Location, location, location. That was the central theme in NAIOP‘s E.CON Panel End User’s Perspective on Site Selection moderated by Scott Belfer, senior vice president for CBRE, Inc.
“The drivers on where to put your distribution center are time in transit, transportation costs, where are we now, where do we need to be next, then we look at infrastructure, tax, labor and lease rates,” said panelist Kunal Thakkar, senior vice president of operations for Newegg.
Panelists agreed across the board that meeting customer demands for deliver times was the key factor in site selection. And since 90% of consumers want their e-commerce goods delivered within two days, that means the distributions centers need to be as close as possible to the greatest number of customers to cut down on distribution costs.
Mark Holifield, senior vice president for The Home Depot spoke of different optimal flow patterns of delivery for his products. “A $2.50 bag of cement isn’t going to ship the same way a $124 saw blade is,” he said. Some products are going to ship from stores on trucks, items like appliances will ship from vendors and take longer. But we look to optimize that flow network to get the fastest delivery.”
“Consumers are expecting free shipping,” said Doug Armbuster, senior vice president/regional managing director for IDI, Inc. “They want convenience, but in the end they want the best deal, so we’re talking about one to two-day ground.”
The group agreed there is a lot of hype surrounding same-day delivery. “But less than 10% are concerned about paying a premium for that kind of shipping,” said Armbuster. “There is a market for same-day, but it’s a small segment.”
A lot of stock was placed in space for flexibility: addition for mechanization, lunchrooms and 30% more parking for seasonal staff.
“Two or three years back we did not know how the business would change,” said Thakkar. “The key is flexibility. Once you sign that 10-year lease, you’re in. Consumer demands are changing so rapidly and you have to be able to change with that demand.”