When renting out warehouses, offline businesses outperform online retailers.
Brick-and-mortar retailers leased more warehousing space than ecommerce companies for the first time in five years in calendar 2022 as sales have been rising both at their physical stores and online platforms.
Offline retailers leased 3.2 million square feet (msf) of warehousing space last year, bouncing back to pre-pandemic levels, data from commercial real estate services firm CBRE showed.
At the same time, warehousing space that ecommerce companies took on lease in 2022 more than halved to 2.2 msf from 5.9 msf in 2021 as demand shifted to offline retail stores that operated without any restrictions last year.
“The return of the majority of shoppers to physical retail after the pandemic and consumers’ choice of hybrid commerce is inducing businesses to reassess their warehouse leasing strategy,” said Anshuman Magazine, chairman and CEO – India, Southeast Asia, Middle East and Africa, of CBRE.
“In 2023, we expect increased leasing activity by retail firms while e-com firms will optimise their strategy and increase their current throughput,” he said.
Experts said the country has been witnessing warehouse space optimisation by ecommerce and retail firms post the peak-pandemic phase.
“The pandemic triggered an atypical leasing trend in the retail and ecom segment as businesses explored new solutions to ensure business continuity,” Magazine said.
The overall leasing activity in India almost returned to the pre-pandemic levels with a total space take-up of 31.6 msf in 2022.
Share of warehouse leasing by ecommerce companies dipped from 23% in 2018 to 7% in 2022. Share of offline retailers reached 10% in 2022, after dipping to 7% in 2020.
Both online and offline retailers take warehouse space near cities they operate to store the merchandise for faster delivery.
Ecommerce player took excessive space during the Covid-19 times due to sudden spike in demand. But now the situation has normalised and ecommerce players have got enough space. Hence, they are not planning to expand in the short term, industry officials said.
Many offline retailers are expanding as post pandemic, warehouse has become the epicentre for their omnichannel distribution network for offline and online clientele.
V-Mart Retail Ltd is expanding its warehouses presence and has competed 70% work on a new warehouse in Sohna.
Footwear brand Skechers said the company began the first phase of its 1.1 msf distribution centre outside Mumbai, which is planned to be operational by mid-2023.
“We are only scratching the surface (in India),” Skechers chief operating officer David Weinberg told investors.
Recently, Tata Croma leased 309,000 square feet of warehousing space at Gurgaon’ Sohna Logistics Park from logistics development platform ESR, which will be the consumer electronics and durable chain’s biggest distribution centre in North India.
“Post pandemic, Indian consumers have switched back to offline shopping mode, because of which the warehousing requirement for offline stores has surpassed the pre-pandemic volumes,” said Rahul Bhalla, cofounder and CEO of women’s western wear brand Latin Quarters. “Also, to improve the efficiency of the supply chain, offline brands are investing in regional distribution centres across different hubs of the country,” he said.
