Amazon and Flipkart are in talks with several warehouse operators across the country to lease their space temporarily in anticipation of a bumper festive season as consumers increasingly click to buy and avoid crowding brick and mortar stores due to the continuing Covid-19 pandemic.
Both companies expect their sales to outpace existing fulfilment centres and are looking for incremental storage areas for the next few months, until they develop their own facilities.
While Amazon has already taken about 3 lakh square feet of space at National Highway 8 in Gurugram for a few months and is in talks with others to lease more, Flipkart too has held negotiations with multiple buyers, according to two people aware of the developments.
“E-commerce players take space on a temporary basis before the festive season and leases are usually 4-8 months. But this year, the size of such deals is expected to be bigger,” said Abhijit Malkani, CEO of logistics developer ESR, a venture of private equity firm Warburg Pincus and global investors.
Usually, the size of temporary lease ranges from 50,000 sq ft to 1.5 lakh sq ft.
Last month, Amazon said it plans to set up 10 new fulfilment centres, gearing up to cater to a surge in demand for online buying usually only seen during the festive season.
Amazon and Flipkart did not respond to an email query.
“Many of the offline retailers have moved online due to Covid-19 and even the wedding shopping is happening online. At least three e-commerce giants are in talks with warehouse operators in Gurugram for temporary space to cater to demand from North India and deals are expected to close in a few days,” said Anckur Srivasttava of GenReal Advisers. “Some of these swing space leases are already in place,” he added.
Within apparel, most brands are reporting over 20-25% contribution from online channels, more than doubling over the past six months.
The festive season, which starts with Navratri and goes up to Diwali, usually contributes 40-45% of annual business of white goods makers.
Capacity addition started July-end for most companies and players including LG, Samsung and Panasonic saw their best August sales in the last five years.
“While demand is a key trigger, there is also a rush of small sellers moving into online marketplaces for the first time but don’t have their own warehousing” said an industry official.
High sales in electronics has a direct correlation to e-tailers revenues as the consumer electronics segment forms the biggest chunk of their sales revenues compared to apparel and packaged consumer goods.
“We have committed 50% more space at the same facility temporarily as most of the shoppings are now happening online. Even the local grocery stores are buying it online,” said Samarth Agrawal, founder MaxWholesale, a B2B e-commerce platform for kirana stores that takes warehouse space on lease in Delhi-NCR.