Amazon’s growth into grocery is transforming industrial cold storage from a niche CRE market into a necessary link in grocery supply chains. According to the numbers, millennials will affect overall online grocery sales with some predicting that within seven years, 70% of people will buy their groceries online.
A rising tide of new online grocers as well as traditional grocers is getting into same day delivery in order to meet that demand – increasing the need for more cold storage facilities. More than that, online and brick-and-mortar grocers are looking for more industrial cold storage near or inside city limits.
Once Amazon Got into the Grocery Game…
Traditional brick-and-mortar was already getting pummeled by Amazon’s e-commerce dominance. Once they got into the grocery game last year by buying Whole Foods, grocers everywhere stood up and took notice.
Local grocers, traditional powerhouses like Kroger and Walmart are all feeling the heat from Amazon as the company continues to innovate and experiment with grocery delivery. From reinventing packaging and delivery of food product to new ways of streamlining cold storage closer to urban centers, just by getting into grocery, Amazon is forcing supermarket giants to do the same.
For example, since Wal-Mart recently began providing online ordering, their online sales have gone up by nearly 65%. They’ve now set their sights on competing with Amazon for same day grocery delivery by buying its own parcel service.
Cold Storage Will Climb In-Line with Online Food Sales
Currently, online grocery accounts for only “3% of grocery sales.” Over the next six years, ULI (Urban Land Institute) predicts that number will go up to at least 13%. As those numbers climb, so will the need for more cold storage facilities. Not only that, the types of cold storage facilities that are needed will change and where they are located will expand.
Right now, cold storage facilities are concentrated in states with port cities like Washington State, Texas, Florida, and California with a whopping 400 million cold storage facilities. In the near future, there will be cold storage facilities that fit inside of retail storefronts and climate controlled cold storage facilities on wheels.
5 Things to Know
From now on, food deliveries will be packaged differently and we will see fewer big trucks filled with hundreds of boxes of one item. Instead they will be packaged in real-time based on individual online orders and packaged by robots and shipped in cold storage facility trucks. Here are 5 other things to know:
#1: Regulations Will Increase Cold Storage Demand This Year – The way perishable products are packaged and kept will change due to increased online grocery sales.
#2: Cold Storage Warehouses Are Getting a Serious Tech Makeover – Automation, AI technology, and advances in mobile refrigeration will impact industrial cold storage buildings.
#3: Cold Storage is Expensive – Calling All Refrigerated 3PL Firms – Cold storage facilities are expensive to build and maintain leading many grocers to take advantage of high tech refrigerated 3PLs for local and same day grocery deliveries.
#4: Mix-Load Truck Storage is Replacing Single Item Food Deliveries – Mix load deliveries are replacing massive single item deliveries, thereby reducing delivery costs and expanding the types of items consumers can order online same day.
#5: Borders and Ports Make Great Locations for Industrial Cold Storage – Despite changes to the industry, industrial cold storage facilities located on borders and shorelines will continue to be in highest demand.
The Trend Continues
Houston is just one region that is seeing its warehousing sector explode because of the increase in industrial cold storage demand. New Jersey has a huge warehousing and distribution location right on the ocean and a couple food giants from the state are expanding into Houston. Many industry experts like Nielsen agree that online grocery sales are expected to increase over the next few years.