fewer requirements to visit a physical shop. This will initially impact the logistics market with an increase in the volume of deliveries, however, after a few orders the retailer will have a better understanding of consumer taste and fewer but larger parcels of tailored products will be delivered to the home.

Personal outsourcing be it to people, or artificial intelligence (AI) and robotics as opposed to companies to undertake deliveries of groceries, clothing, gifts etc. is another trend to watch. Deliveries will become more efficient as people will liaise with other people or AI to agree on accurate times and locations for delivery. This has the potential to improve the efficiency of logistics providers and further reduce the volume of returns.

Several innovations are highlighted in the media; including drones, robots, automated picking but the actual volume of ‘newness' is relatively low. CBRE predicts that a small number of businesses will dictate the future for the retail logistics industry.  The most successful approach is to invest in and understand the innovations that others are working on and adapt operations accordingly. Those that lead will have first mover advantage and only those that can select which innovations to mirror or ‘cherry-pick' will also succeed.

Andrew Phipps, Head of UK & EMEA Retail Research, CBRE, commented: "These initiatives will drastically shape the way both retailers and consumers act in the coming years.  There may actually be fewer requirements for traditional deliveries but the positive aspect for property is that there will still be a requirement for physical infrastructure. However, there will be changes in scale, location and the way facilities operate. 

Shoppers are unlikely to want slower, more expensive and less efficient deliveries so it is incumbent on the retail logistics industry to continue to adapt in order to meet this demand."