According to the Boston-based investment bank Capstone Headwaters, 2021 will be an active transaction year as companies adjust to the post-Covid supply chain environment. “The historically under-appreciated segment of third-party storage facilities has not only been reconciled, but prioritized as the rise in e-commerce shifts operational functions such as product storing, sorting, and packaging to outsourced warehouse locations,” Capstone said in its February warehousing & fulfillment industry update, titled “New Factors Impact Valuation in Storage, Supply chain, and Fulfillment.”
While third-party storage services have been undervalued by investors for decades, that situation began to change slowly in the 1980's with the introduction of lean manufacturing philosophies and just-in- time inventory capabilities. The rising valuation of warehousing then accelerated during the coronavirus crisis, as consumers migrated from brick-and-mortar retail to online shopping, Capstone said. Since shoppers were not setting foot in malls and shops, the “operational” functions of a store—storing, sorting, packaging, and servicing products—shifted from a retail location to a warehouse location. With a lot of fulfillment responsibility and customer experience value now transferred to fulfillment centers, investors are seeing greater value in third-party storage companies.
With online commerce growth showing no signs of slowing, acquisition activity in the fulfillment sector has also accelerated, bringing heightened valuations for companies providing the infrastructure that make e-commerce possible. For example, Amazon saw its revenue rise from $75 billion in the first quarter of 2020 to over $125 billion in the fourth quarter, and Shopify reported a revenue jump from $470 million in the first quarter to $714 million in the second quarter. And even before the pandemic boom, enterprise logistics firms were investing in the trend, with deals like Walmart’s 2016 acquisition of jet.com and UPS Inc.’s 2018 launch of Ware2Go, the bank said.