Fulfilment centres and retail strategy
Pick-up and delivery services inside malls a win-win for e-commerce and physical retail. By Pakapon Utaobin
As e-commerce keeps growing, more traditional retailers are embracing strategies that include omnichannel marketing, downsizing physical stores and reinventing new retail store formats to enhance their sales revenue and profit.
Nevertheless, these omnichannel retailers still need a physical space to show products and a fulfilment centre where goods are stored, managed, packaged and shipped to online purchasers. The concept of the shopping fulfilment centre — which provides a combination of retail and fulfilment services — could help retail developers stay relevant and survive in the e-commerce era.
Online shoppers are not only demanding discounts and free delivery, but also expecting to receive their orders within a day or two. A shopping fulfilment centre could benefit both retail landlords and tenants. That’s because a last-mile fulfilment centre could occupy a large space of more than 1,000 square metres in a mall without any need for a storefront, and also help retail tenants minimise the time and cost of delivery.
Because a fulfilment centre does not need an attractive storefront, retail landlords can allocate dead spaces or less-prime space on higher floors to fulfilment services. The only requirement for a fulfilment function is to have appropriate access to a loading dock area and pick-up and collection points for customers.
At present, CBRE is seeing some synergy between retail landlords and delivery companies starting to take place. Most of the retail malls in Bangkok — among them CentralWorld, MBK Center, Future Park Rangsit, K-Village and The Paseo — have at least one delivery service company located inside their mall. These delivery companies know that many omnichannel retailers in the malls are demanding a packing and delivery service.
In terms of location, retail centres and fulfilment centres have two main criteria in common: they want to be near a dense residential and commercial area to serve nearby communities and located on a main road with good connections such as highways and expressways to support transport.
As mass transit stations do not provide much benefit for fulfilment service operations, retail centres in densely populated areas that are far from mass transit lines could still be attractive as fulfilment centre locations.
For this reason, retail landlords that own many outlets across the region have more advantages in attracting fulfilment companies. This is because their locations allow for the creation of an integrated network for storage and transport of products through many channels.
In 2017, Kerry Express — the second largest delivery operator in Thailand — partnered with OfficeMate to provide delivery service points in 80 branches of OfficeMate in Thailand, while Thailand Post partnered with Big C in 2018 to operate in 40 branches of Big C Supercenter across Greater Bangkok.
In general, it has become difficult for fulfilment service providers to find attractively priced land to develop a last-mile centre near an urban area.
On the other hand, retail landlords are seeking tenants to occupy vacant spaces. Therefore, partnerships between retail landlords and fulfilment service firms could be an interesting collaboration for both parties to innovate a future retail format.
Because a fulfilment centre does not need an attractive storefront, retail landlords can allocate dead spaces or less-prime space on higher floors to fulfilment services.