Warehouse Wisdom. Weekly. 3/1/2024

Happy Friday!

We hope you used that extra “Leap Year” day wisely! As we start the first day of this month, the news surrounding Family Dollar stores might have you checking the calendar to be sure it's not April Fool's Day. But it's real, it’s March 1st, and this is no joke. Family Dollar was fined $41.6 million because of a mouse infestation of epic proportions within their Arkansas warehouse, leading to a guilty plea for storing goods in "adulterated insanitary conditions." By epic proportions, we mean over 1,270 dead mice uncovered after an FDA inspection! It certainly pays to keep your warehouse clean.

But that's just the tip of the iceberg for paradoxical logistics news. This week, we're seeing that U.S. online shopping hit new highs in 2023, despite young people liking Amazon less. Shipping problems in the Red Sea made more than freight prices jump – shipping insurance costs also shot up by a number that will make your head spin. Driving gas cars is now apparently cheaper than electric ones, which is tough news for green advocates and EV fans.

Now that you’re all caught up from an extra day of leap year productivity, let’s dive into this week’s newsletter!

LOGISTICS VITALS

E-COMMERCE ACHIEVES RECORD-BREAKING GROWTH AND COMMANDS A LARGER SHARE OF RETAIL PIE

The final tallies are in, and E-commerce in the U.S. made big news yet again, reaching a record high in sales for the 4th quarter of 2023. The percentage jump in sales from the year before was double that of total retail sales growth, showing e-commerce's prominent role in our country’s shopping habits. Overall, total online sales hit a respectable $1.118 trillion for the year. Here are the main points:

• $324.82 billion – total online sales in Q4 2023 

• 7.2% - YoY quarter increase in total internet sales

• 23.5% - E-commerce sales’ percentage of total sales

ONLINE MARKETPLACES

GEN Z's AMAZON FATIGUE, TIKTOK's E-COMMERCE SURGE, AND MAJOR RETAIL SHIFTS

Surely everyone loves Amazon, right?!? I mean who doesn’t like pressing a button and having that box with a smile arrive at your doorstep within a few hours? Actually, those Gen Zers seem to be losing that loving feeling for Amazon. A Mintel survey revealed nearly half (47%) of Gen Z shoppers are trying to shop less on Amazon, with 60% viewing Amazon as too powerful and 39% tired of hearing about the e-commerce leader. Interesting…

At the same time, TikTok is becoming a great place for new brands to get noticed and sell stuff. GuruNanda Cocomint Pulling Oil became a hit on TikTok, selling over 1.2 million units, highlighting TikTok's potential as a sales channel for new and non-established brands. TikTok's content-first approach, compared to the search-first model of other online retailers, offers a unique opportunity for impulse purchases and brand discovery.

Macy's news adds another layer to this changing market. Macy's reported a decrease in digital sales year over year for Q4 2023, with a 1.7% decline in net sales to $8.12 billion. They plan to close 150 "unproductive" locations by the end of 2026 to focus on luxury and small-format stores. Lowe's tells a similar story, reporting no change in comparable online sales in Q4, with total sales declining 17% to $18.60 billion from $22.45 billion in Q4 2022. And even Best Buy saw revenue declines as consumers’ appetites for electronics faded.

Seems like it’s becoming more challenging to make everyone happy, so finding your niche and knocking it out of the ballpark is becoming more and more important in the retail landscape. Oh, and make sure you offer those same-day delivery options (can you say, “big profits”) so you can be sure you’re part of the 80% that report increased revenue from implementing rapid deliveries – especially since those unprofitable free shipping days may be coming to an end.

FREIGHT AND SHIPPING

INSURANCE PREMIUMS FOR RED SEA SHIPPING SKYROCKET AND THE LIST OF COUNTRIES IMPACTED BY HOUTHI ATTACKS GROWS

And from pleasing those discriminate Gen Zers to dodging submarine weapons, our wrap up of the week’s news has as many twists and turns as an action thriller. The leader of the Houthi movement recently said they now have "submarine weapons," causing even more trouble in the Red Sea. Not only have the disruptions brought about shipping delays and shipping price increases, but now war-risk insurance premiums for shipping in the Red Sea have surged by up to 900%.

The impact of these disruptions has impacted businesses across the globe, and the UK is the latest victim. In fact, over half of UK retailers and exporters reporting being affected by the Red Sea disruptions. Shipping costs have surged, delivery times have lengthened, and the overall efficiency of the global supply chain has been compromised.

In other shipping news outside of container freight, an unexpected twist has emerged in the debate between gas-powered vehicles and electric vehicles (EVs). A recent study by the Anderson Economic Group has revealed that, given current gasoline prices, operating gas-powered vehicles is more cost-effective than their electric counterparts. This isn’t the best news for environmentalists and advocates of electric vehicles – at least as long as gasoline prices remain lower.

Finally, the trucking industry in New Jersey is paying close attention to new legislation. New Jersey Governor Phil Murphy proposed a "Buck a Truck" fee aimed at trucks servicing e-commerce distribution centers to mitigate traffic and road quality impacts from warehousing development. The fee, part of the Fiscal Year 2025 budget, aims to raise an additional $10 million but faces criticism from business leaders for potentially slowing e-commerce growth, increasing consumer costs, and further tarnishing New Jersey's business environment.

WAREHOUSE TECH

NEW LEARNING MODELS HELP WAREHOUSE ROBOTS AVOID WAREHOUSE FLOOR COLLISSIONS

What’s the latest warehouse robotics conundrum? Apparently, trying to figure out how to make hundreds of robots move peacefully throughout the warehouse without running each other over. Researchers have developed a deep-learning model to efficiently manage the movement of hundreds of robots in large robotic warehouses, addressing the challenge of preventing collisions among robots. This MIT team's model uses warehouse details, robot paths, and obstacles to spot and ease congestion areas, speeding up the process almost four times faster than old methods. Maybe this new knowledge can be used to avert traffic jams?

And Reelables has launched a new 4” by 8” Bluetooth shipping label, enabling logistics providers, forwarders, manufacturers, and retailers to trace goods from A to Z. Not to be outdone, AR headset manufacturers are reporting increases in pick productivity by up to 15% and picking accuracy as high as 99.9%.

But all these cool tech advancements are happening against a backdrop of continued economic uncertainty that's affecting how much businesses are willing to spend on new equipment. A recent report on U.S. factory orders in January shows businesses being careful about spending on new equipment due to worries about the economy. Even though there was a slight rise in orders for key business tools, a big drop in overall orders for long-lasting goods shows the difficulties the manufacturing industry is facing.

WAREHOUSE JOBS

INNOVATIVE STRATEGIES BY DHL AND WALMART TO RETAIN EMPLOYEES

Keeping good workers is super important in the warehouse and logistics world. So, what are the big names like DHL Supply Chain doing about it? At the Manifest 2024 event, Sally Miller, DHL Supply Chain's CIO for North America, shared that they're focusing on tech solutions to keep their workers happy and reduce the number of people leaving their jobs. They've noticed that places using more tech and gadgets see fewer people leaving. With over 2,000 locations and managing around 180,000 workers—most of whom are paid by the hour and see a yearly change rate of 40% to 70%—that's a big deal.

Walmart is also making smart moves, especially with training and education. They've updated their Live Better U (LBU) program, making it easier for employees to learn new skills for important jobs within Walmart, aiming to prep about 100,000 employees for essential positions in the next few years. Since kicking off in 2018 and making it free in 2021, the program has already helped over 126,000 Walmart workers. They're now focusing on courses that are directly useful for the company's needs, like business, supply chain, transportation, and logistics management.

These initiatives are welcomed “positive” news, especially when mass layoffs are hitting the logistics industry, with the most recent bad layoff news hitting states like California, Illinois, and Michigan.

COMMERCIAL REAL ESTATE

RISING RENTS AND SHIFTING OCCUPANCIES AMID ECONOMIC SHIFTS

Industrial rent increases just can’t seem to be tamed, baffling economists and tenants alike. In the recently released February 2024 report from Commercial Edge, industrial rents showed another increase – this time by 7.6% year-over-year, reaching an average of $7.74 per square foot in January. The national vacancy rate was 4.8%, marking a 20-basis point increase from the previous month.

Concurrently, a report by GlobeSt showed a big drop in how bulk warehouse space was being used in 2023, especially in the Northeast, where there was a lot less demand, leading to more empty spaces everywhere. This drop, caused by building more spaces than needed, signals the market is trying to find its balance again, hoping for a slow return to normal use levels. Is this an opportunity to capitalize on, or have the tides shifted completely? Only time will tell.

WAREHOUSE QUICK DELIVERIES

MERGERS, STRATEGIC AGREEMENTS, STEEP DISCOUNTS, AND MORE…

• The FTC Attempts to Halt the $24.6 Billion Kroger-Albertsons Merger

• UPS Reports Over 5% Decline in Amazon Revenue and Plans Further Layoffs

• J.B. Hunt Announces New Multi-Year Intermodal Agreement with Walmart

• Flexport, Shopify Offering Steep Discounts to Woo New Customers

• FedEx Anticipates Increased Shipping Costs Due to Proposed Trucker Rest Break Regulations

• Puma Cautions Against Decreasing Demand in Upcoming Periods

• Looming Strike Threatens East and Gulf Coast Ports

• The Growing Impact of Climate Change on Food Supply Chains