I have completed the analysis and forecast portion of my global warehouse automation market research for this year. All I have to do now is write the report and publish it. I thought I would take this opportunity to present some of the high-level findings from this research. To those of you on vacation during this peak vacation week – I’m jealous. To those of you in the office. I hope you find some of my insights…insightful.
Warehouse Automation Didn’t Take A Sick Day
Straight to the point, the market didn’t grow as much in 2019 as I had expected, while 2020 is looking better than I had anticipated. It’s interesting how the focus on coronavirus, the effects of the lockdowns, etc., clouded my memory of 2019. Of course, the major factors such as investment to support the growth of direct-to-consumer remained on the top of my mind. However, indirect factors in 2019 such as GDP growth deceleration in parts of Europe, trade decline due to trade disputes, and the strengthening dollar (or weakening euro) fell out of mind once the lockdowns became a reality.
I entered the research process with the expectation that the global warehouse automation market would remain relatively stable during these uncertain economic times, as most direct-to-consumer channels remained active, with some growing very rapidly. Furthermore, warehouse automation suppliers went into 2020 with a substantial backlog of orders to buffer any short-term decrease in demand for project business. And the maintenance and support business of automation suppliers has been growing steadily over the past few years, providing additional support to providers’ business. But at the same time, travel and other restrictions likely caused project delays, so I didn’t expect the market to actually grow in 2020. But 2020 growth now appears to be a real possibility. The International Monetary Fund recently downgraded its 2020 GDP growth forecasts. In contrast, my expectations for the 2020 global warehouse automation market have improved over the last couple months.
2020 Anecdotes and More
ARC’s study process includes direct input from suppliers as well as the use of publicly available information. I am not at liberty to discuss confidential inputs. However, I can say that the most impressive publicly available datapoint from 2020 thus far is KION Group’s announcement that the value of order intake in the Supply Chain Solutions segment (Dematic) was “close to €1.1 billion in the second quarter of 2020, an increase of more than 100 percent on the corresponding prior-year period (Q2 2019: €506 million).” The strong order performance was “due in large part to big-ticket orders from e-commerce customers, including companies in North America and Europe.” Of course, orders are not constrained by capacity like revenues. But the order increase shows that demand for warehouse automation projects remains high. In general, warehouse automation providers informed me that implementation delays in Q2 were less than they had expected, and demand from e-commerce operations of most industries remains strong. There is some notable weakness from apparel verticals, while demand from grocery remains exceptionally strong. My high-level market perspective remains the same as it was earlier this summer, “I believe the same trends will mostly occur as if the pandemic had not occurred. However, I believe technology investments will experience a slight delay, followed by an accelerated shift to e-commerce fulfillment requirements occurring shortly thereafter.”