If rapidly emerging technologies + COVID have taught us anything about life in the U.S., it’s that the only constant is change, and sometimes very rapid change. This observation applies now more than ever to the last-mile distribution of goods shaped by the increasingly vast eCommerce industry. To clarify the terminology, “last-mile” in the context of goods delivery refers to distance and time it takes for goods to travel from a central hub such as a warehouse to the customer’s address. The term eCommerce refers to the increasingly ubiquitous form of purchasing by which goods are ordered online and shipped to one’s address or some other convenient location for pickup. Last week, the Virginia Chapter of the American Planning Association held its annual conference (virtual this year), and one of the sessions I participated in was “Primed for Changed: Last Mile Delivery Knocks on Retail’s Door.” This session was an eye-opener because it revealed just how rapidly goods delivery is changing and its implications for transportation and land use could be substantial. While Amazon is referenced in this blog a number of times, neither I nor RIDE Solutions is promoting this brand. But because Amazon has become so ubiquitous in the realm of eCommerce and has been driving many of the changes in last-mile product delivery, it would be nearly impossible to not mention this company.
Most of us have ordered something online at one time or another. And it is likely that during the height of the COVID-19 lockdowns, many of us had ordered quite a few things online, given that many of the stores were closed. Even if they were open, many of us were wary of being around crowds of any size, so we purchased more of our goods online. As a result of COVID, a paradigm shift which had been underway for a number of years now, involving a gradual stream of commerce away from brick and mortar retail outlets suddenly became a waterfall.
Much of the eCommerce phenomenon is driven by the retail powerhouse Amazon, but others, such as Wal-Mart, are jumping on the bandwagon too. This brings us to a brief discussion of the change in the delivery of goods. Prior to the advent of eCommerce, goods were typically shipped to a main distribution center, from which they were then shipped (usually by truck) to individual retail (brick and mortar) store locations. At that point, the customer would travel to the store and purchase the items he or she needed. With eCommerce, products are also shipped to large distribution centers, and in the context of Amazon, these centers are referred to as “fulfillment centers.” From these central locations, which often occupy close to 1 million square feet of floor area, products are then shipped to individual residential or non-residential addresses rather than to retail centers. The transportation/freight implication of this has been a glut of delivery vans dropping goods off to individual addresses.
But as you’ll soon learn, this giant distribution facility model of last-mile goods delivery is rapidly evolving and could profoundly reshape the traditional function of shopping centers and even, perhaps, “main street.” The trends – which are occurring now – include the following:
- Led by Amazon, “Prime Now Hubs” are smaller warehouses than typical fulfillment centers, which are being constructed in urban and suburban areas. Unlike the larger fulfillment centers described above, these may occupy up to about 50,000 square feet. Also unlike the larger fulfillment centers, these hubs focus on very short delivery time windows and serve a radius of about 15 miles. It is very possible that other companies may follow Amazon’s lead in establishing such hubs based more at the city level than at the regional level. Implications of this model, whichever firm adopts it, are that it would rely heavily on delivery vehicles to deliver products to addresses, much as is the case with the giant fulfillment and distribution centers. A possible trend associated with this “hub” model may spur the repurposing of former anchor retail space to fulfillment centers. The eCommerce phenomenon has resulted in the closure of many brick and mortar retail stores, including many anchor stores at shopping malls. Therefore, some of these former anchor stores may take on a new life serving as these hub-type facilities. It has been publicized that Amazon has been in talks with Simon Property Group Inc., which owns many retail properties across the U.S., to repurpose former Sears and JC Penney locations into such retail hubs. While such facilities will likely not revitalize shopping malls, they can at least re-establish some of their former anchor stores as employment centers.
- Another innovation in last-mile delivery is the “micro” or “nano” fulfillment center. This new paradigm focuses delivery at an even more localized level than the “hub” distribution model. Generally ranging in size from 600 to 10,000 square feet, the micro-fulfillment center can be a combination customer service and fulfillment center, which can easily occupy the space of a vacant downtown or neighborhood storefront. Rather than relying on automobiles to deliver goods to addresses, they can be delivered by bicycle, but there appears to be an increasing trend involving customers picking up their orders themselves. In urban settings, consumers could simply walk or bike to the fulfillment center and pick up their merchandise, or they could drive in an auto-oriented suburban or rural setting. The unfortunate trend of “porch pirates” stealing packages from people’s porches may drive the popularity of this new delivery paradigm. The intent for the creation of the micro-fulfillment center is rapid delivery and returns, lending themselves to greater convenience for customers.
Whether a major distribution/fulfillment center, a more localized hub model, or a micro or nano fulfillment center at the neighborhood level, it cannot be disputed that the eCommerce last-mile distribution system is making its mark on America’s transportation system. While the traditional brick and mortar retail destination has seen its heyday, it will likely not disappear. It is also very likely that the eCommerce trend will shape our regions, cities, and towns for generations to come, much as the shopping mall and the downtown department store before it, have. What impacts will these evolving last-mile delivery innovations have on land use and transportation in the long run? We’ll just have to wait and see.
