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Will Warehouse Construction Opposition Upend Online’s Growth?
More local governments are restricting or outright banning new warehouses that may be required to support the next stage of e-commerce growth.
Among the recent local uprisings, the Board of Trustees of the city of Deerfield, Illinois, in early February updated its industrial zoning code to prohibit fulfillment centers used for the parking or moving of trucks due to concerns about pollution and traffic congestion.
In Buckingham Township, Pennsylvania, the city’s planning commission also in early February delayed a vote on preliminary land development plans for a proposed 150,000-square-foot warehouse after a standing-room-only crowd at a town meeting raised concerns over traffic and noise.
In mid-February, the township of Hillsborough, New Jersey, asked county officials to follow a move by neighboring Middlesex County and conduct a regional study of truck and car traffic related to recent warehouse development.
“Warehouse proposals are impacting the entire state,” Hillsborough’s Mayor Robert Britting told My Central Jersey. “These proposals have a significant impact, not only for the town they are in, but all surrounding towns that lead to the major road arteries.”
Similar protests have erupted over the last year in Tacoma, Washington; Monmouth, New Jersey; Monroe, Georgia; Mount Pleasant, New York; and Perryman, Maryland. In some cases, the protests are over the tax incentives handed out to warehouse operators for the jobs the facilities bring. Also often cited are fears over declining property values due to the combination of pollution, public safety, and quality of life impacts.
A Wall Street Journal article notes that warehouse protests have been increasing in recent years.
“Nimbyism is much more of an issue,” Seth Martindale, senior managing director in CBRE Group’s Americas consulting practice that helps companies identify warehouse sites, told the WSJ. “People want next-day delivery but they don’t want to see a distribution center next to them.”
The warehouses may be needed to support e-commerce growth. Insider Intelligence has forecast that U.S. e-commerce growth will expand at a 10% rate over the next four years to surpass 20% of overall retail sales by 2027.
Property executives and e-commerce companies cite the benefits of jobs and tax revenues the facilities bring to the area. They also tout eco-benefits with local warehousing closer to residential areas, supporting shorter journeys and lower emissions.
The local resistance has resulted in longer delays and higher costs. Analysis by Prologis, the real estate investment trust company, concluded that “e-commerce requires three times more logistics space than brick-and-mortar sales because of piece picking, product variety, direct-to-consumer shipping and the need to process returns.”
Existing warehouses may also require higher costs to address community concerns. Some legislators are seeking to regulate emissions from mega-warehouses and promote the use of zero-emission vehicles.
Discussion Questions
Do local communities in most cases have a strong argument against allowing warehouses to open nearby?
Will community opposition be a minor or major hurdle toward building the warehousing and infrastructure necessary to support e-commerce’s growth and profitability?
Poll
Loading …BrainTrust
Nicola Kinsella
SVP Global Marketing, Fluent Commerce
Lucille DeHart
Principal, MKT Marketing Services/Columbus Consulting
It may complicate things – a little – but it’s hardly going to “upend growth”: there are always communities willing to accept development, whether it’s because the citizenry is powerless to stop it, or they actually want it. (And if it’s the latter, so much the better…it helps spread the wealth around).)
Spread the wealth? Not in my backyard!
Restrictions are disruptive and they will nudge operators to open in alternative locations, but they won’t stop the general trajectory of more warehouses and fulfillment centers being opened. Of course, if the alternative locations are sub-optimal then it may add to the costs and time of fulfillment which will ultimately impact consumers. I also think this is more of an issue in areas with high population densities; in states with more land (like Arizona) there is much more scope to open warehouses with a relatively small impact on local communities.
Ecommerce fulfillment centers have previously been able to open relatively quickly with little opposition. Investors wanted to sell and develop property, and communities wanted both growth in tax bases as well as employment opportunities. But certainly the warehouses aren’t ideal for all locations, and the tax growth and types of jobs don’t always meet expectations. There will be additional scrutiny and time required for site locations and building approvals, but it should not significantly impact online growth.
Online retailers are increasing use of new technologies, primarily automation and artificial intelligence, and will be using smaller warehouse spaces.
Micro-fulfillment centers will be on the rise, and represent a much newer and more novel concept. Micro fulfillment is often located within large cities in abandoned retail space, automotive garages or other near-obsolete facilities, so they don’t get in the way. They actually bring population and activity to deserted areas.
They enable close access to large numbers of consumers who now expect next-day or even same-day delivery. These facilities require the right technology to track and manage inventory and orders, and their success as an asset class will likely serve as a case study for how fully automated distribution centers can work on a larger scale. – Db
Nimbyism: That is when I want all the benefits of the development but none of the downsides.
I suspect most communities already have zoning laws in place to guide industrial development. What these challenges to e-commerce warehouses are is just something to protest against. Be assured that the warehouse developer wants an optimal location, not one that can be squeezed close to the local school or residential development.
No, I don’t think it is going to “upend” growth. While some communities may not want a distribution center, others will.
There will always be communities that want or need the jobs or tax base that a warehouse provides. And for those that don’t, Ship from Store can mitigate this challenge. There are many retailers taking a ‘store fulfillment first’ approach to ecommerce growth. So no, I don’t see this having a big impact on ecommerce growth.
It’s easy to blow this off as a minor complication, but the reality is that consumers have been concerned about the noise, air and traffic pollution caused by large trucks in their areas. As far back as 2015, we did a 360 degree study of the home delivery business. We asked retailers and consumers, separately, their top three challenges with increasing home delivery. Environmental concerns I’ve already described topped consumers’ list but barely moved the needle on the retailers’ sides.
My point is, it’s going to get more, not less intense, and it is not going to be limited to distribution centers. Amazon was wise to expand its fleet of small vans and (finally) change its packaging to be less cardboard heavy. Will retailers find places to put their distribution centers? Sure. But just know that this will not be the last environmental issue they face.
Upend is an extreme take, as it’s just some additional red tape. Take the bid in recent years for Amazon’s headquarters. It depends on which political narrative is most relevant to the moment unfortunately. Retailers are converting stores into distribution centers and other areas that aren’t too proud to beg for business will reap the economic benefits. When you consider the broader picture of increased smaller warehousing, that has the potential to reduce total carbon emissions by having a hub and spoke network.
The containment of warehouse expansion will amount to higher consumer prices. Retailers will create strategies around this hinderance and secure more remote facilities which will amount to longer routes and delivery timing. The extended transportation will be passed along through shipping fees or other pricing methods. Trucking routes may need to create a more “Amazon” local delivery method using vans or rental trucks to avoid weight restrictions and congestion regulations. Regardless, everytime the government tries to contain business growth, the consumer pays.
Well…do these communities want the jobs or not? The issue is a stereotypical “Not in my backyard” argument. We want the benefits of e-commerce (not to mention the stuff) we just don’t want the warehouses. Those should go…I don’t know, in the next county.
The hypocrisy of NIMBY is alive and well. But so are the very legitimate concerns about noise and pollution and congestion. I’d love a new warehouse in my town! But just up the road a piece, please. Where I can’t see it or hear it or suffer from any new traffic. Same for the new solar farm and windmills. We need new tax revenue! And lower energy bills!
We must have progress! Just not in my back yard.
Having 200 orders consolidated and delivered by one vehicle is far more efficient than having those 200 shoppers make trips to and from the store. Satellite warehouses should be a ecological and economic win.Plus a superior shopper experience from faster delivery.
There are unintended consequences, already being seen, when you use store shelves to fulfill ecomm orders. The biggest is your store mix gets diluted with ecomm items.
Specific to grocery, ecomm orders consist of larger sized items, more multiples and more multi packs. When you follow the sales data and offer an assortment that addresses both in-store shopping and online fulfillment, you will reduce in store facings and often variety and replace with larger ecomm items that are seldom purchased in store.
The right answer is a dedicated ecomm inventory in back of store in an automated fulfillment system or at a remote location. That ecomm inventory will reflect the unique characteristics of online shoppers. That leaves the store assortment optimized to reflect in-store purchasing preferences and wide assortment.
It’s normal and natural for densely populated communities to debate the desirability of large new distribution centers. If truck traffic adds to congestion and pollution, the gain of a couple-hundred jobs and (typically) subsidized tax revenue may seem like a poor tradeoff.
Broadly speaking, economic development and modernization is a positive thing, though, and warehouses pose fewer perils compared with heavy manufacturing plants. In regions with sufficient elbow-room, and access to rail and port facilities (like my adopted home town of Tucson, AZ) we have seen a surge of D.C. construction in recent years, with very little community pushback.