Black Friday is set to have a fundamental impact on the buoyancy of next year’s logistics market with both retail occupiers and 3PL operators ready to re-align their business models to prepare for further growth in e-commerce.
The day, which this year falls on 25 November and is set to see the largest online sales on record, will act as a litmus test for the Christmas sales period, as well as for the health of online retail next year, which depends on the efficiency of the UK’s logistics network.
Last year Black Friday generated £3.3bn in overall sales, of which £1.1bn were online. E-commerce consultancy Salmon has predicted that this year it could generate as much as £5bn in online sales.
Retailers’ focus on online has been growing over the past few years and this year has seen the sector become the most active in logistics, accounting for 51% of take-up, according to Savills (see chart).
If this year’s Black Friday is a record-breaker, retailers will have to take up even more space and re-assess their supply chain models further next year.
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Investors and developers will also have to reconsider strategies for development, ensuring that buildings are the right specification and in the right locations to satisfy the anticipated surge in demand.
Kevin Mofid, head of logistics research at Savills, said: “I would view Black Friday as a leading indicator of the strength of the retail sector.
“Forty-five percent of current logistics demand is from retailers and therefore the continued strength of the sector will have a direct impact on the logistics market. If the amount of retail spend keeps on increasing as it has been on previous Black Fridays, then it should mean even more logistics demand for 2017.”
The logistics sector is already under pressure to deliver, and continued demand from online retailers is putting it under further strain. Over the past year retailers have been focusing on their delivery and fulfilment strategies, particularly as consumers are keen to avoid home delivery charges.
Zoë Mills, an analyst at Verdict Retail, said: “Events such as Black Friday put fulfilment under a lot of strain and this will have drawn the attention of retailers over the past year. Over the next couple of years, online will continue to grow ahead of physical stores, ensuring areas such as fulfilment receive continued investment by retailers.”
Parcel delivery is fast becoming automated, meaning production in logistics needs to be faster, and buildings need more loading floors. The volume of orders on Black Friday will put the sector to the test.
Jonathan Priestley, commercial director at Baytree Logistics Properties, said: “There is so much product moving through the buildings that they need to be in the right locations and they need to be designed with mezzanine floors with enough loading bays to meet demand.
“Throughout Black Friday customers want things quickly, so that’s a driver to have the buildings as close to the customer as possible, and that’s something we are looking to do as part of our approach.”
However, it is the third-party logistics companies and fulfilment centres that are under the most pressure. Paul Graham, senior vice-president of corporate real estate at DHL, suggested that retailers should start preparing their fulfilment strategy a year in advance, focusing on an omni-channel strategy.
He said: “Ideally, retailers should start their plans for Christmas in January, assessing their performance over the previous festive season and identifying areas for improvement.
“For multichannel retailers, an omni-channel supply chain strategy should be at the heart of their planning. Each should be based on a holistic assessment of the business’s proposition and capabilities, but certain traits should be considered, such as a fully transparent cross-channel inventory to allow the merging and quick re-allocation of stock.”
Argos powers up
Argos is one of the largest participants in Black Friday, and has upped its logistics operations to fulfil demand.
John Rogers, chief executive of Sainsbury’s Argos, said: “We have been busy preparing for the Black Friday period for many months now, making sure our website, stores and distribution operations are all geared up in anticipation of high levels of demand.”
Argos is offering same-day delivery on a first-come, first-served basis for the event. It has recruited an additional 3,000 Fast Track drivers across Argos’s 800 UK shops, which will serve as fulfilment centres during the period.
This is in addition to processing deliveries from its 11 distribution centres, which cover 5.4m sq ft and will be served by 1,800 lorries.
Paul Graham, senior vice-president of corporate real estate at DHL, added: “The stakes are high for retailers over the Christmas season, because of its potential to yield such large revenues and make up shortfalls experienced elsewhere in the year.
With planning based on learning from previous years, businesses can feel confident that they are on the front foot to take full advantage of the opportunity.”
