E-Commerce Rapid Growth Could Mean Higher Online Shopping Prices

In a recent report, Forrester predicted that online sales will account for 17 percent of all U.S. retail sales in 2022. One of the Giants behind this leap in online sales growth is Amazon. This report also revealed that 83 percent of U.S. online adults purchased something on Amazon in 2016, and 55 percent used Amazon as a research tool before buying a product.

The rise in e-commerce has led to many changes, from alternative payment processing options like high risk merchant accounts to an increasing need for more warehouses. Brick-and-mortar retailers have especially been affected. To keep up with e-commerce’s rapid growth, these retailers have started to use omnichannel fulfillment (e.g. ship-from-store and click-and-collect) methods to leverage their store locations and in-store inventory. Offering cheaper, more convenient delivery options, turning stores into fulfillment centers and limiting shipping costs are just a few of the ways brick-and-mortar businesses are trying to manage the transition to digital.

E-commerce retailers also have their fair share of challenges. As more consumers shift towards buying online, companies are seeking more space to fulfill orders quickly and keep up with the competition. In turn, this has caused land prices to jump considerably in parts of the U.S., as businesses seek plots to build/rent their warehouses and distribution centers.

Real estate company CBRE found that the average price of large plots of land (50 to 100 acres) doubled by 50 percent year – more than $100,000 per acre. In addition, smaller industrial plots have increased from around $200,000 per acre to $250,000 per acre; these locations are typically closer to urban centers to handle same-day shipping. Amazon alone has 140 fulfillment centers – both small and large-scale warehouses – across the U.S.

In a statement to the press, David Egan, CBRE’s Global Head of Industrial & Logistics Research, shared that “This situation won’t go away any time soon, because the markets where distribution centers are most in demand — typically near or in densely populated city centers — have scant available land for industrial uses.”

What does this all mean? For the consumer, it will likely lead to paying more for online shopping in the future. The high cost of acquiring locations will eventually trickle down and affect the prices consumers pay for shipping. For businesses, finding (affordable) locations for warehouses and distribution centers will be more difficult, and they will have to be creative in covering shipping costs.

Electronic payments expert, Blair Thomas, co-founded eMerchantBroker in 2010. His passions include writing/producing music, and travel. eMerchantBroker is America’s No. 1 high-risk merchant accounts company, serving both traditional and high-risk merchants.