The storage industry is currently crippled by the crazy demands in place for it. UPS CEO, Carol Tome, indicates that the $20 billion investment into the warehousing industry is simply not enough to contain the shocking demand. Why has this always profitable industry become so popular? What are the setup costs for those interested in pursuing a fledgling warehouse business?
E-Commerce
Of course, the brick-and-mortar killer is involved, there is no secret that e-commerce has grown exponentially due to the Covid-19 pandemic. With millions of citizens locked away, all they had was the ability to purchase online, and this has pushed the big online retailers into overdrive recording record profits. Now, how has this affected warehousing? Well, with record products being purchased digitally,Amazon and the like need areas to store mass products.Amazon themselves spent $164 million on warehousing in 2021, and have been seen disbanding this network in 2022, after suffering the consequences of inventory bloating.
Online retail is estimated to be worth approximately $5 trillion in 2022, and this is forecast to increase upwards of $7.5 trillion by 2027, meaning the demand for physical storage is only set to increase. How has e-commerce caused stockpiling behaviours from online retailers?
Stockpiling (Bloated Inventory)
Stockpiling has been seen by big players in recent years.The reason for this is the incredible demands being placed on online retailers. Predicting product demand is a tall task when you’re shipping globally, so why not bloat your inventory levels? It isn’t just done to keep up with demand, though. Online retailers have been sharpening up their money-saving tactics during the fuel crisis.The cost of shipping products can be reduced if you maximize your stores, eliminating the transportation needs for product lines. Not only has the western world faced a fuel crisis, but the Russian invasion of Ukraine has also crippled supply chains in specific areas, causing supply chain bottlenecks globally. You should also consider the economic woes caused by Covid-19. The pandemic has directly driven people to look into lean warehousing methods. The pandemic drove people straight into the paws of online retailers, exacerbating the need to stockpile products at extreme levels. Warehousing has only benefited from this newfound demand.
Rent Increase
With demand increasing, so has the rental fees for people hoping to rely on warehouses to store their goods. This has occurred because of, again, the big hitters. To get ahead of their competitors, the larger, more profitable online stores have been paying large sums to rent out warehouses.If the owner sets a price that’s ridiculous, the chances are that the big companies can afford to take it, leaving the smaller companies to look elsewhere. This especially occurs in busier locations, such as New York City and California. Statistics from 2021 show a 25% increase in rental fees across warehousing in the US. The storage industry is booming as a result of the above.Now is a great time for those with land to consider building a storage firm. Profits largely depend on location and the initial costs vary depending on size. The costs can range from $10,000 upward to $750,000, depending on what size lot you’re planning on building.
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