Global real estate service firm, Jones Lang LaSalle Vietnam predicts the Airbnb logistics model will soon develop strong roots in Vietnam. According to JLL, the rise of same-day delivery of business and consumer goods has put merchants on the hunt for warehouse spaces close to their urban customer base.
Typically, logistics companies maintained large-scale industrial space outside of the city center since delivery of goods was in “three to four” days. However, in the new world of commerce, where businesses and consumers expect “same day” delivery, companies are being forced to develop logistics and warehousing capabilities that are close to the city center.
JLL says that strong demand has made industrial real estate increasingly hard to find, and that even when space is available that “It’s not in the city center, but in sheds, that are the size of football fields in the suburbs.” The increase of industrial space for logistics and manufacturing has seen Vietnam’s land usage increase from 335 hectares of land in 1986 to an estimated 80,000 hectares in 2018; representing an average increase of 2,800 new hectares of new space each year, but the majority of new space each year is far away from the centers of Vietnams cities.
Rich Thompson, Manager, Global Supply Chain & Logistics Solutions team at JLL Vietnam, said, “Because customers today demand fast delivery when they order online, companies need more smaller locations rather than fewer larger locations. The Airbnb model for industrial warehousing space allows companies to be nimble enough to respond to seasonal changes and compete in the age of e-commerce.”
So what is the “Airbnb Model of Warehousing”?
Specifically, it means developing multi-user / flexible warehouse, logistics and delivery service for companies. Multi-user warehouses can allow any business to go online and concentrate on its core strengths of merchandize and marketing, with the warehouse providing the tailor-made transshipment, storage, picking, order preparation, delivery and payment solutions that each company may need.
Stephen Wyatt, Country Head, JLL Vietnam said: “that strong demand from the e-commerce sector in particular requires smaller and flexible warehouse facilities for the fastest ‘last mile’ delivery and that It is only a matter of time before we see a flexible approach to leasing warehouse space.”
According to a variety of industry statistics e-commerce customers and revenue are steadily increasing each year as more companies and consumers purchase goods from vendors and this trend will continue to increase in future years.
· 2016: 46.7 million customers $1.40 billion in revenue
· 2017: 48.5 million customers $1.75 billion in revenue
· 2018: 49.8 million customers $2.30 billion in revenue
· 2020: 52.3 million (est.) $2.50 billion in revenue (est.)
Many business experts have said that the Vietnam’s e-commerce industry is facing multiple challenges including consumer expectations of quality and low prices, payment options and poor logistics. Vu Duc Thinh, Country Manager for Logistics, at e-commerce giant Lazada said: “The challenge for commerce in Southeast Asia in general, and Vietnam in particular, is logistics.”
Prime Minister Nguyen Xuan Phuc said at a conference earlier this year that: “Inflated logistics costs are putting a strain on local businesses and need to be cut in order to make firms more competitive.” According to the World Bank, Vietnam’s logistics costs accounted for 20.9% of gross domestic product (GDP) in 2016, higher than regional peers China, Thailand and Japan.
One reason for Vietnam’s higher logistics costs, is that 59% of goods are transported long-distances by land, rather than rail and that the existing rail network does not connect into locations with large storage facilities. These higher prices are passed on to consumers, forcing them to pay more for goods than they need to.
The hope for the future of e-commerce companies are increased rail / storage networks combined with delivery of goods into smaller flexible warehouses at multiple points across cities that will then speed up delivery of goods to businesses and consumers. In this model, the Airbnb Model for Warehousing should see quick take up in Vietnam.