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E-commerce businesses in India are thriving today. Since this is the second-largest consumer market in the world, there is a lot of scope for growth in terms of scale and penetration. However, what is surprising is the speed at which the market is evolving, with consumers increasingly choosing convenience over value when making purchases. This trend will be reflected in the expansion of the quick commerce segment, which is expected to grow by 15 times its current size in less than five years from now. In-city warehouse construction is very critical for quick commerce and other convenience-centric retail models, which is why warehouse construction companies are seeing heavy demand for the construction of in-city warehouses and will continue to do so in the coming years.
Increased frequency of online purchases
The pandemic has accelerated the growth of e-commerce, causing customers worldwide to make online purchases more frequently than they have before. The size of India's e-commerce market has more than doubled in the last year, rising from $30 billion to $84 billion. As the size of India’s e-commerce market grows, the demand for warehouse construction companies is also increasing. Most top warehouse construction companies in India are witnessing a heavy demand for the construction of in-city warehouses. The transformation of brick-and-mortar shopping spaces into e-commerce fulfillment centers, a trend sparked by the closure of physical retail operations in the previous year, has led to an increase in in-city warehouse construction. Due to this, warehouse construction companies are also seeing an increased demand for large grade A warehouses that are located outside of major cities.
Rise of hyper-quick and hyperlocal delivery models
During the pandemic, the volume of goods and services purchased online increased dramatically. Along with that, the range of products and services being offered online to customers has also expanded. E-commerce channels are now more frequently used to acquire everyday essentials like groceries and meat. Since these are low-margin products, their distribution requires maximum efficiency to be sustainable. Hence, the demand for warehouses built specifically to store these types of products is increasing. Therefore, warehouse construction companies are building more Cold Storage or Refrigerated Warehouses that can be used for storing perishable commodities like eggs, butter, fruits, vegetables, fish, fresh meat, etc. To improve unit economics, these types of perishable items are sourced locally and stored in warehouses close to densely populated consumption areas. Hyperlocal delivery is a specialized shipping service that fulfills orders by obtaining goods straight from a nearby local store. In this type of delivery model e-commerce businesses collaborate with local vendors so that every local store works like a warehouse for the e-commerce businesses. Online retailers can reach their customers much faster by delivering orders from the customer's closest local vendor than by fulfilling orders from their central hub. In-city warehouses form the core of the business models that use hyperlocal delivery.
Need for e-commerce players to have timely deliveries
Many consumers prefer same-day deliveries even if it means paying a premium for them. The demand for warehouses has risen as newly emerging quick commerce players have broadened their product offerings to include non-essential items like electronics and clothing. There is a significant increase in the demand for warehouses due to the pandemic also. The heightened need for oxygen cylinders, vaccines, essential supplies, food, masks, etc made fast and timely deliveries a priority. Fast and timely deliveries are achieved by e-commerce businesses with the help of warehouses. Many large e-commerce companies have recently begun to contract warehouse construction companies. These e-commerce companies have set up new benchmarks for timely deliveries. As a result, the expectations from traditional e-commerce businesses are also increasing. Deliveries within hours will become increasingly common in the future, making in-city warehouses extremely valuable.
Gaining an advantage in the e-commerce business is not a zero-sum game, considering the demand for goods is a seemingly limitless flow variable. However, the same cannot be said for physical real estate at strategic in-city spots, which will run out at some point in the future. As a result, warehouse construction companies are witnessing a heavy demand for multistoried warehouses that are located within constrained urban localities.
Conclusion
The pandemic accelerated the growth of the e-commerce industry as customers worldwide made online purchases more frequently. The range of products and services offered online to customers has also expanded. Fast and timely deliveries became a priority for many large e-commerce companies. All of these factors increased the demand for warehouses, particularly in-city warehouses. The demand for in-city warehouses is expected to rise even more in the coming years as many large e-commerce companies are targeting to ensure same-day deliveries of food and groceries items to their customers.
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