E-commerce Transportation: Why We Still Need to Talk about COVID-19 Impacts
Let’s be honest — we are all tired of talking about COVID-19. No one wants to hear more about the “new normal” or the lasting impacts of this global pandemic that still seems to be dragging on. We all just want it to be over.
Unfortunately, we all have to live up to the hard facts of life and recognize that there have been a lot of impacts on our society due to this little virus. One aspect of our society that seemed to rock the most as COVID shook our boat was transportation. While all dimensions of transportation were impacted, the E-commerce field saw an interesting change over the past year and several researchers have noted the impact of COVID-19 on E-commerce and how our transportation system has changed. They found that because of COVID, there is an increased demand for E-commerce, and it is unlikely that this demand will shrink to pre-COVID levels. With traffic returning to normal levels as well the package delivery transportation infrastructure will need to improve.
Now, you are probably saying, “No duh E-commerce has increased, I mean, have you seen all the Amazon vans driving around?” Maybe it does seem obvious, but keep reading, because there are some interesting reasons behind this increase, and why it will continue.
First, imagine your grandparents. Do they have a computer? Do they know how to use it? Many people have never done online shopping because they don’t know how to. When COVID and shopping in physical stores became more difficult, many of these non-online shoppers were forced to learn how to shop online. As you can see in the figure below, almost every generation (except the oldest one) gained about 10% more online shoppers.
Not only has online- shopping increased, it is also likely to stay at high user levels. Once new online shoppers learn how to buy things online, they are more likely to continue using technology. Further, surveys show that people intend to continue the online shopping patterns that they started during the pandemic. After all, can you imagine going back to a flip phone after finding out the joys of a smartphone?
All this increase in online shopping has sent ripple effects through the E-commerce transportation system. Remember all those Amazon vans you mentioned earlier? They aren’t cheap. Their freight costs have increased significantly over the last few years, even shooting up 46% in 2019 and around 57% in 2020. These shipping rates are increasing faster than the rate of online sales. Furthermore, there is a shortage of drivers to deliver packages from distribution centers which leads to overworking of drivers. The increased demand for E-commerce will stay at these new high levels, which means that the E-commerce transportation systems will forever be impacted by this new increase in demand.
During the last year, the E-commerce system has changed a little in response to this demand. Many companies, such as Amazon, already had E-commerce transportation systems in place, but other businesses without such systems changed by creating “curbside pickup” stalls in their parking lots. Customers could order online, then drive to a local store or restaurant and have items delivered to their car. However, these curbside pickup areas would often become congested and unwieldy as most businesses did not have existing infrastructure.
Even though businesses adapted to COVID-19 by creating pickup areas that often became congested, they did not need to adapt to last-mile deliveries because traffic actually decreased during the pandemic. According to the National Academies, traffic decreased between 77% and 96% in the aviation, passenger car, and Uber sectors. However, as the pandemic winds down and traffic increases, businesses will not have the luxury of empty roads and will need to adapt to the increased demand for E-commerce.
So where does that leave us? We’ve talked about how the biggest impact of COVID-19 on the E-commerce transportation system has been an increase in demand. We then talked about how that demand is not likely to decrease. We saw that some businesses attempted to transition their parking lots and drive-throughs as impromptu E-commerce transportation systems, but those systems did not always work that well. Finally, because of traffic reduction, businesses did not have to adapt much in their last-mile delivery. However, as traffic returns to pre-pandemic levels, the E-commerce transportation systems will need to adapt. So what now? How will our E-commerce transportation system change to meet the demands of a post-COVID-19 world? Here are a few projections for the e-commerce system.
National Academies projects two solutions to the paired increase of traffic and E-commerce demand. Their first suggestion is the use of drones in delivery and warehouse operations. The use of drones could mitigate the negative effects of increasing traffic on e-commerce as things begin to return to normal. Currently, Amazon is investing in the use of drones for package delivery systems. The other solution the National Academies suggested is the integration of transit-only lanes to reduce passenger car travel and to encourage public transit. Virus transmission via transit has not been an issue and these transit-only lanes would not disrupt traffic flow. These transit-only lanes would ideally allow e-commerce delivery vehicles to travel more quickly and efficiently.
Miguel Figliozzi and Avinash Unnikrishnan, in an article about equity in-home delivery, project that E-commerce transportation will need to adapt to deliver packages more equitably. Before the pandemic, home delivery services were considered a luxury or convenient service where people could choose to pay extra delivery fees instead of going to the lengths of venturing out of their homes themselves. Now, in the midst of this pandemic, these services can be considered essential and health-supporting for those who are immunocompromised or are at a higher risk. It was found that wealthier households were able to adapt and their delivery rates increased during the lockdown. Households with lower annual incomes received fewer deliveries during the lockdown. This is a large issue that needs to be addressed. Figliozzi and Unnikrishnan introduce the concept of home-based accessibility (HBA) which is the idea that during times of pandemics or even during normal times for certain populations, essential services and products can easily arrive or be delivered. Certain policies could be set in place to increase HBA among underserved and vulnerable populations. E-commerce transportation systems will have to adjust in order to resolve this social equity issue.
Kumar et al. made a final projection for the E-commerce transportation system in their study. They projected that companies would need to cut costs and increase production to meet the increased demands because the pandemic has increased consumer demand and disrupted global production and supply chain systems. The authors recommend that manufacturing plants shift their manufacturing capabilities to digital manufacturing to reduce the number of workforces. Also, because there is currently a shortage of drivers and vehicle connectivity, they suggest that the transportation industry should optimize its supply chain network to serve more manufacturing plants. Smaller more local warehouses would allow for shorter last-mile deliveries which would require fewer drivers. Another solution to driver shortage is an Uber-style delivery system such as Amazon Flex, which increases the number of drivers a company has available.
Overall, COVID-19 has greatly impacted e-commerce systems. Although the demand for e-commerce has increased and is not expected to decrease to pre-COVID-19 levels, E-commerce will now have to face new issues relating to increased traffic, social equity, and disruptions in global production and supply chain systems. We have projected some potential solutions to mitigate the effects of these issues: drones as a method of delivery, transit-only lanes, digital manufacturing, optimization of supply chain networks, and the implementation of policies for E-commerce to cater to underserved populations. As the E-commerce transportation system adapts, we project that these solutions will be a part of their adaptations.
Written and Edited by Nicole Adams, Kyle Cannon, Emily Dicataldo, Kamden Peterson, and Colt Sargent