Kansas City Will Benefit From the Shift to E-commerce
Dick Ringer – Assistant General Manager, Hunt Midwest
With its central U.S. location, great labor force and affordable lease rates, Kansas City offers an exciting value proposition for e-commerce companies, and the time is right for deal-making in the industrial market.
Online sales currently comprise about 7 percent of all retail sales and are growing at a rate of 15 percent a year. E-commerce is ultimately expected to account for 50 percent of all retail sales. This shift to e-commerce creates an opportunity for brokers and developers in Kansas City’s industrial market as new fulfillment centers open.
As the online sales industry has matured, so has the consumer’s demand for timely and inexpensive delivery. The fact that 85% of the U.S. is accessible via 2-day shipping by truck from Kansas City is a strong selling point for e-commerce companies scouting fulfillment and distribution sites.
It wasn’t too long ago that customers didn’t mind waiting more than a week to receive online orders, and we didn’t even mind paying for shipping. Now we’ve grown accustomed to free shipping and two-day delivery. Of course, the faster that e-commerce companies can deliver products to the doorstep, the more they sell. And retailers probably don’t need to be reminded of the cost benefits of shipping by truck compared to shipping by air.
A significant advantage for Kansas City—especially when it comes to moving goods manufactured overseas– is its presence as the largest rail hub in the nation in terms of tonnage, which means lower transportation costs. Products that are produced overseas can be transported across the ocean on a ship, taken by rail from ports on the coast to one of the rail intermodal yards in Kansas City (which is far more economical than trucking on long hauls), then the product is taken from the rail yard to an e-commerce fulfillment center where it can be shipped by truck to online buyers as it is ordered.
Since online sales volume directly correlates to the speed of delivery, proximity to hubs like FedEx and/or UPS, along with the availability of late pickups, is invaluable. Another important consideration is the access to fiber, which is plentiful in the metro area. Robust, redundant fiber is essential for e-commerce companies to process orders quickly for delivery. Troy Brown the EVP of OmniChannel & Marketing for Zumiez who cater to the younger electronic savvy demographic, said that if their customers don’t get a shipping confirmation within half an hour of placing an order, Zumiez may very well get a phone call asking “what’s up?”
Finally, Kansas City’s labor force is among its strongest selling points. E-commerce fulfillment centers tend to have more employees per 1,000 square feet than typical warehousing operations. And because orders rise during peak seasons and times, fulfillment operations need to be located where there is a good temporary workforce available.