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March 7, 2021
BUSINESS BUSINESS COMPANIES ECONOMY EDITORIAL OP-ED OPINION POINTS OF VIEW Real Estate

P3: COVID-19 pandemic accelerates e-commerce and logistics revolution

P3 Logistic Parks (“P3”) presents the latest trends in the e-commerce and logistics sectors as predicted by futurologist Sean Culey – strategist, transformation advisor and external consultant to the company.

Covid-19 could be the rocket fuel of the commercial revolution of the 21st century. 2020 will not be known only as the year of the pandemic, but also the year when consumer paradigms shifted, the e-commerce tipping point was reached and the chasm from niche to mainstream was crossed. The last months have highlighted a significant increase in e-commerce, which has registered a spectacular evolution in record time, and 2020 is seen as a time of strong growth in this segment. Thus, e-commerce makes a major leap registering important figures globally, reaching 4.28 trillion dollars in 2020, an increase of 27.6% compared to 2019. As a result, Amazon manages to report a net sales revenue of 96, 1 billion dollars in the third quarter of 2020, 37% higher than in 2019. Except the United States, Germany is the largest market for Amazon, followed by the United Kingdom.

Sinziana Pardhan, Managing Director P3 in Romania, says: “The current coronavirus pandemic is set to change many of our existing paradigms, both socially, economically and technologically, having a major impact on our working and shopping habits by accelerating internet adoption, automation and cashless revolutions, as well as the transition from physical shopping to e-Commerce. Most certainly, many of the trends, behaviours, ways of working, and solutions that until recently seemed very futuristic, will become an integrated part of what we nowadays call the new normal.”

 

Europe catches up

 

Europe’s e-Commerce adoption is also growing at an incredibly fast rate, with an increase of 13.6% in 2019, and Amazon’s direct presence in the UK and Germany has no doubt driven a lot of this e-commerce growth as the two countries represent the largest markets on the continent. The UK is by far the largest B2C e-commerce market in Europe. Much more, Central Europe is fast embracing e-commerce, with the Czech Republic the fastest-growing e-commerce market in Europe. In 2019 alone, its e-Commerce market was worth 4.4 billion euros and was projected to expand at a compound annual growth rate of 16% to 2021. Although most parts of the old continent are fast embracing e-Commerce, Eastern Europe displays the lowest level of adoption, with less than 26% of shoppers using that channel in 2018, compared to over 85% in the UK. However, the region seems to be catching up fast as online retail sales in the Eastern European countries continue to grow at double-digit rates annually.

 

A glimpse on the future of logistics

 

Due to the convergence of three major forces – increased efficiency through automation, better planning through AI, and the ability to facilitate small-scale production of goods and provision of services using robotics and 3D printing – a new type of digital supply chain is emerging: the PAL supply chain – Personal, Automated and Local. This convergence of new technologies is being used to create a logistics network capable of providing an on-demand, e-Commerce marketplace in both urban and suburban locations. For instance, just like Amazon, competitor JD.com is prepared to roll out very similar solutions such as automated warehouses, autonomous delivery drones and road robots. Furthermore, the innovation hub of the Chinese retailer is working on building a network of underground tunnels to create a tube-logistics network capable of moving goods from its mega-warehouses to smaller, more regional or urban fulfilment locations, with the last mile of the delivery to be completed by road robots or delivery drones.

 

Europe’s challenge: the growing demand for logistics services

 

Europe is facing a growing demand for logistics services but a diminishing supply of logistics land. Much more, many cities are undertaking climate change initiatives that aim to reduce the number of vehicles in city centres, either by placing congestion charges on them or through pedestrianizing the centre and building cycle lanes, which creates an ever-increasing demand for the rapid, almost 24/7 delivery of goods and services, but limited space to store the goods, an inability to demolish and rebuild, and an already overloaded road infrastructure system. To meet this new wave, logistics needs change and the answer could stay in repurposing the past – in this case, the partial or even complete transformation of some commercial buildings.

 

Going back to basics – the tube station

 

Traffic jams are accentuated in cities, with goods transport making up a large part of the traffic volume in these metropolitan areas. A tube-logistics network could be the answer for several European countries – and companies – as a network of pneumatic, pressurised tubes was used to transport items across some European cities for hundreds of years (pneumatic tube networks gained acceptance in the middle of the 19th century until the end of the 20th century, and were used to transport small, urgent packages such as mail, paperwork, or money over short distances across five cities – London, Vienna, Berlin, Paris and Prague). Now, a number of new projects across Europe are going back and revisiting the idea. Major European cities can benefit from such perks by repurposing disused underground/metro lines or expanding the disused pneumatic tube lines and could create a 24/7 logistics pipeline that links together the edge-of-city fulfilment centres with a network of urban warehouses designed to service the local community.  Perhaps the biggest underground freight mega-project is the Cargo sous terrain (CST), which will connect the major centres of Switzerland starting 2031.

 

Repurposing Car Parks: Underground Fulfilment Centres

 

According to the United Nations, 55% of the world’s population currently lives in urban areas. By 2050 that figure will have risen to 68%. Moreover, the growth in the global population means that by 2050 an additional 2.5 billion people will be living in urban areas. But while the cities grow, so does the amount of traffic causing congestion, carbon emissions, poor air quality and ultimately, climate change. Also, once cars become autonomous and electric, they will also become something people hire by the journey, rather than own as an asset. This means that vehicles will be constantly used rather than parked up, and this scenario involves the constant use of cars and a considerable decrease in the actual parking spaces usage time.

As a result of this transition, the need for massive parking spaces will decrease, creating a real opportunity to solve the puzzle of where to locate the required urban fulfilment centres. Furthermore, the parking lots in question can be repurposed as urban micro-fulfilment centres that form a connected network of hubs served by the logistics networks of the pneumatic pipes mentioned above. The idea is already in use. In Paris, for example, Chronopost operates two underground facilities: the first was opened in 2005 in a former car parking just below Place de la Concorde, and the second, which was opened in 2013, is located in Beaugrenelle under an existing building. Another company that took advantage of this opportunity is the Israeli start-up Fabric, formerly called CommonSense Robotics and newly relocated to New York more than a year ago. Fabric has combined the technology of autonomous robotic storage systems with the infrastructure of underground car parks and intends to create a network of connected micro-fulfilment centres, between city centres, through the underground car parks that have been redesigned to become automatic fulfilment centres. In December 2019, the company opened its first such centre, located right under the Shalom Meir tower in downtown Tel Aviv: an 18,000 square meters space with a height of 11 meters, ambiental and controllable temperatures for fresh items storing, from where the company can pack and deliver goods in less than an hour.

 

European supply chain “PAL” – from prediction to reality

 

The European supply chain PAL has, therefore, the potential to become reality. Through a mix of state-of-the-art technologies such as AI, robotics or autonomous vehicles, together with refurbished and connected infrastructure – disused properties, underground car parks, tunnels or pneumatic pipelines – countries such as Germany, which show significant growth prospects in the e-commerce segment, will be experiencing soon an increasing pressure on behalf of end consumers to offer fast and cost-effective delivery solutions.

 

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