The decision by the UK’s second-largest pure play online retailer, Shop Direct, to close its three fulfilment centres near Manchester reflects the e-tailer’s strategy to become a broader nationwide business.
The business, which is most famous for its Littlewoods and Very.co.uk brands and is generally perceived as being Northern-focused, is coming out of 1.5m sq ft across centres in Shaw, Little Hulton and Raven. It has occupied its Raven site since its origins as a catalogue retailer when it was founded in 1932.
It is relocating its operations to a new automated warehouse it is developing itself on land it is buying at SEGRO’s East Midlands Gateway in Leicestershire.
The new facility will cover only 500,000 sq ft, a major downsizing in terms of occupational space but a reflection of the fact it will be far more efficiently occupied than its current space, some of which is more than a century old. The cost to the Barclay brothers-backed business, including the acquisition of the land, development and site closures, will be around £200m.
An automated future
The company said that the new facility was necessary in order to meet customer demand and for this to happen, it needed a “well-connected location that can accommodate all one-man fulfilment and returns operations on one site, and that provides room for continued expansion”.
The new facility at East Midlands Gateway will employ new technology to make Shop Direct more responsive and reduce the time it takes to get products to customers.
The site’s position in the East Midlands, adjacent to the M1 and East Midlands Airport, with its own rail freight terminal, will enable the business to push its cut-off time for next-day delivery forward to midnight from the current 7pm, and to introduce same-day delivery in the future.
Construction is due to begin in May this year with completion expected by 2021. It will close its Manchester sites by mid-2020.
A source close to the company said that it had been plotting the move for some time. “The company was set up to serve the North West as the major catalogue brand, and it has been very successful, but it is no longer just a North West business, it is a national business.
“Shop Direct remains committed to the North West but it is trying to expand, which it needs to do from one big automated facility, not its current dated ones.”
18-month business review
The company said that the decision to close the facilities was determined by an 18-month review project, which concluded that Shop Direct’s three Manchester sites had “limited accessibility, layout and loading restrictions, coupled with a lack of space, meaning that these centres won’t meet the group’s future operational ambitions”.
The retailer’s current main procurement facility is its distribution centre in Shaw, which comprises three former Victorian mill buildings covering 950,000 sq ft in total and owned by the Barclay brothers themselves. The company has operated out of this space since 1979 and today it processes the majority of Shop Direct’s smaller parcels and multiple items across its brands and online department stores.
The brothers also own the company’s return centre, in Raven, also a converted former Victorian mill that covers 250,000 sq ft. The business has operated its returns out of this property since 2003.
Shop Direct’s 330,000 sq ft second distribution centre in Little Hulton processes larger single orders such as furniture. Shop Direct has occupied the property, which is owned by Logicor, since 1998, and it is now likely to look to sub-let it.
Demand in the North West region remains strong – according to JLL, in the North West, 87% of industrial floor space under construction at the start of 2017 had been taken up by the start of this year.
Limited range of occupiers
However, the age of the facilities at the properties owned by Shop Direct itself may limit the pool of potential future occupiers. The Barclay family has not revealed its plans for the future of its owned sites. Logicor’s asset in Little Hulton could be suitable for a retailer looking for last-mile facilities in the area.
Shop Direct may have decided to move on from Manchester, but it is committed to its headquarters in the North and will remain in its Liverpool headquarters, Skyways House, which is owned by Palmer Capital and where it has invested £5m in modernising the building.
JLL is advising Shop Direct.
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