The rise of micro-fulfillment centers

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Grocery delivery, Ecommerce

Covid-19 has changed consumer behaviors and shaped a new landscape for businesses throughout the last year. One of the most noticeable and talked-about big trends is the exponential growth of e-commerce. While this trend is posing a challenge and threat to conventional retail business models, a rising new opportunity is getting more and more attention: the micro-fulfillment center.

Facilitated by the pandemic itself and lock-down policies, the global e-commerce market expanded to $27 trillion (USD) in 2020, taking a share of almost 20% of all retail sales.1 The leader of this sector, Amazon, has been reported increasing the footprint of its fulfillment centers by 50%.2

Record-number calls for an unconventional system

This rapid expansion of e-commerce and delivery industries has started the super-growth of micro-fulfillment centers as well, although being a relatively new business model. As its name shows, it’s basically a tiny warehouse. Located around urban areas unlike their bigger counterparts near highways far away from city centers, what they do is providing extremely fast (same day) delivery service while cutting the cost. But the most important job of those MFC’s is making fresh online grocery shopping possible– as grocery sales being the main contributor to the MFC market with around 70% ~ 80% share.3

The small size makes it easy to proliferate, as it conveniently utilizes existing property or even the backside of retail stores and the basement of malls. The estimate shows the market size of MFC is expected to be 10 times bigger than now and reach worth about $10 billion by 2026.3

Smaller-scale vitalizes new technologies -or will it challenge existing players?

Meanwhile, the management of these centers requires data-managing technologies due to their time-oriented nature. Same-day delivery makes it necessary to predict what products to store to maximize the limited space, which means A.I. and Big Data technologies will probably be heavily used, even more than in gigantic logistics hubs.

Another noticeable trend is that besides the established global leaders such as Amazon, Walmart, and Alibaba, there are a lot of new players entering the MFC market.3 For the enterprise mobility industry, this can mean either a new future opportunity of a smaller and more segmented market or a challenge to maximizing profit, if the average product quantity per sale goes down.


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