the changing world of trade

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Navigating New Channels to Success As technology, demographics and infrastructure continue to accelerate the speed and efficiency with which goods are produced and moved among world markets—global supply chain strategies are being revisited and new models are emerging.

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  • 1.THE Changing World of Trade A Cushman & Wakefield Research Publication1GLOBAL ECONOMIC OVERVIEW 2E-COMMERCE: NO. 1 GAME CHANGER7GLOBAL TRANSPORTATION15 REAL ESTATE IMPACTS 28 CONCLUSION: WINNING REAL ESTATE STRATEGIES2013

2. the Changing World of TradeA Cushman & Wakefield Research Publication Global Economic overviewE-COMMERCEGlobal transportationChanging World of Trade Navigating New Channels to Success As technology, demographics and infrastructure continue to accelerate the speed and efficiency with which goods are produced and moved among world marketsglobal supply chain strategies are being revisited and new models are emerging. If global trade continues to grow by an average of 9.5% per year for the next 10 years, about $2.7 trillion in new goods will be added per year to the global pipeline. By 2021, an astounding $45 trillion in goods could be crisscrossing our planet every year. That compares to $6.5 trillion in 2001. As Cushman & Wakefields White Paper on the Changing World of Trade explores, technology and demographics are dramatically altering global labor and consumer landscapes which is driving change across commercial estate sectors, including warehouse and distribution, manufacturing and retail. Rising wages in some Asian countries, increasing transportation costs and advanced automation have some manufacturers rethinking their business models and moving all or parts of their operations back to North America or Eastern Europe or emerging new markets. As e-commerce takes hold, retail is undergoing a revolution and brand new real estate strategies are emerging. OmnichannelingREAL ESTATE IMPACTSCONCLUSIONallows shoppers to purchase virtually anything at anytime from anywhere. Some experts estimate that up to 25% of all retail sales in both the US and UK will take place through online channels by 2020. Retailers and mall developers are responding with futuristic store formats and sophisticated delivery systems including highly automated distribution centers. Strong economic growth coupled with rising incomes have made Brazil and China dominant players on the global scene. With European and American brands expanding their presence in these markets and cross-border retail on fire around the world, there is a growing urgency to accommodate changing distribution networks. Major markets around the world are positioning themselves to capitalize on trade opportunities by investing heavily in infrastructure improvements to ports, airports, highways, railways, industrial parks and intermodal hubs. Market leaders include Toronto,Vancouver, Chicago, Miami, Berlin, Moscow, Upper Silesia, Shanghai and Hong Kong, to name a few. Meanwhile, governments are focused on negotiating new trade agreements and easing foreign direct investment regulations. Winning strategies in our Changing World of Trade will demand flexibility and diversity, collaboration, automation, technology -- and a keen balance of scale and scope, most likely through consolidation and vertical integration.2 3. the Changing World of TradeA Cushman & Wakefield Research Publication Global Economic overviewE-COMMERCEGlobal transportationREAL ESTATE IMPACTSCONCLUSIONGLobal Economic overviewThe Trajectory of Global Trade Global trade has been increasing at an average rate of 9.5% per year for the past 63 years.The latest surge in growth began in 2002 on the heels of China joining the World Trade Organization in 2001 when exports were at a then-record high of $6.5 trillion. Since then, global trade has nearly tripled. In 2010 and 2011, even as economies struggled to recover from the global recession, world exports surged by almost 21% each year, jumping from $12.5 trillion in 2009 to $18.3 trillion. If global trade continues to grow as some expect by an average of 9.5% per year for the next 10 years, it would add about $2.7 trillion per year in new goods to the global pipeline. By 2021, an astounding $45 trillion in goods would be moving around the world. Even at half of this pace, exports would reach nearly $30 trillion in 2021. WorLD GOOD EXPORTS (1948-2012) 20,000 18,000 16,000Billions of US Dollars14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012SOURCE: World Trade Organization$2.7 Trillion9.5% If global trade continues to grow by an average of 9.5% per year for the next decade, $2.7 trillion in new goods would be added to the global pipeline per year. Turning Point: 2014 For global trade to sustain high growth rates, the global economy must first recover. It was on the verge of taking off after two years of sluggish expansion following the 2007-2009 recession when the U.S. and European sovereign debt crises suddenly slammed the brakes on growth. With 2013 growth projections in the U.S., euro zone and Asia Pacific still falling short of the recovery pace set in 2010 and materially slower than those seen during the 2002-2007 period, growth remains constrained, although green shoots are emerging in countries and markets around the world. As governments work to resolve their debt issues, consumers and businesses will continue to gain confidence and act on significant pent-up demand. Spending and hiring will gain traction. Reinvigorated demand will feed into the global manufacturing system, driving healthy output in many mature and emerging markets, and stimulate the flow of goods around the globe. The result will be stronger growth in global trade in 2014 and a projected return to that long-term growth trend of roughly 9.5% per year.1 4. the Changing World of TradeA Cushman & Wakefield Research Publication Global Economic overviewGlobal transportationE-COMMERCEREAL ESTATE IMPACTSCONCLUSIONE-COMMERCE: No. 1 Game ChangerOmni-Channel: The Future of Retail Retail today is undergoing seismic change, as it becomes more global, urban and specialized due to the rapid rise of online shopping, mobile technology and changes in consumer spending patterns. These trends are driving a retail revolution that has made the logistics of delivering goods to customers a top priority. Omnichannel requirements are putting new inventory, location, transportation and space cost-control pressure on retailers and shippers at a time when they are expanding into new continents and adapting to the challenges of retailing in increasingly dense cities. In addition, because of the unique requirements of each shopping channel and changing consumer demands, retailers will be expected to constantly adjust their strategies, optimizing costs and service levels within the integrated cross-channel experience.As more consumers shop through multiple channels, retailers are taking action in greater numbers to integrate their online and physical store presence. Consumers are comparing products and prices online at home or price shopping and comparing variants in a physical store. While in the store, theyre using their mobile phone or tablets to compare selected goods with other store availabilities. Return strategies must offer maximum ease and flexibility, allowing consumers able to use both in-store delivery and parcel post if they are dissatisfied with a purchase. In some retail sectors, experts believe that up to three-quarters of all transactions will be completed via multiple channels before the end of the decade. For the customer, the expectation is that the process inventory, price and service level will be one stable, consistent experience.GLOBAL E-COMMERCE GROWTH PROJECTIONS: COMPOUND ANNUAL GROWTH RATE 2011-2016F 70% 60% 50% 40% 30% 20% 10%11.0%11.2%25.4%11.4%22.7%24.7%57.3%UK0%US - TotalUS - MobileJapanBrazilChinaIndiaSOURCE: Cushman & Wakefield, Forrester Research2 5. the Changing World of TradeA Cushman & Wakefield Research Publication Global Economic overviewE-COMMERCEGlobal transportationKEYS TO ON-LINE SUCCESS E-commerce retail leaders identify the following as being critical success factors: 1. Scalability: Ability to leverage inventory to offer a wider range of products and services cross channels to a larger market (multi-country, multi-consumer). 2.echnology: Ability to manage online T traffic, the payment and processing of orders and the entire e-fulfillment supply chain, which includes interfacing with e-fulfillment partners. This is a significant growth industry in the technology space. 3.upply Chain: Understanding that the S supply chain is a critical part of the financially driven business model and not the other way around. A cost-effective supply chain should be integrally linked to the cash-to-cash order cycle. 4.ustomer Experience: The customer C must receive what was ordered when promised. Increasingly, customers will expect purchases to be delivered the next day or same day for free and, if needed, returned for no shipping or restocking cost.REAL ESTATE IMPACTSCONCLUSIONE-Commerce 2.0: Combining Online and Physical Worlds In the first phase of e-commerce lets call it e-commerce 1.0 retailers generally created separate and dedicated business channels for e-commerce and physical retail stores. Retailers who mastered this phase are now pushing into a business model that combines online and physical retail worlds. In this model, the customer can buy anywhere, fulfill anywhere, return anywhere. Major consumer expectations of e-commerce 2.0 include: he physical and online buying experience is seamlessly merged T into a single branded interface. he same items are available both online and in a store. Inventory T allocation between the physical stores and the e-commerce channel is postponed for as late as possible. f a store is out of an item, it can be shipped directly to a I customer through the e-commerce channel or to any store for later customer pickup. nventory location information is made easily available to the I customer to support the decision on where to purchase a product. tems can be physically handled in the store,

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