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More E-Commerce, More Storage Needs, More Storage Space

E-commerce has been attracting a lot of attention and developing in Turkey, especially since the pandemic. While conventional retailers sell through e-commerce in addition to their stores, SMEs that have never sold retail before and even individuals with no commercial experience started to sell through e-commerce. This development of e-commerce increases the need for logistics for e-commerce.

E-commerce Logistics

Although “transportation” is the first thing that comes to mind when “logistics” is mentioned in many places or only “transportation” is mentioned when “logistics” is discussed, as can be seen in the link https://www.eticaret.gov.tr/cevrimiciegitim/lojistik-entegrasyonu-36, “What is E-commerce Logistics?” for the question “E-commerce logistics is a process that enables the management, control and storage of the inventories of e-commerce companies that offer online shopping experience.”, I was very happy that the first thing that comes to mind when it comes to “logistics” is “storage” and the emphasis on “warehouse” (honestly speaking, I said “let the envious ones crack”).

Logistics for e-commerce is a process that starts with the customer placing an order, continues with fulfillment operations such as receiving, stocking, picking, packaging, value-added operations in the warehouse, and finally ends with quantity-based delivery (distribution) from the warehouse directly to the customer (or consumer) (includes returns if necessary).

More E-Commerce, More Storage Needs

90 percent of e-commerce is logistics and especially “fulfillment” operations in warehouses. Trade is virtual (e-commerce) but logistics is not. Logistics for e-commerce is the process where virtual trade, i.e. e-commerce, becomes reality. Therefore, “fulfillment” operations and distribution in the warehouse ensure that the virtual sale becomes a reality.

Many individuals who previously used a room in their home for storage, and many SMEs who used a small space in their shop or workshop for storage, now need more storage space and even want to outsource their own packing and shipping to third parties.

Products must be stored correctly so that they are not damaged, missing or lost; stock management must be done correctly so that “out of stock” is not said, which leads to lost sales; products must be packed correctly so that there is no damage on the way from the warehouse to the customer; products must be packed correctly so that excess shipping costs are not paid; products must be collected correctly so that the wrong product (different color, different size, different feature, less quantity, etc.) does not go to the customer. All this is done in the warehouses, and the customer, who actually makes a virtual purchase by seeing it on the screen and ordering it, is satisfied only when the virtual trade becomes a reality, that is, when the product is delivered.

More E-Commerce, More Warehouse Space

E-commerce may need (use) 3 times more storage space than traditional retail.

According to CBRE, 1.25 million ft2 (116,000 m2) of warehousing space may be required for every 1 billion dollars of e-commerce sales and according to Knight Frank, 1.36 million ft2 (126,000 m2) of warehousing space may be required for every 1 billion euros of additional e-commerce sales. Based on the data of these two firms specialized in logistics real estate, for every 30 billion TL of e-commerce sales in Turkey, at least 120,000 m2 of storage space may be required. Accordingly, there should be approximately 2.2-2.4 million m2 of e-commerce warehousing space in Turkey for e-commerce products worth approximately 550-600 billion TL stored and distributed. Is there this much storage space for e-commerce? It is natural that there is none for e-commerce while there is none for normal trade.

According to the study of Prologis, one of the important companies in logistics real estate development, a classic retailer with sales of 1 billion dollars needs approximately 30,000 m2 of logistics space, while a company with e-commerce sales of 1 billion dollars may need 93,000 m2 of logistics space. Accordingly, e-commerce may need (use) 3 times more storage space than classic retail.

E-commerce warehouses have more varieties (SKUs) in large quantities, e-commerce warehouses have much more automation such as conveyors and sorters, e-commerce warehouses (fulfillment) have more packaging, etc., goods acceptance areas are larger due to the acceptance of goods from many more suppliers, shipment areas are larger due to the fact that distribution will be made to many more points, and shipment areas are larger due to the 8-10 in conventional retail sales. The need for more warehousing space in e-commerce warehouses (fulfillment), the larger size of the goods acceptance areas due to the acceptance of goods from many more suppliers, the larger size of the shipment areas due to the distribution to many more points, and the returns of 30-35% in e-commerce as opposed to %8-%returns in conventional retail sales, reveal the need for more storage space in e-commerce.

According to a study conducted by CBRE, a specialist in logistics real estate, the shortage of storage space supply in the world is also valid for e-commerce storage space, and e-commerce companies should either find (create) alternative storage areas and diversify different non-constructed real estate alternatives that can be used as storage space or use the storage spaces they have more accurately and efficiently in order to meet their needs in the short and near term. The “Gray Storage” solution developed by DepOrtak will enable finding (creating) alternative storage areas and diversifying the real estate locations that can be used as storage space.

According to the Knight Frank report, trading companies that will prefer the distribution model of being much closer to the customer from large warehouses outside the city can use 24,000 m2 of in-city storage space for 1 billion Euros of e-commerce sales. DepOrtak can realize this with its “Last Mile Storage” solution.

Logistics for e-commerce and warehousing, in particular logistics, is the process where virtual trade, i.e. e-commerce, becomes a reality.