A local increase in online sales owing to the Covid-19 pandemic is expected to stir demand for warehousing in Africa, says architecture firm Paragon Group director Estelle Meiring.
“Traditionally, South Africa has been far behind the growth curve for e-commerce internationally, especially compared with the US and Europe. High Internet connectivity costs, low numbers of online consumers and a lack of reliable transport of goods to consumers have been some of the stumbling blocks.”
However, Meiring mentions that, in recent years, there have been huge improvements in Internet accessibility and courier services. Traditional concerns of a digital divide and people not having credit cards to make online purchases are being addressed to a certain extent through increased access to smartphones and alternative payment options such as Scode from PayFast.
“Couple these improvements with a huge increase in first-time online buyers because of Covid-19 fears, and you have the potential for unprecedented growth. Some South African retailers are already reporting off-the-chart e-commerce growth figures,” says Meiring.
She adds that the general rule of thumb is that e-commerce requires three times the logistics space of traditional storefronts: “Therefore, it is reasonable to assume that we will see a much greater investment in warehouse space to support local e-commerce”.
To date, improvements in racking, logistics and building technology have resulted in an increase in warehouse clear eave heights, often as high as 15 m, as well as an increase in yard depths, which at times exceed 45 m.
“We have also noticed more requests for cross-docking and an increase in the number of warehouse doors required, as inputs and outputs are maximised,” reveals Meiring.
Another emerging trend is on-demand warehousing, dubbed the ‘Uberisation’ or ‘WeWork’ of warehousing, which entails acquiring services and space on a ‘pay-per-use’ basis.
This method of warehousing provides customers with more choice and flexibility in terms of location, cost and supplier, either as a complete substitute to owning warehouses or as a partial replacement when a new warehousing location becomes necessary.
“The emergence of on-demand warehousing serves as a response to the increasing number of supply chain challenges that businesses are up against,” Meiring points out.
Many warehouse users do not want long-term leases during times of inventory fluctuation and uncertainty. Predictions are that even South Africa’s larger retailers will need immediate space for slow and fast-moving goods while they assess their long-term distribution plans.
She notes that Cape Town remains unique in that it still has prime vacant land for the development of large distribution warehouses in close proximity to Cape Town International Airport. These sites are centrally situated to consumers and are ideally located for online-sales-related warehousing, distribution and fulfilment.
“Additional areas in the Western Cape that show a lot of promise are the Belville South, Brackenfell and western coast nodes.”
Other parts of the country that are expecting a major uptake in recently developed industrial areas are Midrand and Pomona in Gauteng, and Riverhorse Valley, in KwaZulu-Natal, Meiring mentions.
Drawing on international successes, she highlights a trend in the US, where e-commerce and omni-channel retailers are expanding their distribution networks, working from multiple, smaller distribution warehouses closer to customers, rather than from a centralised distribution centre, owing to changes in demand.
“Where five-day delivery times were once considered standard, consumers now routinely expect next- or even same-day delivery. In line with this, Amazon has now started acquiring some failed malls, using the land to develop online fulfilment centres. This makes a lot of sense, as these malls are located close to consumers and major transport routes,” argues Meiring.
Although South Africa’s e-commerce industry is a lot less mature than that of the US, it would be interesting to see if South Africa will follow the same trend, she adds.
“This might change the way we see distribution centre nodes in future,” concludes Meiring.