Should I visit a store or should I just check out Amazon? You might have asked yourself this question quite a few times by now. But have you ever considered the impacts of this decision on the environment? Well, this article should help you make an informed decision next time.
August 11, 1994 marks the day when the first ever online transaction was made, and since then, the internet has continuously reshaped the way we shop. E-commerce, a term completely unknown to us a couple of decades ago, has gradually become a fundamental part of our daily lives.
With the increasing influence of internet on our decisions as to what and when to shop, how and how much to shop, the underlying question posed onto us is whether online shopping is good for us? i.e. whether online shopping is substituting (replacing) or complementing (co-existing with) in-store shopping? The literature on this largely weighs towards the complementary behavior, thus arguing for an increased travel activity, one from the delivery vans serving the online retail demand, and the other from the personal trips to stores. Yet another aspect of online shopping is the induced demand – an increase in number of purchases made by a consumer, be it online or in-store. Remember this, because it will come to bite us later.
Nerd Alert: To answer the question posed above, I modeled the shopping choice – whether to shop online, to shop in-store, or to not shop at all, with socioeconomic parameters of the individual (such as age, income, education level etc.), city related parameters and some other temporal parameters. The resulting model tells us which factors influence one’s choice to shop online or in-store, or not shop at all. This dis-aggregate model was then applied over the synthetically generated population of the city of San Francisco (SF) to determine people who shop in-store and/or online. The resulting externalities, i.e. traffic in terms of Vehicle Miles Traveled (VMT), and pollution in terms of CO, CO2, SOx, PM, N2O, and NOx emissions were estimated from the shopping related travel.
First, I present here one to one direct comparison of externalities from in-store and online shopping in terms of equivalence of one with the other, i.e. how many online purchases produce the same amount of externalities as the in-store purchase. Turns out, around 8 online purchases produce as much vehicle travel as 1 in-store purchase, thus reducing the traffic. Note, except for NOx none of the equivalence value is below 1, suggesting that if everyone was to only shop online, significant reduction in emissions can be produced. However, as we know that is not the case today. People shop online as well as in-store, thus we look at the results from SF.
To put things into perspective, I also estimated externalities for SF had there been nothing like e-commerce – thus all online purchases are considered as in-store purchases. And although I have already discussed the potential of e-commerce with 100% market penetration, I have also estimated externalities for SF with no stores/outlets, thereby all in-store purchases considered as online purchase. The aforementioned scenarios thus replicate the past and a potential future respectively. Below is a comparison of these two scenarios with the shopping trend today.
This above figure tells us that for the most part we are good (except for NOx), i.e. externalities are less today compared to past and the future with an e-commerce dominant market is bright. If everything is rosy, then why push for cleaner freight movement? Well, because the above figure is an oversimplification of the past and potential future. And one of the main factors that can influence the above figure is the induced demand.
In economic terms, the cost of acquiring information has drastically gone down because of the internet – leaving you with additional money in your pocket to spend. Previously, to try out a pair of shoes or any clothing, one had to travel to a store, burning up both time and money. With plethora of information available on the internet, online shopping saves you resources, but only to buy more, thus inducing demand. To add to that, targeted ads and lucrative offers by online retailers also induce demand.
To conclude, what can you do the next time you have to shop? In the direct comparison of in-store and online shopping we saw the benefits of online shopping, so as a first, you must try to replace your trips to store with online shopping. And as for the induced demand, while the extra money in your pocket will make you buy more, consolidate your requirements into single purchase. This will allow the retailer to send all that you need in a single visit to your house instead of multiple visits. In addition to this, certain lucrative offers such as the faster deliveries offered by retailers with 1-hr, 2-hr or same-day deliveries have extreme negative impacts (more on this in another blog). With this I hope you can make an informed decision the next time you shop.
Notes for Nerds:
This blog is largely from my research Jaller and Pahwa (2019) which was submitted as for poster presentation in the 2019 Transportation Research Board (TRB) Annual Meeting. However, the full paper has been submitted in a journal and is currently under peer review.
For more on shopping behavior read – Mokhatarian (2004), Farag et al. (2007)
For more on impacts of online shopping – Wygonik and Goodchild (2016), Durand and Feliu (2012)
Great work Anmol.
Keep simplifying the nerdy things you do for common masses like us via this blog.