December 14, 2022

The Role of Real Estate in Ultrafast Delivery

The Role of Real Estate in Ultrafast Delivery

While two- or three-day delivery was enough to appease most internet shoppers just a few short years ago, consumers now want online purchases even faster. As a result, online retailers have entered a race for ultrafast delivery, where goods get delivered within hours instead of days. Ultrafast delivery caught on quickly in the grocery sector during the COVID-19 pandemic, but a broader scope of retailers have begun recognizing that their customers want orders as fast as possible. 

However, same-day delivery poses significant logistics challenges for these sellers, who must develop the last-mile delivery capability to move items from stores or warehouses to customer doorsteps nearly immediately. In response to such delivery time requirements, inventory must get closer. 

Finding the Right Location for Fast Delivery

Retailers built today’s existing fulfillment networks with a minimum two-day shipping model in mind. Under this model, fulfilling orders from a warehouse within a few hundred miles was close enough to ensure on-time delivery. Once that window gets shortened to a few hours, there’s no longer time to move an order over that type of distance. 

Every second counts when a customer chooses an ultrafast delivery option. At a minimum, retailers must have inventory reliably placed within 10 or 20 miles. But, of course, that distance gets even shorter within an urban environment like New York City or Chicago, where it might take a full hour to travel just a few miles by car, e-bike, or bicycle.

To accommodate these stringent location requirements, urban retailers have turned to a few methods:

  1. Fulfilling from dark stores. Micorfulfillment centers, also known as dark stores, act as small warehouses where online sellers can maintain a stock of critical inventory ready for immediate delivery. Retailers often lease empty retail spaces to act as dark stores, enabling them to locate online-only inventory in centralized metro locations. 
  2. Fulfilling from retail stores. Some omnichannel sellers choose to fulfill rapid delivery orders from their brick-and-mortar stores. However, this delivery method is the most expensive for the retailer since it essentially requires them to distribute each sold item twice—once to the store and then again to the end customer.
  3. Fulfilling from strategically located warehouses. Savvy (or sometimes lucky) online retailers can find smaller warehouses in key locations for rapid order fulfillment. Unlike major big box fulfillment centers that may feature a million or more square feet of space, retailers can leverage smaller warehouses under 50,000 square feet to stock the items most likely to get ordered for same-day delivery. In addition, while mega-warehouses are near impossible to find in a major city, smaller warehouses of this nature may be less challenging to lease.

Leveraging Your 3PL For Ultrafast Delivery

Fulfilling orders from dark stores, smaller warehouses, and brick-and-mortar stores adds significant complexity to a retailer’s supply chain. Unfortunately, many online sellers don’t have the in-house logistics capabilities to manage such an intricate supply network. 

As such, these organizations often turn to third-party logistics (3PL) providers for help. A 3PL can offer expert advice about which method—or combination of methods—an online retailer should incorporate into their fulfillment model to achieve successful ultrafast delivery. In addition, the right 3PL may already have the necessary fulfillment network to ramp up same-day delivery quickly.

If your 3PL doesn’t have a suitable facility to support your ultrafast delivery offerings, it should be willing to find it for you. At Phoenix Logistics, for example, our affiliation with national real estate firm Phoenix Investors enables us to locate and acquire the logistics infrastructure our customers need to meet their needs.

About Phoenix Logistics

Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.

Kurt Jensen is the Senior Vice President, Acquisitions & Leasing of Phoenix Investors, a national real estate firm specializing in industrial real estate based in Milwaukee, Wisconsin. He is a seasoned executive with over 25 years of entrepreneurial, management, and deal-making experience.

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