How e-commerce is changing the warehouse market

Good morning. My name is Tomek Szpyt and welcome to another podcast in the 7R.Blog.On series. My guest is Aleksander Kuśniewski – a business development director at 7R. Good morning.

Good morning.

Aleksander, there’s a trend that I think we’re all seeing, though, that retail has accelerated.

Yes, yes.

How has this acceleration translated into the warehouse market?

And we need to stay ever closer to the trends that are in the market for an expanding share of e-commerce in our everyday shopping habits.

We are seeing ourselves an increase of interest in the product, which is urban warehouses. We are going to go into cities more and more. We will be more and more visible when it comes to the urban fabric.

What challenges does this pose for a developer when it comes to entering with a warehouse that may be associated with a facility that is located somewhere outside the city? Just closer to the city centers.

It’s definitely a social responsibility. After all, we have neighborhoods. The neighbors can protest too. We have to convince them that our warehouse will fit in with the surroundings, that it will not be a hindrance – and it may turn out that it will be a convenience, that it will be aesthetically pleasing and nice-looking enough not to disturb the harmony of the city. We are in such a good situation that we often have buildings intended for warehousing, for warehouse services – more and more often it will be on the basis of demolishing some old buildings, old factories – and simply replacing them with a modern building. This also makes it a little easier for us to convince the environment of the need for such investments. On the other hand, probably sooner or later these warehouses will turn out to be useful for the neighbors. Maybe it will turn out that there will be some kind of delivery point here. It may turn out that it will be easier to deliver fast products even within minutes or hours, so I think that in this respect it is quite good. Of course – everyone will be afraid of generating some increased truck traffic. However, these deliveries can also be organized in many different ways.

As a director responsible for development in 7R – where, in which areas do you see growth opportunities for the company?

The potential for logistics is enormous. In Poland there is probably half a metre or 0.6 square metre of warehouse space per one citizen. In the Czech Republic it is between 0.7 and 0.8 and in Germany, from what I have read, is one metre or even 1.2 metres. On the other hand, a lot of warehouses in Poland were actually built in response to the demand of the German market, so our supply of space is also somewhat distorted. The potential is huge in every area. The potential is huge also in the area of large warehouse space – big boxes servicing large logistics. Every order that comes to us goes through three or four warehouses on its way. Be it courier companies or companies which deliver products. Let’s not forget that later on we also have to handle returns. The package that we ordered with four pairs of shoes – it goes back to a completely different warehouse with three pairs of shoes. We need about five warehouses for every order, for every click we make on the Internet. We are going to click more and more, so the first area is definitely the big warehouses, the big logistics. What we just talked about – getting warehouses into cities. We’re going to want it faster and faster. Probably ten years ago, when we were connecting to the Internet via Telekomunikacja Polska – sorry more, twenty years ago – it was pretty cool if the product was available within 5-7 days. Now if it’s not available within one to three days, we’re convinced that someone is making a fake offer. Now I’m kind of joking like that. What we just said – that we will need it on the same day or within a few hours. We need to get closer to the people with the magazines as well, so this kind of format… Maybe it won’t be going into city centers. Maybe the answer to this will be the existing commercial facilities, stores. As if for this already really last game, but we will have to be on the ring road of such a city – with the possibility of supplying these points also within minutes, hours. If it will be serviced. This is the second area. The third area – the databases. In order to serve such a huge traffic on the Internet – as a response to all the regulations – we will probably also need databases and we will need server rooms. That’s also a direction that we as a developer are responding to.

You mentioned ordering four pairs of shoes and returning three pairs of shoes. This way of doing things is actually very taxing because of the environment. All those packages of shoes have to be transported somewhere. They go through these three or four warehouses. They reach the customer. The customer chooses and the shoes go back somewhere else. This only results in a carbon footprint. How can you influence the reduction of the environmental impact of logistics and the warehouse market in general? What role can a developer play here?

We are already doing this. It’s not a question of: “What could be the role of the developer?”, but “What is the role of the developer?”. This is not the future. Let’s not look at decarbonization as something that has to come. It’s something we’ve been doing for a long time. What I’m most excited about is the simple solutions that are being put in place that are having a lot of effect. There are destructifiers which mix surfaces and make us heat the entire warehouse volume evenly. There is additional insulation, additional wall thickness, roof thickness. There are seals on the docks. These are very many elements that as a developer trying to place our product in the A++ category that we are already doing. These are visible savings in terms of energy consumption. I think that with today’s situation, with what we are seeing in the market – an increase in the cost of this energy. Anyway, on the one hand the increase of energy costs and on the other hand a kind of growth of awareness of companies about the need to care for environment. We can see that the paths of expectations regarding the climate and the economic path have met, that now the rates of return even for photovoltaic installations are no longer in tens of years, but these are real savings that are easily shown to customers that it makes sense.

Can you point to solutions that will affect savings for tenants? Later on for investors, later building owners, I don’t know…. in a year, two, three, five? Where to further tighten this savings, environmental screw? Where can we look for ideas here? In which areas?

In terms of solutions we can still do something…. A few months ago we joined the Proptech Foundation association. A management company that is responsible of innovation. They introduce some innovative products, often the startups, the companies that are trying to come up with something new. And we participate in that. We catch such innovations. The future can surprise us very quickly. I think 7R was the first company to bring LED to the warehouse standard. Once upon a time – this is not such a distant past. Let’s say ten years ago a fluorescent lamp was a basic piece of equipment in every warehouse. And aquariums too. 7R was the first company that introduced LEDs on a standard. Now we are the first company to introduce LEDs with the DALI protocol. This is a control that allows dimming of lighting depending on daylight or generated motion. And this is one of such innovations, for which until now the customer had to pay extra. We come out with every such innovation. We try to come out a bit ahead. We try to show the customer: “Hey, listen. With us you don’t have to pay extra for this. We give it to you as a standard, and thanks to this you gain an additional point in your classification. In the classification of how you take care of your employees. How you care for your employees, how you care for the environment – this building is aging slower. People work better. As people work better, they’re more efficient.

New solutions in warehouses will continue to be applied? Warehouses will evolve and certainly that evolution probably won’t stop, huh?

The warehouse will remain a warehouse. The challenge facing logistics in general – is the staff resource. Already our customers have such systems as MiniLoad and AutoStore. This is full automation. These are the robots. Ten of these robots consume as much electricity as a vacuum cleaner, so we minimize energy consumption. We maximize the effect when it comes to AutoStore – these are thousands of packages that we would normally have to store in a huge area. Here we can intensify the use of this building volume.

Thank you very much. Our guest today was Aleksander Kuźniewski – a business development director in 7R. I would like to invite you to another podcast in the series 7R.Blog.On.