final delivery: the last mile - urban land...

Final Delivery: The Last Mile

ULI Fall Meeting: E-Commerce Session• Curtis Spencer, IMS Worldwide Inc.

• Chris Caton, Prologis

• Ben Conwell, Cushman Wakefield

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U.S. E-Commerce Retail Sales Forecast 2014-2018

Total US E-commerce Sales $B

2014 201 2016 2017 2018

Ecommerce is Growing

www.imsw.comForeign Trade Zone, Logistics and Supply Chain Consulting

Target fulfilled 30 percent of its online orders from

stores in Q4 as well as netting a record number of

online customers who picked up their orders in

person over the holiday season. Online sales for

Target in Q4 jumped 34 percent.

Amazon had its biggest

holiday shopping

season ever in 2015,

and grew 26 percent in

net sales.

Amazon Growth


• Predicted Amazon sales: 7.2 billion items in

2016, 12.6 billion items in 2020.

• Opened 28 sorting centers, 59 delivery stations,

and 65 Prime Now hubs.

• Expected to build a logistics supply chain that

others can use over next 10-15 years.

Infill Requirements and Geography Considerations


InFill Requirements and

Considerations

• InFill facilities are small(er) fulfillment centers

built in dense urban areas that are filled only

with the best selling items

• InFill facilities support delivery of goods to

customers who want one and two hour delivery

timeframes

• Infill land is located in a city and has usually

already been developed, but is now vacant and

can be re-purposed for new users


Cornerstone, “Anchor” Cities


1. New York City

2. Los Angeles

3. Chicago

4. Washington, DC/Baltimore

5. San Francisco

6. Dallas

7. Atlanta

8. Seattle

Ecommerce Fulfillment Center


Inside the “BIG BOX” Fulfillment Center


Complimentary “Second Ring” Cities


1. Charlotte

2. Boston

3. Philadelphia

4. Miami

5. Houston

6. Detroit

7. Phoenix

8. Minneapolis

9. San Diego

10. Orlando

11. St. Louis

12. Columbus


Last Mile Logistics

What is the Last Mile?


From the last point of

distribution or sortation to

the final destination at a

home or business.

Amazon, last mile means

within 2—4 hours. Next

Day = order by midnight,

get it by noon-5 next day.

WalMart, order today, receive

shipment tomorrow, second

day or three-to-five day

delivery depending on final

delivery zip code

Most others say it means:

order by noon, delivery today

before 8PM; inventory and

logistics have to be

compressed to accomplish

this!

Amazon Prime Air Boeing 767


“It’s not that we are trying to take over (delivery). We will

take all the capacity that the US Postal Service and that

UPS can give us, and we still need to supplement it.”

– Jeff Bezos

Last Mile Robotics


Amazon Prime Now


Over the last three years, Amazon has opened 60 Prime Now

Hubs and fresh delivery stations. Prime Now Hubs are

fulfillment centers built in dense urban areas filled with that

metro area’s specific bestselling items.

CHRIS CATON Senior Vice President, Research

ULI Fall Meeting

E-Commerce

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Five Observations on E-Commerce & Logistics Real Estate

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Global Phenomenon

Great diversity of customers

Yet, relatively few specific use-cases

High intensity of use

Consistent evolution of user requirements

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A Global Phenomenon

E-Commerce Sales, Global($, trillions)

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E-Commerce Share of Retail Sales(%)

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US WesternEurope

Japan China LatinAmerica

2010 2015 2020

Source: e-Marketer, Prologis Research Source: Goldman Sachs, Prologis Research

Diversity Among the Industry’s Customers

Source: Internet Retailer, Prologis Research 19

Distribution of E-Commerce Retailers by Online Revenues, U.S.(%)

Major OnlineRetailers

(>$5B) 40%

MidsizedRetailers

($250M-5B)47%

SmallerRetailers(<$250M)

13%

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Mega Brands

Large Brands

Emergent Brands

Transportation / Parcel Post

Third Party Logistics Providers

Yet, Five Basic Customer Profiles

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High Intensity of Use

E-Commerce Real Estate Footprint: 1.0 MSFBrick and Mortar Real Estate Footprint: 2.8 MSF

Real Estate Footprint by Retailer Type

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Well Worn Path of Customer Requirement Evolution

E-fulfilment operations require multiple major distribution centers, requiring multiple

millions of square feet across several (or many) distribution centers

SCALING PLATFORM

$250-$500M USD SALESINCUBATION PHASE

<$250M USD SALES

TAKE-OFF

>$500M USD SALES

Retailers tend to consolidate

their fulfilment operations into

a single 500K SF to 1M SF

facility

Operations either occur in the

existing supply chain (for brick-and-

mortar retailers) or leverage 3PLs

and/or exist within a handful of small

locations

Real Estate Requirements as Customers Scale their Operations

23Source: Internet Retailer

Note: Forward estimates growth individual company revenues at the expected national average pace. Actual results will be different.

Greater Capacity to be Local

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1 2 3 4 5 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

2010 2015 2020

US Europe Asia Lat Am

Major Online Retailers by Revenue ($, billions, all online retailers with >$5B annual online sales)

Considerable growth continues

High diversity of requirements

Shifting geographic needs

Implications

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Non-Solicitation - Any securities discussed herein or in the accompanying presentations, if any, with

respect to existing or potential joint venture funds, partnerships or other such entities, have not been

registered under the Securities Act of 1933 or the securities laws of any state and may not be offered

or sold in the United States absent registration or an applicable exemption from the registration

requirements under the Securities Act and any applicable state securities laws. Any such

announcement does not constitute an offer to sell or the solicitation of an offer to buy the securities

discussed herein or in the presentations, if and as applicable.

www.prologis.com

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http://www.prologis.com/

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