21 October 2010
As the internet retailing sector expands, its distribution operations grow increasingly complex. High quality, strategically located warehouses are therefore a vital factor in their continuing success.
In Amazon's 1997 letter to shareholders, Founder and CEO Jeff Bezos wrote: "From the beginning, our focus has been on offering our customers compelling value." In every subsequent annual report, Benoz has made a point of emphasising the company's continuing commitment to the highest levels of customer service; an approach that has been replicated by later entrants into e-commerce market. Online fashion retailer ASOS, for example, offers next day delivery in the UK, two day delivery in Europe and three day delivery to the rest of the world.
This strategy has been highly successful and during the economic downturn, internet retail has flourished. In 2009, Amazon added 21 new product categories while ASOS established itself as a global brand with sales to 167 countries. However, as Amazon points out in its 2009 annual report, expansion has meant that the "fulfilment network becomes more complex and operating it becomes more challenging."
To meet these demands, internet retailers need their distribution centres to be sited close to the motorway network in locations where there is a good supply of skilled labour. Also, because internet retailers do not have a store network, it is essential that the distribution centre operates smoothly so that nothing can be allowed to disrupt their business. This means that they need robust facilities that have been built to a high standard supported by a sound, long-term relationship with the landlord.
Prologis can provide distribution centres that satisfy each of these demands and it is significant that Amazon has been a Prologis customer in the UK for around nine years and now leases a total of 1.1 million square feet at facilities in Milton Keynes and Peterborough. Further, when ASOS outgrew its original distribution centre at Prologis Hemel Hempstead, Prologis was able to offer a 530,002 sq ft cross-docked warehouse at Prologis Barnsley. In an area that offers a skilled workforce and close to both Junction 36 of the M1 and Junction 37 of the A1(M), ASOS is not only within a two hour drive time of 15 million potential customers, it has the capacity to fulfil orders within the promised timeframe.
An additional benefit of Prologis Barnsley is that - in line with all new Prologis buildings - it is cost effective to run. The distribution centre is BREEAM 'Excellent' accredited with an EPC 'A' rating (CO2 index 24). In practical terms, this means that the energy costs are 50% less than a new Building Regulations compliant facility of the same size that has achieved an EPC B (CO2 index 48) rating. Compared to an older existing facility that has a typical EPC E (CO2 index 103) rating this saving increases to 77%.
When Gap Direct decided to launch its online business in the UK, it also needed an energy efficient, high quality distribution centre in a strategic location and it selected a 230,347 sq ft facility at Prologis Park Stafford. At such an important point in the development of its UK business, it is perhaps no surprise that - like Amazon and ASOS - Gap chose Prologis.
