The rise of the e-commerce sector in Africa, which is projected
to reach $28,942 million by 2022 according to a 2017 report on the
digital market outlook by Statista, is driving new demand in
the Kenyan logistics market, as online sellers seek quality warehousing space to store their goods and dispatch efficiently to meet digital customer order deadlines.
the Kenyan logistics market, as online sellers seek quality warehousing space to store their goods and dispatch efficiently to meet digital customer order deadlines.
Globally, the retail e-commerce market
accounted for one-tenth of the total retail sales worldwide at $2.290
trillion as of 2017, according to eMarketer.
This week,
Copia Global, an e-commerce FMCG distributor, signed a lease with
property investment company Africa Logistics Properties (ALP) for about
4,500sqm of its logistics complex in Tatu City, Nairobi.
E-commerce
companies are demanding warehouses that have a quality and high-end
space despite them being more expensive than the traditional go-down.
But many companies are experiencing shortages of these warehouses.
“Over 62 per cent of companies in Africa have experience
shortage in the recent past. Essentially, prime space is more efficient.
By way of example, where a typical go-down provides 3,000sqm of space, a
prime warehouse could provide the same amount of utility (say 3,000sqm)
but could do so through a 1,000sqm footprint. This is due to much
higher pallet densities that prime space offers (i.e. typically 12m
which allows for 8 pallets),” according to a report by JLL on Africa’s
prime industry.
“While prime rentals may be higher
than conventional rentals, the gross rental cost (including operational
expenditure) could go down by up to 35 per cent. Sophisticated occupiers
in developed markets appreciate this overall cost saving.”
ALP warehouses incorporate environmental features such as solar power and rainwater harvesting.
“These
specifications enable operators to store up to eight pallets
vertically, leading to lower storage costs and overall higher operating
efficiencies. There is a growing B2C e-commerce market in Africa due to
the development and accessibility of technology on the continent, so it
is no longer just the larger corporations that need to make use of
logistics and delivery services, but individual consumers and small
businesses too,” said Toby Selman, CEO of ALP.
“Copia’s
direct model of selling FMCG products to rural regions via its network
of rural agents removes the traditional additional distributor layers.”
The
payment model for the ALP facilities is quarterly pre-paid payments
with 3,000 sqm as the minimum space an occupier can rent out.
For
e-commerce companies, storage and distribution is key to achieving a
competitive offering, with no consumer walk-ins or direct customer
interface, and all goods needing to be stored efficiently for dispatch,
rather than displayed on open shelving in brick and mortar stores.
According
to a study by US logistics real estate and supply chain logistics firm
Prologis on the demand for logistics real estate by e-commerce
companies, online retail requires 1,000,000 sqm of logistics storage,
compared to every 350,000sqm for brick and mortar stores.
This
has seen Jumia, for instance, one of the leading e-commerce companies
in Africa, open a logistics of over 8,000 sqm in Nigeria, while Konga,
its competitor in the country specialising in electronics, is running an
excess of 11,000 sqm of storage space.
“The global
shift toward e-commerce is changing how the retail and logistics
industries operate. This trend affects all aspects of the retail
industry, including the strategic location of fulfilment centres and
total real estate footprint,” reported Prologis.
E-commerce users require three times the logistics space, or more, as compared with brick-and-mortar, it said.
This
equation is also increasing demand for refined, or grade A, logistics
properties that meet market and international standards, necessary to
reduce logistics costs and increase efficiency.
Such
properties include features such as cold storage facilities,
high-density pallets, truck-level loading bays, air flow, and a range of
technological features that cannot be found in traditional go-downs.
- African Laughter
Very Informative content on Pallet shortages Thank you for the article!
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