Interact Analysis released its mid-year forecast updates for warehouse automation. Its latest forecasts show a slight negative correction, relative to the November 2023 forecast release. However, the real story is more nuanced, with several markets experiencing higher-than-expected growth.
Here’s how the macro-economic environment has changed over the last 6 months, and how this affects warehouse automation investments. For simplicity, it’s broken down geographically:
- Global. Globally, market forecast projections for warehouse automation revenue have come down slightly. However, when you drill down to specific regions, there is a more nuanced picture.
- Americas. Warehouse automation revenue forecast projections for the United States have increased compared with the November 2023 release. This comes as a result of higher consumer spending, improved sentiment toward the economy, and Amazon starting to invest again.
- EMEA. Warehouse automation revenue forecasts for the EMEA region have decreased slightly, although this is driven largely by the UK and Germany. There is actually higher revenue growth in Eastern Europe driven by an expected increase in capital investments from manufacturers (both Western European manufacturers offshoring to Eastern Europe and Chinese producers setting up shop in Europe).
- APAC. Warehouse automation revenues are expected to contract significantly in APAC, driven by a slowdown in investments from China. The housing crisis in China has led to decline in consumer spending. As a result, e-commerce retailers and express parcel operators are pausing their investments, resulting in a fairly significant contraction in investments.
Warehouse construction
Q2 2024 Warehouse Building Stock Database release shows that the number of warehouses added to the building stock is expected to decline, relative to the Q1 release. However, this decline is largely limited to Western Europe and APAC, with minimal adjustments made to the United States. The decline is primarily due to challenging economic conditions in China, and the sustained economic uncertainty in Europe (as a result of geo-political risks and a slower-than-expected climbdown of interest rates).
While Q2 2024 forecast has declined relative to Q1 2024 projections, growth is anticipated in actual terms in warehouse construction between 2023-2026, albeit at a far slower rate than during the pandemic. The Warehouse Building Stock Database model partly relies on macro-economic data published by the International Monetary Fund (IMF) to predict future warehouse construction. Specifically, the model looks at GDP, inflation, e-commerce growth rates, and unemployment.
Latest forecasts, which have been expanded out to 2030, show a slightly more pessimistic outlook for warehouse construction.
Interact Analysis’ latest forecast also has an extended forecast horizon, projecting construction out to 2030, which is a major improvement to earlier releases.
Warehouse automation investments
In general, forecasts have remained relatively consistent, with only a slight negative adjustment to the growth rates. Below are the key changes:
- Data reduced the forecast for China because e-commerce retailers and express parcel operators are slowing down their investments due to weaker consumer spending.
- Projections for the United States have increased slightly. Supply chain professionals are cautiously optimistic about 2024, however there is a substantial increase in qualified leads, which is starting to materialize in order intake growth. Furthermore, Amazon is starting to invest more in automation as part of its regionalization strategy, with other online marketplaces anticipated to follow suit.
- Projections in the UK and Germany have been downgraded given the worse-than-anticipated economic performance by both countries. Many vendors that have investments in the UK have been particularly slow this year, and Germany’s manufacturing sector is still struggling. That said, investments in Eastern Europe, particularly in durable manufacturing, have offset the decline to a certain extent. The result is a very slight negative revision to the European market.
- The U.S. grocery forecast experienced an uptick.
Mobile robot investments
Mobile robot revenue forecast is set to reach $2 billion by 2027, with the projected market size 13% lower than originally predicted. The main drivers for these changes are:
- Weaker demand and higher pricing pressure in China
- Longer sales cycle from third-party logistics (3PL) providers
- Weaker revenue growth for shelf-to-person automated mobile robots (AMRs)
Forecast for material transport mobile robots is broadly unchanged since the last report as this part of the market is relatively more mature and predictable. On the other hand, order fulfillment AMRs are still an emerging and nascent product, which makes long-term growth harder to predict.
However, the industry has now grown to a size where it is no longer immune to the wider economy. Previously, project sizes (and therefore investments) were much smaller, and customer projects were plentiful. This meant the AMR market was in effect too small to be impacted by wider economic performance and could still grow effectively through economic slowdowns. The industry appears to have now hit the inflection point where this is no longer the case.
Despite the above points, outlook for the warehouse automation industry is still extremely positive with the underlying drivers of growth remaining strong.
Final thoughts
While forecast updates reflect a slightly more pessimistic outlook, it’s important to recognize the nuance. Many segments have anticipated much higher growth rates than previously thought.
Given the challenging macro-economic environment, it’s more important than ever to identify the high-growth opportunities.
