E-commerce is booming. What’s in it for urban transport?

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Worldwide, e-commerce has experienced explosive growth over the past decade, including in developing countries. The 2015 Global Retail E-Commerce Index ranks several of the World Bank’s client countries among the 30 most important markets for e-commerce (China ranks 2nd, Mexico 17th, Chile 19th, Brazil 21st, and Argentina 29th). As shown in a 2017 report from Ipsos, China, India, and Indonesia are among the 10 countries with the highest frequency of online shopping in the world, among online shoppers. Although growth in e-commerce in these countries is sometimes hindered by structural deficiencies, such as limitations of banking systems, digital payment systems, secure IT networks, or transport infrastructure, the upcoming technological advances in mobile phones and payment and location systems will trigger another wave of growth. This growth will likely lead to more deliveries and an increase in freight volume in urban areas.

In this context, the Bank has been working with the cities of Sao Paulo and Bangalore to develop a new tool that helps evaluate how different transport policies and interventions can impact e-commerce logistics in urban areas (GiULia). Financed by the Multidonor Sustainable Logistics Trust Fund, the tool serves as a platform to promote discussion with our counterparts on a subject that is often neglected by city planners: urban logistics. Decision-making on policies and regulations for urban logistics has traditionally been undertaken without sufficient consideration for economic and environmental impacts. For instance, restrictions on the size and use of trucks in cities can cause a number of side effects, including the suburbanization of cargo, with warehouses and trucks located on the periphery of cities, far from consumers, or the fragmentation of services between multiple carriers, which may lead to more miles traveled, idle truck loads, and inefficiencies.

In Brazil, despite economic downturns, e-commerce has grown 98.3% from 2011 to 2015, going from about 53 million transactions in 2011 to 106 million in 2015 (WebShoppers, 33rd Edition, 2016, E-bit/Buscapé Company).  Sao Paulo is the biggest e-commerce market in Brazil, concentrating almost 40% of online sales value. E-commerce in the Brazilian metropolis is boosted by sophisticated banking systems, along with high levels of internet access and cellphone penetration. However, current restrictions on truck circulation, insufficient loading/unloading areas, ineffective enforcement, and cargo theft are driving an increase in informality on the logistics chain, given that larger companies are not as flexible to perform deliveries effectively and comply with regulations. The results are low service levels, large and unreliable delivery windows (on average 9 days), higher costs to deliver to the end consumer, and high operational inefficiency.

In India, 40% of the population—approximately 450 million people—have access to the internet. Despite the current low penetration of e-commerce (estimated at 8% of internet users in 2014), the sector has seen unprecedented growth. In Bangalore, 76% of e-consumers still use cash on delivery to pay for their purchases, which increases the average delivery time and reduces success rates on delivery. In addition, due to poor street addressing, e-commerce companies are highly dependent on “delivery boys” that cover the last mile between delivery facilities and consumers’ homes, either on foot or on motorcycles.

So how can we better manage the increase in urban freight traffic induced by e-commerce? The solutions may not be the same in developing and developed countries, even if there are sometimes similar patterns among megacities, or cities with similar urban forms. In any case, the discussion on urban logistics should always take the local context into account, and be as structured as possible. It may be the case that we don’t want to remove big trucks from the city center in Sao Paulo, as increasing the number of smaller vehicles might create more—not less—congestion. We must test and measure various options, such as off-hour deliveries and consolidation centers, in order to identify the most efficient approach. Likewise, we may not want to get rid of the delivery boys in Bangalore, as they are part of a hub-and-spoke system that works well for the city. We may however try to offer more options for them to deliver using bicycles.

We see some interesting linkages between low-tech solutions like Bangalore’s delivery boys and cutting-edge approaches such as crowdshipping, a new model relying on smartphone apps that allows private individuals to take on small delivery contracts at the push of a button using their car, their bike, or even their own two feet… To learn more, check out this video we produced after a recent seminar we delivered in Sao Paulo on Urban Logistics. What do you think?


Bianca Bianchi Alves

Urban Transport Specialist, World Bank

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