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As I said yesterday, COVID-19 is the “Pearl Harbor moment” of our times.
Both came as tragic and deadly surprises, despite some early warning signs.
Both events set changes in motion that shaped the economy for decades to come.
We also spoke about a few of the changes COVID-19 is bringing, such as the shift to working and living remotely and the economic consequences.
Today, let’s look deeper at another one of these trends:
The future of delivery.
I’m Looking Long Term
… All with an eye on what stocks to buy today for 2030, not for 2023.
I’m sure it’s not a surprise to hear that department stores and malls are dying.
Research firm Green Street Advisors predicts their demise is coming this year.
More than half of all department stores based in malls will close by Jan. 1, 2022, according to their research.
Those malls are likely to close with them. After all, Green Street Advisors estimates that department stores account for almost one-third of all mall real estate.
The virus is speeding up the process, of course. But there’s been a long-term trend away from malls and department stores for years.
Which is why it’s safe to say there will be no comeback after COVID-19.
There are plenty of underlying reasons.
The rise of Amazon and e-commerce tends to get most of the blame. But the fact is, changing marketing strategies and social media are probably just as guilty.
See, department stores flourished when they were a mark of quality and taste. Macy’s, Nordstrom, Bloomingdale’s — this is where we went to figure out what we wanted to buy. We trusted that the department stores would show us the best of the best.
But the rise of the internet and especially social media changed that. Companies started connecting with us directly, building brand loyalty and a following. We started hearing word-of-mouth reviews from people all over the country.
Once that happened, there was no point in having department stores anymore. Thanks to the internet, we already knew what we wanted and why and didn’t need department stores to curate it for us.
The ease of online shopping helped, of course. And that’s a piece of the puzzle that exploded during the pandemic. According to software company Adobe, the pandemic sent total online spending up to $82.5 billion in May last year.
That is 77% higher than in May 2019. Analysts hadn’t expected online shopping to be that popular until 2024 or even 2026.
I don’t bring this up to tell you that Amazon is a good investment.
For one, Amazon may be the leader in online shopping, but it’s far from the only one.
Shopify, Walmart, and Target continue to fortify themselves as strong competitors in the e-commerce space.
Why E-Commerce Matters
I bring up e-commerce so we can focus on the longer-term, underlying trends. Because by ordering everything online for delivery to our homes, we’ve made the delivery process a lot harder.
And that’s creating substantial investment opportunities.
Malls and department stores used to serve a vital function: last-mile storage. These stores would keep most of what we wanted in stock for us to buy and drive home ourselves.
Today, we want everything delivered to our doorsteps. And that’s led to a huge increase in demand for small warehouses.
We call these “last-mile” storage facilities because they are where goods get put on delivery trucks. Those tend to drive only a few miles before delivering goods to your home.
That means these last-mile facilities have to be local, close to where people live. Especially as we start demanding more and more things be delivered in just one or two days.
COVID-19 has supercharged the growth in this area, which includes more than just the companies building last-mile warehouses.
We want to focus on the companies working to make last-mile delivery vehicles more efficient or automated.
Some companies are even looking at having drones fly your packages to your home.
There are plenty of opportunities for companies to win market share here. For example, logistics company Storage Solutions claims that 53% of delivery costs come from that last mile.
So, we want to dig deeper into the companies poised to succeed in this area. And we will very soon.
All in all, research company Technavio expects the last-mile delivery market to grow at a compound growth rate of 16% a year through 2025. That will mean a $59.81 billion increase in the market’s value.
That makes this a great area to invest in for the long term.
Even the malls and stores that survive will have to adapt. Last May, the value of goods purchased online and picked up in stores almost tripled compared to the year before.
That means stores have to devote more and more of their square footage to last-mile storage.
This could be another boon for the real estate companies investing in this space. I will dig into the REITs that dominate the last-mile market on Monday.