Despite the economic crisis caused by the pandemic, there is a lot of talk about the good condition of the logistic warehouse properties sector. Has the coronavirus spared the warehouse market?
PR: The coronavirus has shaken up transport and logistics, which are the bloodstream of the entire economy. The logistic warehouse properties sector has also been affected. However, new circumstances proved to be both a threat and an opportunity for the warehouse market.
Firstly, consumer behaviour has changed. A sudden increase in online purchases creates demand for warehouses serving e-commerce. Owners of online shops are doing everything to locate goods closer to the recipients and shorten delivery times (everyone wants to realize the-same-day-delivery – although in the current situation this is quite difficult to achieve). Once the pandemic is tackled, at least some of the consumers who buy online for safety reasons will probably stay online. So we can assume that e-commerce will continue to grow, but not so rapidly, this growth curve will drop a little bit and normalize.
Secondly, problems with supply chain continuity during a pandemic change the perception of warehouse logistics, which is beginning to become an element of competitive advantage. Some companies learned from the painful ‘corona’s experience’ will move production from China to Europe to be closer to consumers. Moreover, suppliers or subcontractors from Europe may be the ones to weight the gold, as they will increase the guarantee of supply chain liquidity.
Thirdly, companies still need to keep a stock of their goods or components. Often, wanting to become independent from Chinese suppliers, they make stocks and look for warehouses for goods on site. More and more often they also start to deal with logistics themselves instead of outsourcing it to gain independence and savings.
And those are the opportunities. Let’s move on to threats.
Developers will build less, primarily on behalf of a particular client. Companies that had bigger investments planned will postpone them to reduce the risk of failure, especially since we don’t know what will happen in the autumn if the virus will not strike twice as hard as it did. It is also important to remember that the market is diverse. There are industries that are growing during the crisis, but there are also those that are collapsing (e.g. the automotive industry, clothing, food, pharmaceuticals, chemicals). Some factories are holding production back, others are operating with double force. Moreover, we notice minor changes in the current functioning of warehouses for rent. Some of them accept goods only from their regular customers. In turn, customers no longer want to sign long-term lease agreements, but short-term ones with the possibility of extension.
The situation related to the coronavirus pandemic is unprecedented and has an impact on the global economy. The only constant at the moment is change and we have to get used to it. What we think is sure today may not be clear in a few days.
Has the number of warehouses for rent providing such services increased with the growth of the e-commerce sector? Is the warehouse market ready for such an increase in e-commerce?
PR: For warehouses, e-commerce services are associated with:
– quick acceptance of deliveries and making goods available for sale,
– can be picked in an instant,
– the presence of large volume fluctuations depending on the seasons, holidays and sales periods.
At the moment, it does not look like we are threatened with a shortage of space, and warehouses since the pandemic has been developing very fast in terms of e-commerce services and are getting better at it.
Certainly, what can help in optimizing the work of warehouses is automation, allowing for quick picking, while at the same time minimizing employment so as to increase safety and save both money and time.
There is often discussion about supply chain reorganization forced by a pandemic. Are companies no longer willing to rely on one production location for example in China? Are they going to relocate production from Asia to Europe?
PR: Some companies may relocate production from China to Europe to be closer to consumers. Suppliers or subcontractors from Europe will increase the guarantee of a smooth supply chain, and this will now be the most important thing for the industry – the smooth flow of goods. And it doesn’t have to be unprofitable for companies.
China got it in the neck. Japan has announced that it will withdraw its production facilities from China. I’m not saying that suddenly everyone will withdraw from China, because that’s certainly not going to happen. Financial analysis will come to that. But it is a signal that the perception of China as a „factory of the world” is changing, from which Europe and Poland can benefit. If the rulers will see this opportunity and take advantage of it. Unfortunately, the pandemic has shown that in the EU, it’s every man for himself. It may also be that these reactions calling for a return from China are temporary, and in some time, when we start to emerge from the crisis, entrepreneurs will return to their old beliefs.
Look also at the relations between China and the USA. In this case, we are dealing with the phenomenon of decoupling, i.e. loosening or reducing the dependence of these economies on each other and moving production (preferably to the USA). The trend of relocation of production is obviously not only caused by the coronavirus. It started a long time ago, at the time of increasing labour costs. However, the pandemic definitely accelerated this process and made it global.
How does your warehouse platform wareh.com work during a pandemic? Have you found your chances in such a difficult time? Did you change your strategy?
PR: We still have one goal – to change the face of warehouse logistics, rental of storage space, allowing for easy and quick search and reservation of safe storage space for short and long periods all over the European Union. At wareh.com it is as quick and easy as booking a hotel online.
We help online shops, manufacturers, find warehouses that provide e-commerce services. What’s important – we give our clients flexibility and the ability to make quick business decisions, react to market changes – we don’t paralyze movements, as happens with long-term contracts with warehouses. We give the possibility of short-term reservations with the possibility of their extension. In the e-commerce space we said ‘A’, but it’s not over yet. Soon we will say ‘B’ because we are in the process of innovating for this market.
We have also just implemented a solution that will help companies weakened by covid-19. We have introduced an additional Corporate Accounts service that allows for instant reservations, but with a delayed payment.