The Impacts of E-commerce on Freight Distribution
Although several aspects of ecommerce are perceived as a
retail activity, it can better be understood from a freight
distribution perspective. Because of the characteristics of
its operations, ecommerce is having four fundamental impacts on
Significant changes in contemporary logistics and freight
distribution are thus being driven by ecommerce. If the
automation and robotization of several manufacturing activities
is considered, then even more significant changes can be
expected since the means of production, distribution and
consumption are concomitantly changing.
- Distribution Pattern. The growth in home
deliveries is one of the most
tangible impacts of ecommerce as consumers are switching a
growing share of their consumption (particularly discretionary) to purchases made online.
Instead of a retail consumption pattern involving consumers
going to stores and carry back home their purchases, with
ecommerce most of
these purchases are delivered through parcel services. This is
changing the scale of last mile logistics with the growing role
of parcel deliveries and strategies to insure that these parcels
reach their consignees.
- Real Estate Footprint. The transition
towards online purchases is reducing the demand for standard
retail activities, implying a
pressure on the conventional retail footprint. Many large
chain retailers have been substantially reducing their footprint
in recent years. Paradoxically, since home
deliveries are distribution-based activities, the growth of
ecommerce involves an increase of the warehousing footprint.
This may also change as well real estate (and rent) values of some
commercial areas since the location dynamics of distribution
centers tend to favor suburban or exurban locations. Stores can
also be designed to cater more effectively to the
characteristics of ecommerce, acting partially as showrooms,
warehouses and pickup locations.
- Logistical Facilities. Ecommerce has
required the development of entirely
new types of
distribution facilities, such as e-fulfillment centers that
are designed to service large volumes of heterogeneous orders to be
shipped in parcels. More than any other type of distribution
centers, the high throughput requirements of logistical
facilities have pressured the need for automation.
- Vertical Integration. Ecommerce is reaching
a throughput level giving some of its main actors significant
leverage as users of logistical and transportation services.
Many are developing capabilities as
third party and
fourth party logistics service providers, following vertical
integration strategies with segments of freight distribution
(home deliveries, air freight, maritime shipping).
Once they reach a sufficient throughput level, online retailers
may take stakes in carrier services, such as parcel deliveries
by truck and even develop their own air freight services. The
setting of sortation centers, urban logistics depots and freight
stations (pick up points) are also part of a vertical
integration strategy. The
development of non-vessel operating common carrier services is
an additional strategy undertaken by major online retailers relying on
containerized shipping (international sourcing) and able to
generate substantial container volumes.