The Prime Effect, Labor Shortages, and Dynamic Economy: A Glance at the 2020 Market
As we near the end of 2019, many of us in the automation and material handling world wonder what the upcoming 2020 market will bring. It is almost impossible to predict, but certain market trends can give us an idea on what to expect for next year and how to prepare.
Retail two-day shipping battles between huge conglomerates like Amazon, Walmart, and Target, in combination with the growing demand for manual labor are just a couple factors forecasted to drive the industry next year. On the other hand, potential market depressions could be soon, as this is the longest period in history without a recession (Frazee). Despite this, the overall outlook for automation demands in 2020 looks promising, due to several reasons further discussed in this article.
Driving Market Trends:
The Prime Effect
We all know Amazon Prime set the precedent with two-day Prime shipping. This alone has fueled the need for automation solutions in distribution warehouses, as people and businesses are expecting their products to magically appear at their door when they click that always satisfying “proceed to checkout” button.
Following Amazon’s lead, Walmart announced its plans in May of this year to roll out free next-day shipping, setting the bar even higher and forcing other retailers to spend billions of dollars on distribution infrastructure in order to stay market-competitive. Of course, Amazon, being the fast shipping powerhouse, decided to offer one-day shipping for all Prime members.
What does all of this mean for us in the material handling world? More business opportunities!
Labor Shortage and Demand
With the eCommerce market booming and more people resorting to online shopping rather than in-store, the demand for warehouse jobs has significantly increased. However, it is becoming increasingly difficult to fill the jobs at the rate demand is growing. The working-class generation is becoming older and fewer people entering the work force are interested in the repetitive types of jobs that distribution facilities typically offer, even with wages for such jobs becoming more and more reasonable. Combine this with a 50-year low unemployment rate of three and a half percent and finding the labor force to keep up with the market demand becomes harder than ever (National Conference of State Legislatures).
Shows the unemployment rate (%) over the last 10 years, according to the Bureau of Labor Statistics.
Material Handling Equipment Distributors Association (MHEDA) noted that material handling is experiencing some "economic softening". Trends pointing to this include shorter lead times on projects, economic indicators, decreasing new equipment sales, and downturns in other markets, such as automotive.
While these signs are signaling a decline in demand for material handling solutions, the rate of growth for automation points in a different direction. Beroe, the world’s leading provider of procurement intelligence and supplier compliant solutions, stated that the global process automation market is anticipated to grow at a compound annual growth rate of 6.6%, set to reach $178 billion by 2020. Also, according to a survey conducted by bar code and RFID solutions provider AbeTech, 55% of warehouse decision makers plan to expand their current warehouses in 2020, while 84% plan to increase the number of warehouses in their operations. Should these projections be true, we as material handling providers anticipate minimal obstacles moving forward into the new year. If they prove wrong, we should expect more competitive pricing options when proposing solutions.
When it comes to analyzing the potential impact of an economic downturn, learning about the future of the market is key to making positive long-term decisions and staying ahead of undesirable trends. The constant speculation of a potential market tank in the future seems scary, but material handling providers should not fear this for a variety of reasons. Due to the demand for near-immediate delivery, a nationwide labor shortage, and the continuous need to accommodate future growth, the material handling industry can still expect to experience continued success into the year 2020.
AbeTech. “Stay Ahead of the Competition: Warehouse Trends 2020: Lincoln's Blog: AbeTech.” ABE TECH Bar Code & RFID Solutions, www.abetech.com/Blog/Stay-Ahead-of-Competition-Warehouse-Trends-2020.
Beroe. “Global Process Automation Market: Best Practices · Benchmarking · Engagement Models · Industry Analysis · Top Suppliers · Trends · Outlook · Download Report Now!” Analysis, Trends, Forecast, Outlook – Market Research, 2019, www.beroeinc.com/category-intelligence/process-automation-market/.
Brainerd, Jackson. “National Employment Monthly Update.” National Employment Monthly Update, 4 Oct. 2019, www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx.
Broida, Rick. “What Is Amazon Prime?” CNET, CNET, 1 June 2018, www.cnet.com/how-to/what-is-amazon-prime/.
Frazee, Gretchen. “Can the Longest Economic Expansion in U.S. History Last?” PBS, Public Broadcasting Service, 1 July 2019, www.pbs.org/newshour/economy/making-sense/can-the-longest-economic-expansion-in-u-s-history-last.
Gabriel, Agna. “United States Unemployment Rate.” United States Unemployment Rate | 2019 | Data | Chart | Calendar | Forecast, 4 Oct. 2019, tradingeconomics.com/united-states/unemployment-rate.
MHEDA. “Material Handling Business Trends.” Material Handling Equipment Distributors Association, 2019, www.mheda.org/about-us/material-handling-business-trends/
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