Top 3 Trends Impacting the Warehouse and Storage Market in China Through 2020: Technavio

LONDON--(BUSINESS WIRE)--

Technavio's latest research report on the warehouse and storage market in China provides an analysis on the most important trends expected to impact the market outlook from 2016-2020. Technavio defines an emerging trend as a factor that has the potential to significantly impact the market and contribute to its growth or decline.

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Sharan Raj, a lead analyst from Technavio, specializing in research on warehouse and storage sector, says, "The substantial growth in a number of Chinese consumers shopping online is one of the key factors that have led to market growth in the last five years. With Internet retailing gaining a strong foothold in both urban and rural areas of the country, it becomes imperative for Companies such as Alibaba Group Holding and JD.com to step up supply facilities and invest in warehouses and storage businesses."

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The top three emerging market trends driving the warehouse and storage market in China according to Technavio transportation and logistics research analysts are:

• Rise of multi-storeyed warehouses
• Increase in number of self-operated warehouses
• Growing use of robotic operations in warehouse and storage units

Rise of multi-storeyed warehouses

China's growth in the e-commerce market has led to increased demand for warehouse facilities. As land in major cities has become scarce and expensive, particularly in key commerce centers such as Shanghai and Beijing, rental rates for logistics spaces are expected to increase 5%-10% in the next few years. As a measure to counter this, developers are adding more floors to warehouse units.

For instance, Goodman Group, the second-largest logistics developer in China, launched a 1,184,030-square-foot multi-storeyed warehouse in Shanghai's Qingpu district in 2016. Similarly, Prologis, a global leader in industrial logistics real estate, has set up a multi-storeyed warehouse with space of 1,067,780 square feet at Beijing Airport Logistic Park in 2016.

Increase in number of self-operated warehouses

Another trend is that big e-commerce players are setting up self-operated warehouse and logistics networks. While this bodes well for the overall warehousing and storage market in China, it could also turn into a challenge for vendors that are solely into warehouse and storage operations, such as Juno Logistics, Kerry Logistics, China Chengtong Group, and China Merchants Group.

JD.com has been operating its own fulfillment infrastructure (warehousing and delivery facilities) since 2007. Similarly, Sfbest.com, an online marketplace for food products, has its warehouses in 26 cities and three integrated temperature-controlled warehouses in eastern, southern, and northern China, which are all self-operated.

"China's e-commerce industry, and its fresh food e-commerce market, is driving the demand for warehouse and storage space in the country," says Sharan.

Growing use of robotic operations in warehouse and storage units

The recent rise in labor costs in China, which amounted to twice that of Mexico and four times that of India, and a shortage of skilled labor is leading companies to use robots for picking and packing in warehousing and storage facilities.

In 2016, e-commerce giant JD.com introduced new automatic machines. The company has opened a facility in Shanghai where items are picked from shelves, packed up, and sent to distribution points, completely by machines alone. About 20,000 packages are sorted per hour by machine at JD.com's largest robot-run warehouse in Shanghai, China.

Alibaba Group, the world's biggest e-commerce company, adopted a similar robot system in its warehouse in the northern coastal city of Tianjin, using solutions from domestic start-up Geek+ in 2016.

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