Discuss the implications for commercial real estate

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Reference no: EM133359229

Assignment:

Apply learning about micro-fulfillment to discuss the implications for commercial real estate, restaurants, and retail. Students will also consider the capital investment necessary for such significant transformation.

The Issue

Employers and workers have quickly grown comfortable with remote working and shopping. A recent McKinsey report concludes that demand is expected to rise across all shopping segments and consumer groups, and Morgan Stanley estimates that U.S. home food deliveries could reach USD 350 billion by 2025. But are companies ready to meet the increasing demand for small custom deliveries? Not yet.

Even before the pandemic, online retail and rapid food delivery struggled to service "the last mile" to the doorstep. Delivery speed and custom orders strain company capabilities to manage inventories, maintain technology, ensure data security, and meet health and safety standards. In turn, customer loyalty hangs in the balance as companies race to affordably match logistics with demand.

Surging demand from "stay-at-home" consumers compounded the problem and stressed even the most reliable couriers. On Cyber Monday 2020, UPS imposed shipping restrictions on Gap, Nike, and others to cope with record deliveries and capacity shortages. Restaurants and grocers face similar challenges in disrupting kitchens and straining margins to process, prepare, and deliver small orders.

Empty mall retail space provides an ideal solution for fractured supply chains. Malls are often located near highways and suburban population centers. They have loading docks for bulk receiving, inventory management infrastructure, and large parking lots fit for small delivery vehicles. Repurposing failing or abandoned malls as mini-distribution hubs stabilizes both overextended supply chains and troubled commercial properties. Mall owners in need of cash flow and lease agreements to meet loan obligations are listening.

For instance, CloudKitchens, a restaurant start-up, repurposed empty mall locations into "ghost kitchens" to serve delivery customers only. UberEats, DoorDash, and other services use parking lots redesigned as order pickup queues. The model has wide appeal as fast food and casual dining restaurants rely more on delivery.

These isolated operations allow existing shops to focus on in-person, takeout, and drive-thru service without the disruption of food couriers and online order spikes at peak dining times. A similar model may work for retailers preparing orders of popular items for same-day or next-hour delivery.

While appealing, micro-fulfillment requires major technology and physical infrastructure investment. Speed, accuracy, and product selection via technology replace the customer retail experience. Such digital transformation requires carefully coordinating customer interfaces with order fulfillment and delivery.

Why Is It News?

Before the pandemic, many shopping malls were struggling to generate sufficient customer traffic and retain tenants. As consumer demand for at-home delivery continues to rise, companies now compete for logistics resources. Commercial real estate holders, restaurants, and retailers are thoroughly evaluating micro- fulfillment solutions. Repurposing existing infrastructure, investing in emerging technologies, and restructuring supply chains offer opportunities with many economic beneficiaries.

Using this case as a guide, research your own example of a specific strategy (with a specific location) being used to prepare for the future of commercial real estate and answer the following questions in your own words;

Describe the strategy being used in your example, how does it prepare for the future? (approx 125 words)
Why do you think this strategy could be successful? Provide at least two reasons. (approx 125 words)
What are the potential weaknesses with this strategy? Provide at least two reasons. (approx 125 words)

Reference no: EM133359229

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