Spike in E-commerce Due to Covid-19: A Silver Lining for Grade a Warehousing?

Hurried purchase shift of consumer essentials from 'local physical' to 'local digital' during this crisis, has led to a remarkable rise in the requirement of essential goods online
Spike in E-commerce Due to Covid-19: A Silver Lining for Grade a Warehousing?
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2020’s global pandemic and the resultant lockdown has seen a necessitated shift to e-tailing for most companies and brands who weren’t following the e-commerce route already. Hurried purchase shift of consumer essentials from ‘local physical’ to ‘local digital’ during this crisis, has led to a remarkable rise in the requirement of essential goods online. This is true not only for Tier 1 cities but also for Tier 2 and 3 cities that continue to report healthy and consistent growth in shopping goods of all kinds online (including day to day grocery and home needs), adding significant pressure to increased supply to these erstwhile underserved markets. Online grocers such as Big Basket and Grofers saw the demand for groceries and essentials upsurge by 3-5X at the mere onset of the pandemic.

According to Neilson, average e-commerce orders for staples surged significantly on a weekly basis in the month of March due to the COVID-19 impact. E-commerce player Myntra sold over 10 million items during the End of Reason Sale and saw an 86 percent increase in shoppers from Tier-II and III locations.

Large players such as Amazon, USA are already gearing for expansion in full swing as they have announced plans to hire an additional 175,000 warehouse and delivery workers amid a rise in online orders due to the coronavirus outbreak and its subsequent effects. Amazon’s India unit too announced that it would hire 50,000 temporary workers in their fulfillment centres and as part of its delivery network, to meet the surge in online shopping in the country.

COVID-19 has thus accelerated both the scope and the pace of e-commerce adoption, which can only be fulfilled by virtue of excellent Modern / Grade A warehousing that offers compliance, human safety, hygiene, and enable automation and social distancing. 

It is therefore imperative that in order to stay relevant, retailers accept that e-commerce is likely to become a go-to channel for many of their consumers and that their supply chain and logistics operation has to gear towards fast, reliable, and consumer-centric delivery methods. 

Thus, warehouses are no more about four walls and a roof that you hope doesn’t leak - today it’s a full-fledged park. A business very survival depends on where and how they stock their products leading to a preference for Grade A warehouses:

  1. Matching Global standards: Bigger global e-commerce players expect certain international standards of warehousing, closest to which is Grade A warehousing in India, making it imperative and an obvious choice.

  2. Safety and compliance: In a post- COVID world, hygiene, safety and regulatory compliance like firefighting systems will be paramount for warehousing employees’ health and will be a primary concern for the end consumer as well, making Grade A warehouses a necessity.

  3. Operational efficiency: the additional floor load, storage heights, sufficient parking, seamless movement are some of the basic reasons which have a positive impact on the overall operational efficiency of these parks. In the near future trends like IoT and automation will pave the way for a new dimension in operational efficiency. These will only be possible in modern warehouses.

  4. Environment & Sustainability Measures: A key feature of Grade A warehouses are the environment-friendly measures taken to incorporate sustainability in the day-to-day operations. A green belt creation along the perimeter of the facility, along with provisions for rainwater harvesting, waste handling and recycling of STP treated water for landscaping are common environment sustainability measures taken which will gain further prominence in the post-COVID era.

Some trends from China suggest that there was a 20% sustained demand even after the lockdown was lifted, hence the surge will be expected to continue in India. Grade A warehousing, thus, becomes even more essential as these e-commerce firms scout for a better quality of warehousing that will reduce mentioned risks and maintain gold standards in daily operations, storage, and last-mile delivery.

A notable observation, hence, is that India faces a fundamental lack of Grade A warehousing with only under 90MM SFT of Modern (Grade A) warehousing stock. Meanwhile, China in the last 15 years has grown to 750MM SFT of Grade A warehousing stock.  Even if the overall consumption dips in the short term, there is a fundamental need for Grade A warehousing in India. With e-commerce demand pegged to see a high growth curve, the country would need Grade A warehousing space more than ever to service these requirements.

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