Businessman holding plastic credit card in hand and using laptop computer while sitting at the wooden table.Man making online shopping.Blurred background.Vertical

Logistics in a Changing World

FUNDAMENTAL EXPANSION OF E-COMMERCE PURCHASING

There has been a fundamental shift in how the American public purchases goods and services. Products are now being acquired through e-commerce platforms at an unanticipated and unprecedented rate, a trend that has been further accelerated by the COVID-19 pandemic.

The pandemic demonstrated just how important e-commerce logistical support has become to the orderly operation of our economy and the delivery of goods and public health-related services. This shift towards a greater reliance on e-commerce purchasing has created surging demand for logistical support at airport locations across the country to accommodate the delivery of goods in an efficient manner.

 

Demand for e-commerce is significantly outpacing current available infrastructure, thereby creating a discernible market dislocation. A mountain of data, compiled in innumerable recent studies and articles by industry experts, confirm this. The negative impact caused by delivery delays in air cargo, freight and logistics are profound and do not exhibit any signs of slowing now or in the future. The consulting firm McKinsey & Company is just one of the many prominent firms and organizations that have extensively studied the proliferation of e-commerce taking place over recent years. Their conclusions, one of which is depicted in the chart above, reflect a tremendous surge in e-commerce in, remarkably, a three-month period. To learn more about McKinsey’s analysis, see https://mck.co/3mEWNWT

amazonboxes

ACCELERATION DUE TO THE COVID-19 PANDEMIC

The impact of COVID-19 on purchasing patterns surrounding goods and services cannot be underestimated based on data derived from multiple independent studies and various government agencies, including the U.S. Department of Commerce. A market that was already trending in an unsustainable direction from a supply/ demand perspective was driven even further out of balance by the shift in consumer tendencies prompted by the COVID-19 pandemic. The vast majority of analysts do not expect a return to prior norms – COVID-19 has likely forever altered the purchasing habits of a significant proportion of the population.

Even prior to the onset of COVID-19, traditional retail and in-person consumerism were experiencing notable effects from technology and the online alternative solutions it has made so readily available. Simply put, online shopping allows individuals and families to more precisely and easily manage their needs. The pandemic’s creation of apprehension for public interaction has only augmented this shift away from prior generations’ purchasing norms. An online consumer expansion that for many years was a function of sheer convenience became seemingly over a matter of a few weeks a necessity to safeguard one’s health. Even after the introduction of the vaccine, e-commerce activity has been significantly elevated. It is thus evident that behavioral norms have been permanently altered, and virtually all credible data available supports this conclusion. For more information relating to COVID-19’s impact on online shopping, see https://bit.ly/3vlphZM

The resulting expansion of e-commerce has been profound. To illustrate just one example, Amazon added 400,000 jobs in 2020 alone to further serve its rapidly expanding customer base and has entered into a multitude of leasing agreements with municipal airports to support their operational needs. For more information regarding Amazon’s lease-centric strategy, see https://bit.ly/3Aimb9S  

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MARKET DISLOCATION

It is well understood - and the data now clearly supports - that this fast-growing trend in e-commerce has placed unprecedented strain on major metropolitan airports. This has created a “bottleneck” in the supply chain attributable to shortcomings in the area of logistics. Major airport hubs have become less attractive and in some cases prohibitively cost-inefficient to clients and suppliers. Given governments’ typical timeline to implement major public works projects at airports and the almost complete unavailability of land at these hubs, as well as the magnitude of the current needs of companies such as Amazon, DHL, and FedEx (among others), a far more creative and expansive solution is now needed.

Consequently, an opportunity has emerged for smaller, more easily accessible municipal airports to present a viable alternative to the traditional model, and at a materially lower cost. The potential for regional airports to become meaningful competitors to metropolitan airport hubs in air cargo, freight, and logistics represents an unprecedented opportunity. As just one recent example of the explosive growth in logistical needs of government and private companies, one need only look to Chicago O’Hare International Airport’s inability to adequately service its current cargo clientele. For additional information about the utilization of a nearby regional airport alternative to O’Hare for freight forwarding, see https://bit.ly/3FxFYG4

CBRE
Brownstein
Kimley Horn
Armstrong Engineering
ELEVATION