Is converting big box retail to last mile distribution feasible?

The human attention span continues to shrink in the digital age. We’re not only paying less attention, but we’re also getting more impatient. Consumer expectations have changed with more people demanding faster service, quicker turnarounds, and immediate results. And when it comes to our e-commerce habits, we’ve come to expect faster delivery speeds. For a long time, last mile delivery services such as USPS, UPS, and FedEx have fulfilled our growing expectations by delivering our goods at impressive speeds, with same-day delivery being an option for some orders. Last mile carriers have been able to provide these services and meet market demand because of their impressive infrastructure and workforce; they have fully-equipped facilities, a massive fleet, and technology for route planning.

But where did this leave big box retailers like Walmart, Costco, Home Depot, Target, and the like? Many big box stores have had to shift their strategy and improve their operations to remain competitive.

The Shift to Last Mile Distribution Trend

There was a massive shift to online shopping at the height of the global pandemic. And even with the world reopening and returning to “normal,” many consumers seem to have recognized the benefits of e-commerce – choosing to purchase online rather than shop at brick-and-mortar stores. With more consumers moving away from mall shopping, the big box retail trend to remain competitive is to shift fulfillment towards last-mile delivery.

We’re now seeing big box retailers taking action to improve their own last mile strategy, starting with acquiring more brick-and-mortar spaces to accommodate the same-day pickup. Some companies have converted their stores into distribution hubs or sorting facilities. Rather than use established, big brand last mile carriers, many retailers are partnering with regional carriers that white-label their services. The last few years have also given rise to last mile carrier startups, giving retailers of all sizes plenty of partner options.

Some big box retailers that have recognized the long-term benefits of having their own last mile delivery operations are investing in last mile infrastructure by acquiring more real estate to turn into fulfillment centers and building an internal delivery fleet.  

Some experts predict dramatic changes as the months reveal consumers’ shift to e-commerce. With gas prices on the rise, we may see fewer and fewer people driving to big box stores - choosing instead to order online. Will big box retailers see their empty parking lots and consider using that space to optimize their fulfillment operations? Not only can that space stage inventory, but it can also be used to park trucks and delivery vehicles.

In summary, converting big box retail to last mile delivery is feasible, and it’s already happening. Of course, it’s not a complete transition. Big box retailers are not likely to close their stores to fully convert them into sorting facilities, distribution hubs, or warehouses in the same way that we’ve seen some restaurants close their dine-in locations and operate solely from a ghost kitchen. 

For more information on how you might be able to reposition an asset, or general information on Commercial Real Estate, please reach out to:  info@cbicommercial.com