Dive Brief:

• Williams-Sonoma plans to increase its manufacturing and distribution capacity by 20% to 30% over the next year, President, Director and CEO Laura Alber said on the company's earnings call last week.
• The expansion will include the addition of about 2 million square feet to the company's distribution network, Alber said.
• The company plans to open two distribution centers meant to "support our elevated growth, as well as various investments in automation to drive speed and efficiency throughout our operations," Executive Vice President and CFO Julie Whalen said.

Dive Insight:

Williams-Sonoma is planning to increase its distribution and fulfillment capacities at a time when it has seen its e-commerce demand grow quickly. E-commerce sales grew nearly 48% YoY in its most recent quarter, Whalen said.

"In the past quarter we increased our total buy online, pickup in store and ship-from-source sales by over 130% as we leverage our retail network as fulfillment hubs," Alber said. "This is a huge unlock for our distribution operations, and it is one of the reasons we were able to fulfill higher than expected volumes this holiday season despite gridlock issues that impacted the industry."

Alber said the company considers its stores to be a competitive advantage for allowing those omnichannel offerings, but it expects its "future growth will be driven predominantly by e-commerce."

Many top retailers with major e-commerce operations have taken stock of their distribution capacity in recent months and years and determined that more capacity is needed.

This year, Home Depot opened a 1.5 million-square-foot fulfillment center in Dallas to help fulfill store and online orders through store pickup or last-mile delivery to consumers' homes. Target is adding distribution centers and sortation centers to help expand the ship-from-store model. And Walmart is spending billions of dollars on expanding a heavily automated fulfillment network.

Real estate companies expect this demand to continue in the coming years, creating more demand in an already tight logistics real estate market.

A recent report from Prologis noted that e-commerce is more space-intensive than traditional retail, requiring three times more warehousing space, because there tends to be more product variety, and parcel shipping needs more space than pallet shipping.