Retailers have implemented numerous strategies to keep up with the steady uptick in e-commerce sales the sector has experienced since the onset of the pandemic.
While the most notable approach has been a dogged pursuit of traditional warehouses in primary consumer markets, real estate stakeholders have also become more creative.
From vertical warehouses to store fulfillment, retailers have stepped outside traditional fulfillment models to place inventory closer to online shoppers and meet demands for same-day, next-day, and two-day shipping.
Micro-fulfillment has gained significant traction since the e-commerce boom began. A micro-fulfillment center places the most popular SKUs in a small fulfillment center - usually less than 10,000 square feet - located centrally within a population center.
Micro-fulfillment centers have popped up in various places during the pandemic, such as disused retail or office spaces. Additionally, retailers or logistics providers can bring these facilities online within weeks, allowing them to quickly alleviate stress on fulfillment networks.
Since the expansion of micro-fulfillment happened in response to unexpected growth during the COVID-19 pandemic, some retail stakeholders have wondered about the permanence of the fulfillment model. Yet, even as the U.S. moves away from restrictive COVID-19 safety measures, the sector still managed 14.2% growth in 2021. In response, micro-fulfillment doesn’t seem to be going anywhere.
If industrial real estate were widely available in key markets, perhaps that would put a damper on the popularity of micro-fulfillment. But warehouse vacancy remains at record lows, while industrial real estate demand remains at all-time highs. As a result, even conservative estimates place any sort of balance of supply and demand in warehousing about two years out. This factor should give micro-fulfillment plenty of time to normalize itself in fulfillment networks.
Research and Markets estimate that micro-fulfillment center installations will grow more than 20 times by 2030, with more than 80% of those installations deployed in North America. This data suggests that micro-fulfillment will become a staple of e-commerce fulfillment practices within the next few years.
Micro-fulfillment centers may provide a convenient way to quickly get top-selling goods to consumers, but that doesn’t make them right for every e-tailer. To determine if micro-fulfillment is right for your online sales, explore the advantages and disadvantages of the model.
Some of the advantages of micro-fulfillment centers include:
Of course, micro-fulfillment is not without its drawbacks. Some of these include:
Partnering with a third-party logistics (3PL) provider can help you manage increased fulfillment network complexity and mitigate any other risks associated with micro-fulfillment while still allowing you to reap all the benefits.
Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, founded by Frank P. Crivello, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s needs.