eCommerce Refashions Middle and Last Mile, and Real Estate, Too

As retail goes, so do various sectors of the U.S. economy — demonstrating just how interconnected we really are when we buy things and have them delivered to the doorstep.

More specifically, as Amazon and other eCommerce retail goes, so go the last mile, the supply chain overall, and even real estate.

Reports came this week, per The Wall Street Journal, that warehouses, which are part of the industrial real estate segment of the economy, may be in for some headwinds.

In part that is due to the fact that Amazon has been retooling its eCommerce operations, which in turn means that that there may be less demand for warehouses and distribution square footage — critical cogs in the middle and last miles of commerce.

Amazon, according to reports, is subleasing some of its warehouse space (it owns about 374 million square feet of space as of the end of last year). Subleasing may have the ripple effect of making the rental markets a bit more price-competitive (and, we note, provides an additional revenue stream for the eCommerce giant).

As we’ve noted in this space before, Amazon has been expanding its logistics footprint and has been branching out into everything from planes to warehouse to enlisting Flex drivers to pick up the orders from mall-centered retail outlets and deliver those orders to consumers’ homes.

Read also: Could Amazon’s Flex Drivers be the Shopping Mall’s Saviors?

Deep Pockets Help

For the retailers with relatively deeper pockets — Amazon, yes, but Walmart and Target, too — owning more of the process of getting order fulfilled does a few things. It ensures, for lack of a better term, quality control. It also gives the company a way to control at least some operating costs. Walmart, in another example, has been boosting its trucking operations.

Within the real estate itself, the warehouses and the distribution centers, we’re seeing a move by retailers to transform what happens inside those brick and mortar structures. Robots comes to mind here, and artificial intelligence, too, deployed in the service of more intelligent and effective inventory management.

Read more: Retailers Seek New Supply Chain Efficiencies to Offset Soaring Diesel

It’s a way to help offset fuel prices and gain more leverage than simply boosting prices charged to the end consumer.

See also: Retailers Seek New Supply Chain Efficiencies to Offset Soaring Diesel

There’s also the exploration of taking the last mile into the skies. Walmart, as reported last week, is expanding its unmanned aerial delivery service with partner DroneUp to six states, with plans to complete 1 million drone deliveries by the end of the year for a flat fee charged to consumers.

“As we scale our drone infrastructure, we’ll continue to influence the expansion of drone technology and enable other businesses to explore its benefits, too,” Walmart U.S. Senior Vice President of Innovation and Automation David Guggina said in the announcement, pointing to use by cities, insurance companies, real estate and construction companies as potential drone customers. The added revenues, management has said, will offset delivery costs.