Balmiki Bhattacharya, vice president and market sector leader of the industrial practice at Nelson Worldwide, explains the concept behind “hyperlocal” fulfillment centers, and the criteria that retailers should consider when creating them. 

The purpose of a hyperlocal fulfillment center is to place products as close to the e-commerce shopper as possible, Bhattacharya says. Exactly how close depends on the retailer and type of product, but hyperlocal centers typically are designed to process orders within one to two hours, and at most a day. They are supported by regional centers that are farther from the end customer and larger in size, sometimes a million square feet or more. Hyperlocal fulfillment centers, by contrast, tend to be much smaller, often under 100,000 square feet.

Some hyperlocal fulfillment operations share space with retail stores. That setup is the result of retailers scrambling to make use of vacant or under-utilized real estate, brought about by the COVID-19 pandemic and its dampening effect on in-person shopping activity over the past two years.

Such shared operations face challenges, however, as retailers attempt to squeeze two disparate shopping environments into a single building. Bhattacharya says that model could end up driving away in-store business. “The retail customer is experience-driven,” he explains. “When you try to combine experiential shopping with [an operation] that’s purely based on efficiency, it’s very hard to make that work, to co-exist in a fashion that works well for both types of customers.” and 

A dual operation must also be staffed by two separate sets of workers, which can be difficult to sustain in the smaller facilities that are classed as hyperlocal. In addition, retailers need to deploy suitable technology for the fulfillment side, including various kinds of robots and other automated systems that can ensure the picking of items with maximum efficiency.