The e-commerce industry has become a key driver of Northeastern Pennsylvania’s economy.
According to research by Mericle Commercial Real Estate Services, 20 companies that appear on InternetRetailer.com’s list of the top 500 e-commerce companies have large fulfillment or bulk distribution centers in the region.
Fulfillment operations ship products directly to consumers, while bulk distribution centers typically ship to retail stores.
Launched in 2000 and completely revamped in 2010, InternetRetailer.com is the most visited informational website in e-commerce with more than 250,000 unique monthly visitors. The site provides business information on market trends, technology, competitive practices, and people that are shaping the e-commerce industry.
Firms on the InternetRetailer.com top 500 list with fulfillment or bulk distribution centers in the area include Amazon.com, American Eagle Outfitters, AutoZone, Babyage.com, CVS Caremark, Discount Dance Supply, J.P. Boden, The Home Depot, Lowe’s, Men’s Wearhouse, NBTY, Neiman Marcus, OfficeMax, Ozbo.com, Philips Electronics, Sears, TABcom, Vintage Tub & Bath, Walmart, and Webgistix/Rakuten. More than half of these companies have located here within the past 10 years.
“With the evolution of online retailing and the push for ever-shorter delivery windows, e-commerce companies have sought out areas where they can establish strategically located and cost-efficient fulfillment operations,” said Mericle Vice President Jim Hilsher.
Hilsher said he expects the growth in e-commerce or “e-tailing” to continue for the foreseeable future. He cited reports from several national organizations as evidence.
According to the National Retail Federation, 42% of all retail sales over the 2014 Thanksgiving holiday were transacted online. This compares to 26% in 2006.
ComScore, Inc. reported that online shopping for the period from November 1 through December 21 rose 15% versus 2013. During that time, total U.S. online retail sales reached $48.3 billion.
Hilsher said a drop in gas prices and modest growth in employment are improving consumer confidence and freeing up more funds for discretionary spending. He said Americans’ growing dependence on mobile devices and the move by many e-commerce companies to deliver products purchased online to consumers’ doorsteps in two days or less are also helping to drive online sales.
“Last week, digitaljournal.com reported that by 2020, more than six billion smartphones will be in use worldwide,” Hilsher said. “The site also noted that during the holiday season, more than 12% of retail sales were made with mobile devices, and Amazon.com announced that 60% of its holiday sales came from customers using a smartphone, tablet, or other type of mobile device.”
Hilsher said he believes Northeastern Pennsylvania is well positioned to accommodate more e-commerce operations.
“More than 51 million people live within 200 miles of the center of our area,” he said. “Five interstates converge here and our businesses are served by dozens of trucking firms and several overnight delivery companies. This makes it very easy for e-commerce companies to get their goods to their customers quickly.”
He said the availability of labor, sites, and buildings will become increasingly important in 2015 and beyond.
“E-commerce fulfillment operations are usually very labor intensive,” he said. “With the national unemployment rate continuing to fall, companies are expressing concerns about being able to recruit adequate numbers of people. Although our unemployment rate has fallen to six percent from nine percent in 2013, it is still higher than the state and national averages. We’re likely to be on the radar of quite a few companies as a result.”
Hilsher said Northeastern Pennsylvania is also in a fortunate position because unlike many competing areas, this region has a fairly strong supply of available industrial buildings and fully prepared sites. “We are hearing from our commercial brokerage contacts that parts of New Jersey and Southeastern Pennsylvania are running out of industrial land,” he said. “Through our ReadyToGo! Program, we are fully preparing 90 sites in 11 business parks and developing new industrial buildings on speculation. Because of this, we expect to win some deals that might have otherwise located in those areas that are now short on land.”
Hilsher said that 13 of the 20 firms on the InternetRetailer.com list are Mericle tenants or clients.
Still unknown according to Hilsher is the impact the expansion of the Panama Canal will have on the growth of the e-commerce sector in Northeastern Pennsylvania. Expected to be completed in late 2016, the $5.25 billion project will add a deeper and wider third lane and a new system of locks to accommodate ships up to two and a half times larger than currently allowed.
“The completion of the project is expected to make the East Coast competitive with the West Coast in trading with Latin America and Asia, which will have implications for most industries, including e-commerce,” he said.
Hilsher said related work at several East Coast ports is now underway, including deepening projects for numerous harbors and a significant dredging project for New York. All of this will mean more efficient movement of goods he said.
“A dramatic increase in East Coast port traffic will likely drive up the demand for distribution space in relatively close proximity to the ports,” he said. “With land becoming scarce in many of the traditional industrial areas of New Jersey and Southeastern Pennsylvania, we expect to be one of the next logical areas for growth.”
Hilsher said more than 33 million square feet of industrial space has been absorbed in Northeastern Pennsylvania since 2000. He said Mericle has room to develop more than 12 million square feet of industrial space on its current land holdings, including more than seven million square feet in CenterPoint Commerce & Trade Park alone.
Mericle has a flex building and office building under construction on speculation in CenterPoint. Both are expected to be ready for tenants in the first quarter of 2015, according to Hilsher. He said Mericle has constructed 15 industrial, flex, and office buildings on speculation locally since 2008. “We plan to monitor the e-commerce industry very closely and will continue to construct industrial buildings on speculation to keep up with demand,” he said.
“Speed is all important to e-commerce businesses,” Hilsher said. “Having the right kind of space ready when companies call us greatly increases our chances of landing their projects and bringing their jobs to Northeastern Pennsylvania.”
For additional information, please click on link below to read the E-Commerce White Paper.
Mericle Commercial Real Estate Services, founded by Rob Mericle, is a vertically-integrated company with more than 200 in-house professionals with expertise in all aspects of commercial real estate development and construction. The Mericle team includes licensed architects, land planners, professional engineers, surveyors, licensed electricians, plumbers, carpenters, certified public accountants, in-house legal counsel, leasing and marketing professionals, licensed brokers, property managers, and more.