As Europe becomes reliant on online deliveries, what does the future look like for e-commerce?
Since Italy and Spain went into quarantine over a fortnight ago, it is now estimated that one quarter of the world’s population is currently in lockdown. Being housebound has meant that online food shopping has become a necessity for many households and we have seen e-commerce soar as the continent’s food security looks to be increasingly reliant on the ability of the big supermarkets to deal with the immense pressure on their supply chains.
The UK has seen shoppers buy an additional £1 billion of food over a three-week period of buying and supermarket websites have been crashing due to unprecedented activity. But what will the more permanent effect be on Europe’s e-commerce activity?
Consumer habits have been changing significantly over the last decade as e-commerce has taken hold and this has had a huge impact on Europe’s real estate markets. The UK has led the way with over 20 per cent of all goods now bought online, while countries such as Spain and Italy are more than 10 years behind with between 5 and 7 per cent of all good purchased online in 2019.
Covid-19, however, has brought a whole new perspective and meaning to what we thought of as structural change and it is highly likely to become the catalyst for the rise of e-commerce across Europe.
Last year we were predicting an additional 15 million sq m of logistics space would be required in Europe over the next three years to deal with the increase in online spending alone, but such soaring e-commerce activity will have reached parts of Europe that under normal market conditions, may have taken years to penetrate, leading to increasing demand for logistics space.
While the lockdowns are in place it is only the essential goods that consumers are allowed out of their homes to buy. As we potentially go from spending weeks to months at home even more of us will look to e-commerce to provide us with what we need and the longer this continues, the harder it will be for the physical stores to recover and bounce back. Can we really expect huge crowds of shoppers to descend on high streets and shopping centres across Europe at any point this year?
Considering the cultural disparity in attitudes towards shopping on the continent when looking at the long-term effect is also key. The UK and Germany have been well ahead of the curve in terms of their e-commerce activity but our neighbours in Southern Europe are content to shop locally in farmers’ markets, family-run bakeries and butchers and will likely return to this daily ritual.
The challenge for e-commerce and the logistics market will surround its ability to cope with this continued surge in demand given the limited amount of logistics space available, with already record low vacancy rates and the impact from Covid-19’s effect on the construction of new supply. The success of e-commerce relies on efficient supply chains.
The whole retail landscape will be very different going forward and the longer the crisis continues, the more profound its impact on consumer spending.
The article from Savills Blog.