Automation Creates Opportunities for European Distributors
October 27, 2021
The European e-commerce market is growing quickly, creating significant changes, challenges and opportunities for the region’s material handling industry. As in the U.S., COVID-19 caused a spike in online shoppers and sales volume — accelerating growth trends, which are expected to continue.
In early 2020, Western EU countries saw online sales increase by as much as 21.4% — far more than the 6% originally projected. Economists revised their annual growth estimate to 9%, with a projected revenue of €750,000M in 2025. User penetration is also rising, from around 56.7% of EU households in 2020 to an anticipated rate of 67.1% by 2025.
These surges have put Europe’s distribution centers (DCs) under pressure to move significantly higher quantities of smaller, irregular items that are difficult to convey, identify and sort. As a result, demand is increasing for automated material handling equipment (MHE) capable of maintaining and increasing the necessary throughput to keep European DCs running profitably.
Automation Will Provide Significant Competitive Advantages
Four factors are making a strong case for automation in European fulfillment operations:
- Booming e-commerce — Regional e-commerce is growing at 6–8 times GDP at a 10–12% average compound annual growth rate (CAGR); it’s 15–20% in Germany and the UK. And that’s just the tip of the iceberg: online sales currently account for only 10% of total retail sales in Western Europe and 5% in Eastern Europe.
- Land and labor are constrained — Some of the most prosperous markets in Western and Northern Europe — including Germany, the UK and Scandinavian regions — have high labor costs and limited available space, making automation increasingly beneficial.
- Challenges of serving urban centers — Although demand for large DCs of more than 50,000 square meters (sqm) remains strong, mid-sized DCs of less than 10,000 sqm — also known as micro-fulfillment centers (MFCs) — are growing in prominence close to large urban centers, driven by e-commerce, “last-mile” considerations and the need to process more parcel units. Automation enables these smaller DCs to optimize operations, increasing storage capacity and throughput.
- Central and Eastern Europe (CEE) emerging as key regions — Growing economies in the CEE regions are fueling e-commerce growth. Cheaper land, easier approval processes, and proximity to improving transport links are encouraging Western European e-retailers to set up new DCs throughout CEE. Nearby Russia is also a growing market, with the potential to create additional opportunities.
To discover more about how Honeywell is empowering European DCs to confront the key challenges they’re likely to face in the next few years, check out the article “Vive l'e-commerce!” in the latest edition of On The Move. You’ll learn the ways consumer shopping behaviors are changing throughout the European region, plus see how automation solutions can optimize productivity, labor management and SKU handling.
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