Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Tag: logistics

  • An interactive map of industrial space in southern California

    Here is an interactive map, created by the Robert Redford Conservancy for Southern California Sustainability, showing the approximately 1,573,777,062 square feet of industrial space that can be found in Los Angeles, Riverside, and San Bernardino.

    The map allows you to zoom in on specific parcels to see things like site area, warehouse size, and year built. You can also play around with different map radii to create a rollup of warehouse space within a specific area, which includes an estimate of daily truck traffic and CO2 produced.

    The Guardian also used this data to create the following chart, which is helpful in showing the dominance of certain cities, as well as how much of this industrial space has been built since 2010:

    The point of this interactive map, this data, and the accompanying articles is to highlight just how disruptive all of this new industrial space is to these southern California communities and to the environment in general. But I think it is also an important reminder that, whether we like it or not, our online activities have real-world physical implications.

    Online shopping requires warehouses and logistics. Online food delivery requires (ghost) kitchens. And online activity, in general, requires the storage of unprecedented amounts of data. All of these “back-end spaces” take up room, even if they’re mostly easy to ignore when we’re just looking at our phones.

    This is our new “phygital” world and, yes, it is changing the landscape of our cities. Now our task is to figure out how to do this in a way that respects communities and respects the environment.

  • TikTok wants to open warehouses

    Last week, Axios revealed that TikTok is looking to hire a bunch of people that can help the company build out fulfillment warehouses and an entire e-commerce supply chain system for its users. All of this was discovered through various job listings that the company has posted to LinkedIn.

    Broadly speaking, this is I think interesting for two reasons. Firstly, it is an atypical approach compared to other social networks. Instagram allows people to sell stuff via its platform, but it’s done through an asset-light approach. What TikTok is doing is more Amazon meets social. (Though this is not my area of expertise and I’m going to need someone like Ben Thompson to do a deep dive into TikTok’s business model.)

    Secondly, I like to think about the physical spaces that service our online activities and what any changes might mean for our cities. Today if you order something from UberEats, it may come to you from a ghost kitchen that is servicing multiple restaurant brands and various food apps, and has no front-of-house operations. Tomorrow if you order something you see on TikTok, it may come to you from one of their warehouses.

    This is not any different than how Amazon works today, except for the fact that TikTok has this incredibly powerful and sticky social layer. If you take this to an extreme, it’s almost as if our physical spaces are slowly becoming back-of-house providers to front-of-house spaces that only exist somewhere online. Who needs Zuck’s metaverse, we may already be living in one.

  • Container shipping rates are still scary

    The cost of container shipping continues to come to the forefront in this current environment. Today I was reviewing prices from a number of our suppliers and the rates for a FEU (forty-foot equivalent container) now seem to range anywhere from $8k to almost $18k (both CAD), depending on the origin.

    This is up from a few thousand at the beginning of the year, and from far less prior to that. To help illustrate this point, above is a chart I found over at Statista showing an aggregated global container freight rate index from July 2019 to November 2021. This chart, which is in USDs, suggests that container rates may have peaked and be now tapering off, but who knows really.

    This is a challenge for our suppliers and partners to manage through and it is a challenge for us to manage through. In some cases these additional costs will necessarily trickle down to the end consumers of the spaces that we and others are building. But in other cases that is not possible.

  • Amazon’s supply chain moat is turning out to be useful

    Today, Amazon ships approximately 72% of its own packages. This is up from about 47% in 2019. Ben Thompson of Stratechery recently published an excellent article talking about why this is important and how the company’s investments in logistics are, yet again, paying dividends.

    The foundation of Amazon’s “moat”, Ben argues, is aggregating customer demand. When most people buy something on Amazon from a third party merchant, they think and feel as if they’re buying directly from Amazon. Some people probably don’t even appreciate the difference and in most cases it probably doesn’t matter. It comes in a box with Amazon’s logo on it and that’s that.

    But it’s an important distinction because if you’re a third party merchant, Amazon pretty much “owns” your customers. They are the ones aggregating demand. They have the brand equity and loyalty. And if you left the platform, your customers would be unlikely to follow you.

    This is kind of the opposite of how Shopify’s ecommerce platform works. When you operate a Shopify store you are using their platform, but you are bringing your own brand, web domain, and other assets to it, such that you can now establish a more direct relationship with your customers. This doesn’t mean that Shopify doesn’t have a moat, it’s just something different.

    All things being equal, most businesses would rather “own” their customers than not. The problem right now is that shipping and supply chains are no joke, and so there are real advantages to being on Amazon and having them handle your fulfillment. It could mean the difference between getting your products out for Christmas, or not.

    So all things are not equal.

  • The great unbundling

    Every year, Benedict Evans publishes a presentation about the “big macro tech trends” impacting the global economy. They are always excellent and I usually share them here on the blog. It’s also becoming harder and harder to differentiate tech trends from the rest of the economy, and so in many ways this is just a presentation about important macro trends.

    In this year’s presentation, he focuses on the “unbundling” of retail, ecommerce, advertising and TV; China and the end of the American internet; and a few other timely topics. To view the presentation, click here. Benedict also delivered this same presentation at a recent event by Protocol and Nasdaq (video link) in case you’d prefer to consume the content that way.

  • Air Canada partners with drone delivery provider

    Today, Drone Delivery Canada (TSXV: FLT) — a company that I have written about before on the blog — announced that it has entered into an exclusive 10-year agreement with Air Canada. Press release, here. Globe and Mail article, here. BNN Bloomberg article, here.

    As part of the agreement, Air Canada Cargo will market, sell, and promote DDC’s drone delivery services across the country using its sales and marketing platforms. It will be positioned as premium offering, and Air Canada has agreed not to engage any other drone delivery service during the term of the agreement.

    This is a pretty big deal for DDC because it gives them distribution and legitimacy (they’re a pre-revenue company). And for Air Canada, it is an opportunity to be a part of “Canada’s first national drone cargo solution.” The promise is a more cost-effective solution for servicing remote communities.

    DDC plans to build out and operate up to 150,000 drone delivery routes across Canada as a result of this partnership. But, of course, it remains to be seen just how profitable these routes will be when they begin servicing their low-density communities.

    Full disclosure: I am long $FLT because I think that what they are trying to build is very interesting and I think that better connectivity will be a positive thing for remote communities within Canada.

    Photo by Ethan McArthur on Unsplash

  • Everything delivered on demand

    Last week I had something delivered from Amazon almost every single day. They weren’t necessarily big things though. One day it was a new corn broom for the patio. Another day it was a small set of hooks that I wanted to hang some lights. And the list goes on. 

    This is what Amazon wants us to do. Order every little thing, instantly, as soon as you think about it. And it’s magically convenient.

    Developers and architects are of course thinking about the implications of this shifting shopping habit on new residential developments. Usually it comes in the form of a large “Amazon room” and/or a parcel locker system. 

    I recently measured the package room in my building (geeky, I know). It’s about 10′ x 6′ and it sometimes isn’t enough for the volume of daily packages generated by ~360 units. 

    The other thing that happened last week is that my concierge said to me: “Brandon, we have become a full fledge post office with the amount of packages that come through here every day.” Every evening there’s a lineup of people waiting to collect their packages. 

    That immediately signaled to me that simply providing a larger room probably isn’t enough. This trend is only going to continue. How could we better design and optimize for this shift?

    I am sure that there many companies working on this problem. Hopefully they will surface in the comments and in my inbox following this post.

    Photo by Maarten van den Heuvel on Unsplash

  • Is it only a matter of time before Amazon enters the delivery business?

    Yesterday I ordered something from Amazon Prime. The guaranteed delivery time was today before 9pm, but within an hour of ordering the delivery estimate was updated and it ended up arriving on the same day about 5 hours after my order. I thought this was pretty amazing, particularly because the package was a bit time sensitive.

    Delivering to individual residences is more expensive than delivering to more centralized businesses and stores. And with the rise of online shopping, UPS now delivers as many as 31 million packages every day. Because of this, every little detail counts. 

    Last year the company started installing Bluetooth receivers on the inside of its delivery trucks. If a driver incorrectly loads a package that isn’t on their route, it pushes out a loud beep. (This is one of the many tech and data-driven projects that UPS is working on to ensure it stays competitive.)

    Previously there was no final check. If there was a rogue package on the truck, it meant the driver would have to stray from their route, coordinate a handoff, or delay the package for another day. These mishaps can really add up when you’re delivering 31 million packages in a single day.

    With Amazon squeezing delivery times and with the rumors that it’s going to start its own delivery business (to compete directly with UPS and FedEx), one has to wonder about the impact that these volumes will have on our cities. Perhaps autonomous vehicles will really become the new roaming retail outlet – ready to deliver as soon as we click buy.

  • From retail to logistics

    Over the past few weeks we’ve been talking about the future of the mall on this blog. It’s a topic that I’m very interested in.

    Yesterday the Wall Street Journal published an article talking about the trend of converting retail/shopping facilities to logistic centers. 

    Here’s an excerpt:

    “In Mesquite, Texas, FedEx Corp. next month will open a 340,000 square-foot distribution facility on what once was the site of the former Big Town Mall. Located along U.S. Highway 80 in Texas, the mall declined after newer malls were built nearby. It was demolished in 2006 and the land was later rezoned for industrial use.”

    It turns – and we’ve talked about this – that good retail locations are also good distribution locations. They are usually located close to humans and infrastructure.

    Here’s another example from the article:

    In North Randall, Ohio, Amazon.com Inc. is considering the site of the former Randall Park Mall as a fulfillment center, according to Port of Cleveland, a local government agency focused on spurring job creation and economic growth in Cuyahoga County. Amazon didn’t immediately respond to requests for comment.

    For a short time when it opened in 1976, Randall Park Mall was the largest shopping center in the world and had been “a thriving heartbeat” for the local economy, according to Mr. Davis. But the mall closed in 2009 as stores struggled with fewer shoppers.

    Assuming this trend continues and people continue to buy things online, one has to wonder about the placemaking that should or needs to happen in these areas.