E-commerce (short for electronic commerce) describes the buying or selling of products and associated services over the internet or through mobile applications. The most visible vendors are Amazon, Walmart and Wayfair furniture, however, there are millions of smaller entities thanks to the ease of online marketplace platforms. Offerings include durable goods (such as furniture), small goods, groceries and prepared food deliveries. The growth in e-commerce is now reshaping cities, suburbs and outlying industrial districts, as well as traffic patterns for moving goods from ports to warehouses to a shopper's doorstep.
Benefits & Problems Addressed
Planning for E-commerce: Planning for e-commerce is not a new topic; the surge in big box stores and online ordering has put pressure on smaller businesses and downtowns for over a decade. Because retail plays a role in creating vibrant downtowns and mixed-use communities, cities and retailers are formulating new strategies to attract and retain customers through boosting an experience that online retailers cannot replicate.
Anticipating changes in real estate & traffic: As e-tailers (online retailers) seek faster fulfillment and delivery times, they are experimenting with new building formats, pick-up stations and vehicle types. In many cases, stores are altering existing interior plans, devoting more room for (1) storage, (2) package preparation, (3) customer pick-up, and (4) staging for deliveries. These new patterns defy assumptions used in forecasting travel and parking demand.
Tips & Techniques
Trends: According to Digital Commerce 360's 2020 report covering online retailers, (1) e-commerce accounted for slightly over half of all retail growth in 2019, (2) online sales grew by 15%. Online sales from shopping channels experienced a slight decrease in sales as consumers drop cable subscriptions carrying those channels (such as QVC). While Amazon's growth in 2019 was 19%, smaller entities also saw growth at an average of 15%. Over 30% of online orders for goods are returned while 15% never reach the customer.
Key Statistics and Studies: Here are some key statistics:
- Delivery trucks account for 7% of U.S. traffic yet create 28 percent of the nation’s congestion (Urban Mobility Report, Texas A&M University Transportation Institute, August 2019)
- In Seattle Washington US, delivery vehicle drivers spend 28% of their day searching for parking (Transport Policy, October 2020).
The Washington DC Department of Transportation, working with the technology firm Curbflow, conducted a pilot project testing curbside management reservation systems. In the pilot, they found double parking and illegal U-turns decreased by an estimated 64%. On demand parcel and food/grocery deliveries (the most common curb users in the study) lasted an average of 7-11 minutes, while rideshare and taxi stops were on average 2.5 minutes. (November 2019).
Types: There are several types of business models with e-commerce. The most prevalent are Business-to-Consumer (or B2C) and Business -to-Business (B2B). Marketplaces like e-Bay are referred to as Customer-to-Customer (C2C). The supply chain is also changing; as online replaces in-person shopping, last mile (and even last 50 feet) are the focus of innovation since this is the most complex aspect of a delivery. Transactions, and associated planning issues, include: (1) large durable goods (furniture, large screen televisions), (2) durable goods (small items); (3) services, (4) groceries, and (5) prepared foods.
Land Use and Traffic Implications: Prior to the rise in e-commerce, shoppers either ordered items through a catalogue purchase or by visiting a physical store or showroom. A product's journey typically began at a port or factory, followed by distribution through warehouses typically located near Interstate highways. From there, goods would be delivered or shipped to a brick-and-mortar retail outlet. These patterns were enshrined in zoning codes, traffic demand models and trip generation rates.
As e-tailers seek to shorten delivery times and increase customer satisfaction, they expand the number and types of facilities for order fulfillment. The Institute for Transportation Engineers has recently revised its trip generation manuals to reflect new building types, though most zoning codes refer to conventional building types. Here is a list of trends in building types and implications:
Warehouses: Warehouses are buildings that hold goods (long or short term) and are typically allowed in rural, suburban, and urban areas. There are generally limits (e.g., no more than 15%) of floor area devoted to retail sales. High cube warehousing refers to a facility with over 100,000 square feet and ceiling heights greater than 24 feet. Warehouse typologies include transload (or cross-dock) facilities where in bound shipments are sorted and loaded directly into a second truck headed to an individual store or store chain. Sortable high cube warehouses are where several different items are packaged together in a single shipment. These facilities are typically larger and have more employee than non-sortable warehouses, which handle large items. There are also cold storage warehouses for perishable items. For traffic patterns, sortation centers generate more employee traffic. Truck traffic is a growing issue, particularly near highway interchanges experiencing high growth in warehouses and fulfillment centers.
Fulfillment centers: A fulfillment center is a building from which a third-party logistics (3PL) provider fulfills customer orders for ecommerce retailers. Some warehouses can also handle fulfillment activities, though most fulfillment operations are smaller and focused on preparing and shipping deliveries, Fulfillment operations are evolving and may be housed in a variety of building formats. The larger the variety of items distributed (i.e. with different Stock Keeping Unit or SKUs), the larger the building since each SKU occupies its own individual location. As retailers and e-tailers race to lower fulfillment times, they are seeking locations in more urbanized locations. For redevelopment, some existing buildings are better candidates than others. Older malls may have irregular geometries and ceiling heights, while “medium box” stores under 100,000 feet with no impediments are prime candidates. For zoning and/or conditional use permits, planners will need to consider intensity of operations. Some are operational around the clock, serviced by vehicles that range in size from 18-wheeled tractor trailers to cargo vans
Micrologistics Centers (or Microhubs): Small footprint fulfillment hubs are growing in popularity for several reasons: (1) they can be easily located within existing facilities, (2) they are closer to shoppers, (3) they are an affordable option for small e-tailers, (4) are highly flexible with lower up-front costs, and (5) can be even more flexible with mobile hubs that can be driven or towed. Brick and mortar stores are converting floorspace to micrologistics areas. This benefits a retailer who has stock on hand for both in-person and online orders. The traffic implications here come into play when a facility that generated few trips is transformed into a facility with constant deliveries. For brick and mortar stores, the patterns may remain the same, though shopper dwell times can be lower and parking turnover higher (thus reducing the need for parking).
Mini Warehouses: These facilities include self-storage units and are often regulated in zoning codes. Typically, the only activities allowed in mini warehouses is the storage of goods. This implies fulfillment within a self-storage unit is not a permitted use.
Dark Stores: Dark stores are replicas of a brick and mortar store but is only to be used to fulfill orders (for pick-up or delivery). These stores are typically used by grocery stores since the costs of operating a second store are justified by the need to quickly assemble and ship perishable items. For cities, the impacts are related to the dark store's location. If located in a walkable, urban location, a dark store is basically a warehouse serving orders.
Ghost Kitchens: Like dark stores, ghost kitchens' purpose is to fulfill orders. One model is a ghost kitchen where multiple restaurants send their most popular recipes to a kitchen, which is located close to customers. Another model is a ghost restaurant which is a single restaurateur. A third is a hybrid model where a ghost kitchen also offers walk-up orders. For cities, these operations tend to spread out delivery operations and trip lengths. Some ghost kitchens are located in underused parking lots.
Reverse Fulfillment: Since one-third of orders are returned, e-tailers are trying to find ways to ease the process. Some online-only retailers are partnering with brink-and-mortar stores. Lockers that accept delivery drop-offs are another model. Going forward, e-tailers are using artificial intelligence to lessen the chance a customer is dissatisfied with a purchase, thus eliminating the return altogether.
Delivery Vehicle Types: Most freight and delivery trips still occur mainly by three modes: freight trucking, delivery trucks and smaller delivery vans. As e-tailers seek to move operations closer to urban areas, they are turning to innovative new vehicle types to match the delivery vehicle to the delivery route.
Cargo bikes: In Europe and larger American cities, delivery firms like UPS and FedEx are tuning to electric cargo bikes for cities. The use less space for parking and are more agile in navigating tight city road and alleyways. FedEx notes bikes can deliver 25-30% more parcels since congestion and parking are not an issue.
Electric delivery vehicles: Amazon plans to have 10,000 electric vans deployed by 2022, and 100,000 by 2030. Even larger freight companies are turning to fleet electrification.
Autonomous vehicles: COVID-19 accelerated the testing and deployment of autonomous delivery vehicles. Because there are no passengers, these vehicles have been granted the necessary regulatory exemptions for roadway use. There are four main delivery vehicle formats to date: Automated vans, shuttles, delivery pods and personal delivery robots (also referred to as deliverybots and ground drones). The main difference among these vehicle types is (1) size, (2) top speed, and (3) allowable roadway routing. For example, delivery pods have a top speed of 35 miles per hour while personal delivery robots travel no faster than 4 miles per hour. As such delivery pods are allowed on roadways while deliverybots are restricted to sidewalks and some bike paths. For urban planning, there are several issues. First, technology companies are successfully lobbying for pre-emption, limiting localities’ ability to regulate routes and operations (except for safety reasons or where operations are “unreasonable”). Second, it’s not clear what deployment looks like at scale. Most pilot projects are small with only one company. Finally, there is already considerable competition for space on roadways, along curbsides and on sidewalks with current users and uses.
Aerial drones: Air drones also proved successful use cases during the pandemic by delivering medical supplies. Air drone delivery is hampered by strict rules (e.g. an operator needs to have continuous line of sight) and a broad swath of no-fly zones in urban areas and in other sensitive locations. The Federal Aviation Administration (FAA), is in the process of granting certificates called “Part 135 air carrier certificates using unmanned aircraft systems.” Thus far, those certificates apply to several companies including Amazon, Alphabet (under Wing), and UPS. Walgreens was the first U.S. company to offer on-demand drone delivery, debuting its program in Christiansburg, Virginia in 2019.
Hybrid: Given the likely, future restrictions on drones, hybrid vehicles offer a mix of options: a vehicle with a driver where drones are restricted, who can deploy drones once in allowable air space. One example is private communities, where drones are a lower impact method for distributing packages (which can be delivered behind a fence for secure deliveries).
Planning Issues: Urban planners and their planning partners will continue to see pressure on local land use, transportation, and economic development performance. Some of the top issues include:
Potential impacts: Given the fast paced evolution of e-commerce, researchers are still following how changes to building types, land uses and transportation patterns contine to unfold. The economic impacts are stark and well studied, so it's worth following the direction and degree of impacts in other related areas.
Mall to Town Center Transformation: Many cities are eyeing malls and other large properties under single ownership for economic development and housing through mixed-use development. With online retailers and logistics operations occupying the site (or a portion of the site), the economic and social trade-offs are unclear. The employment picture shifts from retail jobs to fulfillment, though it is unclear if job replacement is 1:1, as well as the skills needed for new jobs. It’s also unclear whether a site can successfully mix placemaking with fulfillment and warehousing.
Traffic Generation and Impact Fees: In many cases, a delivery trip replaces a shopper’s trip, so there is only aa marginal change in local traffic impacts. However, if the new fulfillment center serves more customers, or if shopper habits result in multiple deliveries instead of one shopping trip, there will be higher impacts. If aerial drones can be deployed over private properties without line of sight restrictions, there will be a new class of impacts (noise, risk of dropped payloads). For cities that collect impact fees, planners will need to create new calculations for both new and existing operations that are serving more customers through deliveries.
University of California (Davis), Institute of Transportation Studies, Sustainable Freight Research Center
University of Washington , Supply & Logistics Center, Urban Freight Lab