Pop-up Warehousing for Retail Support
It’s undeniable: the internet has completely changed consumer purchasing habits. The explosion of e-commerce vendors (and traditional vendors moving into the digital realm) has coincided with an environment of immediate gratification.
Consumers want to order goods online, they want those goods delivered quickly, and they’re willing to pay for this speed and convenience.
While a boon to consumers, this demand for prompt home delivery poses massive final mile logistical challenges to retailers. In an attempt to tackle this challenge, retailers have begun to consider temporary, pop-up warehouses as an expedited storage solution, opening opportunities for commercial real estate investors.
In the following article, I’ll discuss some of the items investors and retailers should consider with pop-up warehouses. Specifically, I’ll dive into each of the below topics:
● What’s a Pop-up Warehouse?
● With Final Mile, Smaller Can Be Better for Retailers
● Challenges to the Pop-up Model
● The Pop-up Warehouse Path Ahead
What’s a Pop-up Warehouse?
Similar to pop-up retail, pop-up warehouses offer companies an ad hoc, pay-for-the-space-you-need solution for storage requirements. Businesses can stock items they’ll need for peak season in areas with high customer density, thus creating a temporary solution in a temporary space.
While every pop-up warehouse agreement will have slightly different terms, the following common characteristics exist across the industry:
● No annual contracts or minimum inventories
● Scalable storage space to flex to your dynamic storage needs
● Guaranteed shortened delivery times within pop-up warehouse networks
● Optimized seasonal operations (that is, seasonal demands are expected - and accommodated - so do not incur additional costs)
Local commercial real estate professionals can help you identify the ideal pop-up warehouse locations for your market and unique situation - need help finding reliable ones in your area? Drop us a note!
With Final Mile, Smaller Can Be Better for Retailers
More precisely, smaller and more storage space can be better for final mile solutions. In other words, retailers gain more bang for their buck using a larger network of smaller warehouses in close proximity to customers as opposed to a handful of large, isolated distribution hubs.
Expedited shipping is inherently costly for both buyers and sellers, but surveys consistently demonstrate that customers are willing to pay more to receive their goods quickly. Consequently, businesses that can provide this prompt shipping have a higher likelihood of both gaining and retaining customers.
Recognizing this, pop-up warehouses provide retailers a cost-effective and logistically efficient means to support their customers by A) reducing shipping costs, and B) reducing shipping time. It’s easier - and faster - to ship to customers from smaller warehouses in urban / residential areas than from massive warehouses in outlying areas.
Bottom line, it costs far less to rent and stock a smaller, pop-up warehouse where customers live during peak seasons than to ship from large, centrally located fulfillment hubs. Furthermore, some retailers have actually combined pop-up warehouses with retail space, a strategy that can completely eliminate the costs of shipping.
Challenges to the Pop-up Model
In analyzing any deal, investors do themselves a disservice by ignoring the inherent challenges to a given strategy. For commercial real estate investors and retailers considering pop-up warehousing, it’s just as critical to understand the challenges to this strategy.
● Short-term leasing: Many commercial landlords won’t consider the short-term leases inherent to the pop-up model. However, pop-up warehouse networks have created solutions to this problem, with retailers essentially sub-leasing pop-up space from these networks - rather than signing a long-term lease themselves.
● Location: Successfully employing the pop-up warehousing model relies on finding a space in close proximity to customers, thus cutting down on final mile delivery time and cost. As such, retailers need to actually know where their customers live, which requires “hot spot” analysis and network optimization.
● Labor: Unlike the trends towards automation in many industrial spaces, pop-up warehouses are generally low-tech spaces. As such, these spaces rely on temporary labor to sort and ship goods, which poses a potential administrative challenge. Once again, working with a CRE professional, you can access a pop-up warehouse network, providing you the benefits of this solution without the headache of personally staffing and supervising these spaces.
Feel free to drop us a note if you need help analyzing pop-up warehouse needs or finding a local pop-up network. This analysis can seem challenging, and we’re happy to help!
The Pop-up Warehouse Path Ahead
For today’s retailers, limiting shipping distance is absolutely critical to minimizing final mile delivery expense.
By properly analyzing where their customers live, businesses can identify optimal locations for pop-up warehouses, thus bypassing the increased distance, time, and cost of traditional warehouse solutions.
Additionally, pop-up warehouses do not need to exist in final mile isolation. In other words, retailers employing pop-up warehouses can also pair them with other creative delivery solutions like pick-up lockers, local delivery networks, and warehouse/retail hybrids.
Whatever path retailers choose, integrating pop-up warehouses creates flexibility to both increase delivery speed and trim overhead storage costs.
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We recognize that, even after outlining the above information, tackling final mile warehousing challenges in the commercial real estate world can seem daunting.
That’s why we’re here to help. The Pocket Broker team lives and breathes commercial real estate, so drop us a note to see how we can help you achieve your unique objectives!