For some time now, e-commerce has been reinventing retail and distribution. Nearly everything consumers can think to purchase is competitively priced, and instantly available at the click of a mouse. Transportation from a final commercial hub to the customer\’s home (last mile delivery) is the expectation for every order. Against a backdrop of the most rapid population, economic, and urban growth in human history, potential hundreds of millions of new urban consumers menaces a daunting question: How to manage the swelling number of last mile deliveries in ever more congested urban environments already struggling to cope with this new consumer paradigm?
E-Commerce, Growth, Urbanization = A New Problem
E-commerce sales have increased steadily (13% of total US retail in 2017 [excluding cars and fuel], 10% worldwide), and growing at four times the rate of bricks-and-mortar. The world\’s largest e-commerce retailer, Amazon, recently entered into the fresh grocery market. Meanwhile, the world\’s largest retailer, Walmart, is pushing to match Amazon (in selling, well, everything consumers can think to buy), an indication of e-commerce\’s exponential growth in size, scope, and ambition. Alibaba, JD.com, and Mercadolibre, among others, are quickly expanding share outside of North America and developed countries. Statista.com puts e-commerce current and projected growth at 251%, in the 7 years from 2014 to 2021¹.
Global population and urbanization projections show a cool billion (with a \”B\”) more people inhabiting urban areas by 2030 (just 12 years from now). And with the IMF projecting global income growth at nearly 4% through 2018 and 19, these new urbanites will have more to spend. In fact, most of this growth will come from emerging economies, in which hundreds of millions more neo-consumers are already vaulting into the middle class. This is where e-commerce thrives; PWC projects a cumulative GDP growth of 130% between 2016 and 2050, with China and India, the world\’s most populous, and rapidly urbanizing countries, topping the USA by 2050.
|Year||Population (B)||Pop Growth/Yr||Urban Pop (B)||Urban Growth/Yr||Urbanized %|
Urban areas in developed and emerging economies alike will manifest the intersection of population growth, economic growth, and e-commerce most traumatically. Consider grocery delivery, for example. Groceries are uber-consumables; bulky items, replenished weekly. Contrast the mass and volume of a typical grocery order with a one-time purchase of a leopard-print iPhone case, multiply by ten, or a hundred thousand households, repeat weekly, and the enormity of this distribution pipeline becomes clear. Just 10 years past, home delivery was rare. Currently, delivery trucks stop on residential streets several times daily. 10 years from now, more commercial traffic will delivering to additional residences, in busier, denser neighborhoods, increasingly frequently, and in much greater volumes. Already, direct to consumer distribution is straining against capacity, efficiency challenges, infrastructure, delivery bottlenecks, carbon, green, and waste targets, and restrictive regulatory policy, among others.
The Private Sector
Private sector challenges are largely capacity and efficiency related. According to a recent survey by eft, logistics service providers are experiencing a 50% demand increase for last mile services in the past 18 months alone. To meet demand, 52% now offer direct to consumer service. Still, providers faced backlogs over the 2017 holiday season. Collectively, retailers and distributors will need to find ways to increase efficiency individually through collaboration. Order consolidation (including cooperative warehousing and distribution), efficient grouping and routing of deliveries, packaging reductions (clamshells or boxes within other boxes are terribly inefficient), and alternate delivery methods. Since the private stakeholders are benefiting economically, we can assume they will handle these challenges in the most economical way they are allowed. Amazon has leased aircraft, Walmart pays employees to deliver goods on their commute home, most if not all are testing drones and other delivery methods as part of fulfillment strategy. While these companies are serving their customers\’ needs, the public sector\’s duty is to ensure that they do not do so by harming the greater good.
Community and the Public Sector
The social costs of the e-commerce revolution are less visible, and more difficult to measure directly. Professors, engineers, economists, NGOs, and government officials have long been discussing these issues, with differing context than shifting consumption patterns: the environment, energy use, health, governmental policy, corporate responsibility, quality of life, and transportation (here meaning people). However, e-commerce is a relatively new phenomenon; policy discussion regarding its potential to reshape the avenues of retail consumerism is only beginning, outside of private concerns. For the most part, consideration to logistics and distribution has been left to private enterprise, professional associations, and other private organizations. Given the previously described impact of the home delivery model for groceries, there is a clear need for public sector involvement.
For example, mixed-use (residential-commercial) neighborhoods are typically medium to high-density have less space to drive and park large commercial vehicles safely. Many are double-parking illegally now in order to complete deliveries on schedule, causing traffic congestion and air pollution. Designated delivery areas for commercial vehicles, regulations and zoning allowing drone deliveries, and building codes mandating accessible storage lockers for deliveries (bigger mailboxes) could help alleviate these issues.
In post automobile-revolution (1950s) neighborhoods, population density is typically lower, with infrastructure catering to vehicular traffic. Low density means increased time and distance to these neighborhoods, as well as between residences and delivery vehicle. In turn, this prompts the need for more delivery vehicles, which in turn equates to increased noise, pollution, congestion, fuel consumption, and decreased safety. Communities could face a tragedy of the commons type scenario in which no one wants delivery vehicles in the neighborhood, unless the delivery is theirs. Anticipating scenarios like these and proposing alternatives for the public good is public domain, and should coincide with broader shifts in society. For example, as the volume of regular postal mail declines, perhaps the scope of post offices (pre-existing local distribution facilities purpose-built, equipped, and staffed for home deliveries) could be expanded to include drive-through parcel pickup in car-centric suburbs, eliminating the need for multiple commercial vehicles on residential streets. While either or both public and private enterprise could accomplish this, it is the former\’s purview to enforce non-commercial zones would ensure success.
A rapidly growing number of people, purchasing consumer goods online more often and in much greater volumes, delivered in ever more crowded urban areas. Prognosis: TORRENT of STUFF™. Beware the deluge. If it sounds to you, gentle reader, like I\’m preparing to make a feature film (@Michael Bay), franchise, license, merchandise, etc…, then you\’re hearing correctly. Contact me for opportunities. I\’ve even got the working title for the terrifying sequel- TORRENT of STUFF™ TOO: Reverse Logistics- The Return. Maybe two sequels? Or is that overdoing it?
The point is, our changing consumption patterns will change our cities, and the topic could do with more public attention.
¹ 2014-16 chosen to capture recent rate of growth.