Making it Work

E-Commerce and Warehousing Logistics

In a not-so-distant past, big department stores ruled the retail world in the United States and Canada. Juggernauts like Sears, Eaton’s, and Simpsons seemed unstoppable, as they sold everything from towels to transistor radios. These and other big retailers were the only places to shop other than small, specialized businesses carrying footwear, hardware, and the like. If you needed a television, tape recorder, refrigerator, sofa, or artificial Christmas tree, you headed to the nearest department store or ordered from one of their massive full-colour catalogues, like the Sears Wish Book, which came out every fall in anticipation of the upcoming holiday season.

For decades, the status of the mighty department store was assured, until more and more retailers emerged selling specific products, such as New York’s legendary Crazy Eddie and Canada’s Future Shop, both specializing in electronics. Like the department stores before them, these and other stereo shops blossomed and eventually died, to be replaced by online e-commerce sites like Amazon, eBay, Alibaba Group Holding Ltd., and others, perhaps less-known to North American buyers but no less impressive. These include companies such as Japan’s Rakuten Group, Germany’s Zalando, and China’s Jingdong.

Even well-established businesses are not immune from the threat of other companies using the internet to sell everything from toys to T-shirts. Retailers that many of us believed would exist forever are collapsing under the dramatic shift from physical storefronts to online purchasing. These include children’s clothing retailer Gymboree, which filed for Chapter 11 bankruptcy protection in January, for the second time in just two years. This was followed by shoe seller Payless shuttering its doors in February, resulting in 2,500 stores closing across the U.S. and Canada and 16,000 employees out of work.

While some online retailers maintain successful brick-and-mortar physical presences – like American multinational retailer Whole Foods – many are struggling from so much competition. Amazon was created in 1994 by Jeff Bezos and has a huge twenty-five-year jump on the competition, reportedly holding thirty-eight percent of America’s online retail business, according to eMarketer estimates. Walmart is projected to lose billions of dollars this year as it tries to keep up.

The world’s remaining physical department stores with few or no online selling tools are faring even worse. Paying for staff, rent, property taxes, insurance, utilities, and inventory to maintain actual storefronts is becoming too expensive for retailers big and small. The days when customers would be greeted by the sales staff who were on hand to answer questions and could browse for hours on end are rapidly disappearing.

We now go online and make a few clicks to place products in a virtual ‘shopping cart.’ This requires almost no effort, unlike getting onto a bus or driving our cars to a mall and finding parking, which consumes fuel, time, and money. Using a computer or smartphone, we can access online retailers, make purchases, pay via methods like credit card, PayPal, WePay, or 2Checkout and receive emailed a conformation and receipt in seconds. Once this happens, warehouses spring into action, and buyers can then track when their items are shipped, as well as expected delivery dates and times.

Services like subscription-based Amazon Prime means products are delivered directly to our homes or offices swiftly. As many grocery chains are moving toward online ordering, customers can choose products, pay for purchases, and grab packed boxes or bags from convenient pick-up stations, without ever having to set foot in the food aisles.

Today’s buyers know exactly what they want and have often read detailed product descriptions and reviews from other customers. If they are unhappy with their purchase, they can print out a label and send the product back by mail at no cost.

In decades past, there was a need for department store managers, clerks, and stock boys. Companies today must fill thousands of warehouse positions to pick, pack, and ship products for online retailers. It is not unusual to see advertisements online, hear them on the radio, or at logistic job fairs for full, part-time, and seasonal warehouse workers for companies like Amazon.

Carrying practically every product imaginable from toasters to tools requires online retailers to have vast amounts of warehouse space. Amazon’s fulfillment centres are as large as twenty-eight football fields, “and can hold millions of items, ready for our customers to order by the click of a button.”

Since online retailers sell worldwide, they require staff to work around the globe in what Amazon refers to as fulfillment centres, “supported by innovative world-class technologies,” according to the company. Amazon offers a range of benefits including medical, dental, prescription drug, and vision coverage, holiday overtime and paid time off. Employees in the United States also contribute to 401(k) savings plans and can purchase products sold by Amazon at a discount.

Human workers are assisted by Amazon Robotics’ automation that brings – from the slimmest paperback novel to a two-person canoe – products to workstations where employees are trained to stow, pick, and sort items, pack the orders and place them onto delivery trucks.

These warehouses represent the future of shopping for reasons of convenience and selection. But e-commerce is changing more than how we as consumers shop; it is also changing how millions of products are sourced, stored, sorted, packed, and delivered and how warehouses and logistics systems are designed, set-up, managed, operated, and staffed.

Warehouses of the past were located in remote areas, usually far out of town, to take advantage of cheaper real estate. These dimly-lit buildings held stacks of goods on of wooden pallets. By the 1970s and 1980s, retailers received products straight from suppliers, leading to centralized distribution centres. By this time, a growing number of products came from around the world and were made offshore in countries like China to keep costs down. Huge warehouses and distribution centres were built in Beijing and Shanghai close to the ports.

Today’s e-commerce warehouses and e-fulfillment centres are both enormous and purpose-built, with colossal loading bays to receive products, specially-designed metal shelving to safely store items, and robots to assist humans. These sophisticated e-commerce centres represent tens of millions of dollars in investment by the likes of Amazon, Costco, and other giants and are big business.

In the U.S. alone, the Department of Labor reported warehousing and storage companies added 5,400 jobs in April for the fourth month in a row. And in 2018, the fulfillment industry added about 70,000 jobs, not including thousands of other positions filled by outside courier companies that made the deliveries. When taking into account that online sales spiked by 14.2 percent in 2018, the trend – according to the U.S. Census Bureau – generated a staggering $513.6 billion for the American economy.

Consumer demands are at an all-time high, and many people will pay for the convenience of online shopping. About half of Americans hold Amazon Prime memberships and jump on deals during the thirty-six-hour Amazon Prime Day, Black Friday, and Cyber Monday. Logistics and warehousing companies may be finding that business has never been better, as e-commerce warehouses move advance steadily toward automation.

In many smaller cities and communities across America and Canada, the move toward e-commerce warehouses has produced an economic boom after these areas were negatively affected by the downturn in manufacturing. Long-closed facilities – many conveniently located near interstate highways – are being repurposed as distribution centres, bringing jobs, businesses, and new residents back.

November 22, 2019, 4:34 PM EST