Wednesday, July 25 2018
By Jose Lozano, President and CEO, Choose New Jersey, Inc.
When Amazon opened its first New Jersey distribution facility in Robbinsville in 2014, eCommerce was not yet a driver of our State or National economy. With total retail sales estimated at nearly $305 billion nationwide, according to the U.S. Census Bureau, it accounted for just 6.5 percent of all retail sales.
Fast forward to today: eCommerce retail sales have grown exponentially, reaching an estimated $453.5 billion in 2017 – an increase of 16 percent year-over-year following a 14 percent increase in 2016. Today eCommerce represents approximately nine percent of all retail sales in the U.S. and is growing.
Eight in ten Americans now shop online, with 29 percent of U.S. internet users shopping online at least once a week. Analysts predict that the double-digit growth of eCommerce will continue through 2020, when sales in the U.S. are projected to grow to more than $684 billion.
Concurrently, Amazon’s New Jersey footprint has grown too. Today, with eight New Jersey distribution and sort facilities, the eCommerce giant is the fifth-largest employer in the state, with more than 16,000 employees working at facilities north, central and south. Amazon is not alone.
Many prominent eCommerce companies are growing here too – from Jet.com to Wayfair to Boxed and Blue Apron. Best Buy, a leader in online consumer electronics sales, will be moving into a new 725,000-square-foot distribution center in Piscataway by the 2019 holiday season, expanding its already sizeable footprint in New Jersey. Adore Me, the disruptive lingerie start-up based in New York City, recently established its first distribution center in Secaucus.
Why are so many top eCommerce companies locating to New Jersey or expanding their footprint here? The answer is simple: location and market access. New Jersey offers both.
Conquering the Last Mile and Beyond
A decade ago, the expectation of same day delivery was virtually non-existent. Today, 96 percent of customers consider “fast delivery” to be synonymous with “same day delivery.” In fact, 56 percent of online consumers between the age of 18 to 34 have come to expect delivery of the products they order online within a day. More than 80 percent of shoppers want it and more than half of retailers offer it, according to industry surveys.
The demand poses one of the biggest challenges for the eCommerce industry: how to get products into the hands of customers both quickly and cost-effectively. Many companies have discovered that last mile shipping costs can be reduced dramatically by locating their facilities close to where the people are. That’s where a New Jersey location gives them a competitive edge.
Situated in the heart of one of the most affluent consumer markets in the world, companies can reach more than 22 million consumers with nearly $800 billion in disposable income within a two-hour drive of a central New Jersey location, making same day delivery both possible and cost efficient. Forty percent of the U.S. consumer market is within a day’s drive of a distribution center anywhere in the state.
In addition to an enviable location, New Jersey has a world-class transportation infrastructure that provides connectivity to regional consumers, as well as nearly every major market in the U.S. and beyond via road, rail, air or sea. It’s no wonder logistic leaders, including delivery giants FedEx and UPS, have been building new facilities and expanding their operations here.
A Tech Savvy Talent Pool
With business opportunities expanding, so does the need for a workforce with deep knowledge of how to move product quickly and efficiently. New Jersey excels here too.
The State’s transportation, logistics & distribution sector employed more than 382,000 workers in 2016 – 11.3 percent of the state’s private sector workers, as compared to 8.8 percent of private sector employment nationally. The warehousing and storage subsector added nearly 13,000 jobs in the past decade to fill the needs of a growing industry. What does that mean for eCommerce companies with a New Jersey location? They can access a growing and experienced talent pool that can accommodate their operational requirements as they grow.
What’s more, with the second-highest high school graduation rate in the nation and a workforce where nearly 39 percent have a bachelor’s degree or higher, New Jersey has one of the most highly-educated, highly-skilled workforces in the U.S. Additionally, nearly 7,000 students graduate with computer science-related bachelor’s degrees each year from New Jersey colleges and universities, which has been a big plus by many eCommerce companies.
In an era where technology is driving logistics operations, companies have found a tech savvy workforce – which includes more than 115,000 software developers, network architects, systems analysts and other IT-related professions – can help manage the sophisticated technology and data that have become critical to operational efficiency.
UPS clearly recognized the value of the state's workforce when they choose New Jersey as the new home of the new UPS Innovation Center. Roughly 900 developers, designers and IT professionals manage the technology that keeps 100,000 ground vehicles and 18 million packages moving each day from its 200,000-square-foot center in Parsippany.
Driving the Growth of the State’s Industrial Markets
The growth of eCommerce and consumer expectations for same-day delivery have propelled demand for New Jersey warehouse and distribution space to new heights, according to Cushman & Wakefield’s Marketbeat report.
In 2017, the industrial market absorbed more than 10 million square feet for the fourth consecutive year. New development hit a century-high mark, as the need for modern warehouse facilities remained strong. Nearly 9.8 million square feet of new industrial space was built during 2017 in Northern and Central New Jersey alone. More than 83 percent of that space is fully leased.
The market in 2018 remains red hot with another 2.5 million square feet of industrial space delivered in the first quarter of the year to meet the strong demand. While 68 percent of that space has already been leased, primarily to eCommerce companies, the development of quality, modern facilities to meet the needs of a growing eCommerce sector is expected to continue well into the future.
As an increasing number of consumers demand same-day delivery of the products they purchase online, savvy eCommerce companies will look for locations that will help them provide better service while keeping costs in check. They’ll find that perfect location in New Jersey.
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