Changes Come for Retail’s Distribution Model

There is a revolution happening in distribution.

“The move from distributing to retail stores in bulk to distributing to customers in customized packages has changed the entire distribution model,” says Ryan Companies Southeast President Doug Dieck.

Dieck says the point at which retailers start the delivery truck makes a huge difference in how quickly and efficiently they can distribute into a neighborhood. Retailers don’t want the truck to start at an industrial park on the edge of town. They want to be closer.

“We want these packages to be as close as we can get them to the consumer,” Dieck says. “That is a clear change that has been happening.”

For about a decade, retailers have been working on getting their last mile distribution hubs closer to people.

“There are some online retailers that are on the leading edge of this,” Dieck says. “There is no question that the acceleration has been very real from the customers that we’ve talked with and worked with. They need to go faster because their demand is suddenly much greater.”

In this case, going faster means building their network quicker. “Now, most major retailers are building this network nationwide,” Dieck says. “There’s just a need to accelerate to build the network faster because the demand is continuing to go up.”

Dieck says the distribution network needs to be redone with fulfillment in mind. “That has been going for ten years, but we’ll have to go for many, many more years to get that fully retooled,” he says.

The problem, of course, is available to space. To get that last-mile delivery hub, companies need to go into mature neighborhoods and either find land (which is next to impossible) or convert an existing building to a distribution use.

“The office warehouse manufacturing facility from the 1960s or 1970s, that has outlived its useful life is a great opportunity,” Dieck says.

Even that comes with its pitfalls. Dieck says retooling an existing facility may require a costly repositioning.

With malls struggling, there is also a lot of talk about converting old malls into distribution facilities.

“There is a contemplation of taking down a portion of a tired mall,” Dieck says. “But that’s very, very difficult to do.”

But those aren’t the only uses Dieck sees for retail. With people migrating and living longer, there may need to be some residential that can be incorporated into these retail centers.

“Retooling the old Montgomery Ward’s building that still may exist and turning that into a residential play that is directly adjacent to retail and those kinds of creative plays will continue,” he says.

Like many other observers, Dieck also notes there could be some healthcare uses for retail.

“Healthcare moving into a retail kind of format where they’re on the street corner and in the shopping mall will also continue to happen,” Dieck says.