E-commerce and Same-Day Delivery Fueling Estimated $1.9 Trillion Warehousing Market

by Nicolette Emmino

The global market for warehousing is currently growing at a CAGR of 6 to 8%, according to Beroe Inc, a procurement intelligence firm. Factors contributing to these growth rates include increasing service levels such as e-commerce and same-day delivery, which are, in turn, influencing retailers to invest further in the warehouse industry.

Regions such as EuropeNorth America, and some parts of APAC (Australia and Singapore) have high market maturity due to steady supply conditions and tremendous technology adoption. India and China are expected to be the projected growth driving markets for the warehousing industry due to the anticipated increase in manufacturing facilities and the growth in the e-commerce sector.

The growth of retail and FMCG goods has been the main driver for the industrial warehouse industry. The maturity of the e-commerce industry has led to an increase in demand for warehouse space from third-party logistics (3PLs) across the globe and the demand will expand at a faster pace in emerging economies such as India and China. Another growth driver for the warehousing industry is the increase in disposable income, which is increasing at 2.3% among the general public. This income has created a demand for consumer goods along with increased imports and exports.

A growing economy with strong manufacturing sectors such as the U.S., manufacturing PMI (purchasing managers’ index) is projected to trend around 53.00 in 2020, which contributes to the increasing demand for warehouse space. Moreover, the availability of skilled labor and nominal wage rates compared to developed regions with strategically located hubs such as Dubai and Jeddah gives MEA a higher potential for warehouse space.

What else? 

  • Europe and North America show higher development in the service provider department due to high technology adoption levels and a wider range of services offered. Emerging countries such as BrazilIndiaChina, and Japan show low to medium maturity due to lower 3PL rates and lower adoption of warehouse technology.
  • Use of technology in warehouse management functions such as AGV (automated guided vehicle), i.e., pick to light and voice directed picking is emerging in the industry. Most warehouse occupiers are accommodating their distribution centers (DC) towards faster response times and space-saving, efficient systems with minimal labor requirements.
  • Contract warehousing is a low-margin business with an average gross margin of 8 – 10 percent and an average net margin of approximately 2 – 4 percent.
  • The unavailability of skilled labor in regions such as North America and Europe along with less expertise in the warehousing field keeps wages relatively high. This impacts the overall operating costs and becomes a major constraint in the warehousing industry.
  • Just-in-time techniques and vendor-managed inventory systems also require warehouse usage; thus, there are no substitutes for warehousing.
  • The union of warehouse management systems with TMS (transportation management system) and LMS (learning management system) will increase communication and planning for companies with the use of real-time data transmission across various platforms.

How these findings were extracted: The research methodology adopted for the report compiled by Beroe included:

  • Experts with twenty years of domain experience
  • Interaction with buyers
  • Inputs from supply chain partners

In emerging markets such as LATAM, some parts of APAC, and MEA factors such as availability of warehouse space, lower rents and competition, and warehouse service providers willing to reduce rates are increasing the buyer power. However, in developed markets, the vacancy rates in countries such as the U.S. is at a 15-year low of 6%. Due to this, there are tight supply conditions prevailing in the market, which diminishes buyer power.

Learn more at Beroe.

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