Summary

It hasn’t happened yet … but it will … and here’s why.

Last week I was speaking with a colleague from Glasgow City Council. She explained that non-residential business tax income is down from both retail shops and from offices. Councils see high Street retail closures as part of a long-term decline. Business rates income from office space has shown a more recent drop as home working gains in popularity at a time of unprecedented empty office space. Scotland’s largest facilities managed office block, Skypark in Glasgow, has capacity for around 3,200 people. Last week there were fewer than 300 people using it.

Although local taxes in Scotland and the rest of the UK are handled very differently North and South of the border, local Government officials are already discussing alternative ways of filling the gap left by the downturn in retail and office income. In parallel, several politicians and parties have been advocating reducing taxes on traditional traders while shifting the tax burden to those involved in online trade. Arguments in favour of this shift point to companies such as Amazon whose tax bill this year increased by £3.8 million during a year when their sales increased by over £1.89 Billion. While BigTech will inevitably shoulder the largest tax increase, it's highly likely that others within the ecommerce sector will also be expected to contribute.

The UK is in the midst of an ecommerce warehouse boom caused by the growth in ecommerce. The UK added 3.4m sq metres (37m sq ft) so far in 2021 with an investment of over £6bn in just the first 6 months. These new warehouses will inevitably be seen as a mechanism to help balance the public sector books. How might ecommerce companies best respond to these changes?

Optimising Ecommerce Warehouse Costs

There are two main levels at which businesses can optimise their warehouses. What they each have in common is that they (a) make the most effective use of space and (b) make the most effective use of automation.

Level 1: When we first engaged with Toolstop and launched their first ecommerce website, the company operated out of an old Victorian warehouse whose levels were connected by small, narrow staircases. As sales increased, all available space was used for stock storage. As sales were made, staff were struggling with boxes up and down the stairwells while keeping accurate track of what stock was where was virtually impossible. As the company grew and moved to a dedicated warehouse, efficiencies increased and growth continued. Having a modern building with clear space was an important factor in their first 10 years of rapid ecommerce growth.

Level 2: For almost all businesses, their business rates are charged on the basis of square footage/meterage. This provides the basis for how a company might optimise and minimise it’s business rate costs. The solution is to think in 3D.

In terms of 3D volume, how well is this Amazon warehouse making use of it’s available space? Even at ground level, most of the ground area is used only for access.

Compared to Amazon, this 3D warehouse based on Autostore is at least x10 better at utilising the warehouse volume. Courtesy: logistikknowhow‍

Let’s introduce the concept of how much stock can be held by each square foot or square metre of warehouse storage. A 3D warehouse like Autostore is likely to store ten times more stock for the same 2D floor plan than a traditional, single-level warehouse.

A full 3D warehouse not only saves on business rates. It also maximises automation potential - particularly for businesses that need to operate on a 24/7 basis.

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Covid has cost the UK around £400 Billion. To start to balance the books, the public sector will be looking to recoup costs from those that were seen to benefit from lockdown and are considered able to afford the extra taxes. For ecommerce businesses, now is the time to start thinking about how this will impact your business and what you can do to mitigate against these increased costs.