Testing for Efficacy: Assessing the Real Impacts of E-Commerce Policy & Practice
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This month Meeting of the Minds’ Senior Writer Kate O’Brien sat down for a phone conversation with Professor Genevieve Giuliano, PhD, who is the Margaret and John Ferraro Chair in Effective Local Government at University of Southern California’s Sol Price School of Public Policy. She also serves as Director of the METRANS Transportation Center. Dr. Giuliano conducts research on relationships between land use and transportation, transportation policy analysis, and information technology applications in transportation.
Thank you for joining me by phone today. I gather from my reading of your work that you conduct research focused on the world of e-commerce and its many impacts.
Dr. Guiliano: Yes, that’s right. Right now, the rapid growth of electronic- or e-commerce is a worldwide trend, and everyone is trying to figure out how to manage it. My work supports those efforts.
Tell me about the aspects of e-commerce you’re focused on specifically. What are you examining with your research?
There are a number of issues to look at associated with the growth of e-commerce. I’ll talk about a couple of different sets of problems, the first of which being that e-commerce means there are more trucks on the road, and more deliveries happening. In terms of destination, I’m looking at downtowns and dense cities, where e-commerce is already making big impacts on the built environment, particularly buildings. In recent years, across large cities, lobbies of high-rise condominiums and apartment buildings have begun to function as mini-warehouses. Those who manage older buildings are adapting ground floor spaces to accommodate parcel and packages, while designers of new buildings are integrating systems for storage of residents’ package deliveries, and for transmission of information about those deliveries. So, on the insides of buildings, we see adjustments being made.
On the outside, however, adjustments are not yet happening so much. We’re seeing increasing demand for curbside space in dense, urban, residential areas, which aren’t yet equipped with the dedicated space and infrastructure for delivery that more commercial areas have by design. There’s increasing competition for very limited space, where delivery trucks can park and drivers can drop packages at their ultimate destinations. E-commerce is pushing need for this kind of change in the built environment, which is far slower to happen than commerce itself.
Are there examples of built environment adjustments happening? Where’s the leading edge, and what are those places doing differently?
Europe has been experimenting with and using different types of package pickup strategies. For example, in France, there are pick-up points at either post offices or neighborhood businesses, where packages are dropped for the neighborhood. Residents then pick them up at one centralized location. This reduces the vehicle miles traveled (VMTs) involved in going from house to house to house or building to building to building for individual deliveries.
This is a big problem in Asian cities, too—much of this has to do with serving high-rise buildings that contain thousands of residents. In Seoul, they’re testing out the imposition of charges for those living on higher floors who want their packages delivered to their door. They’re testing incentives and a system for pickups at common places there rather than having several workers go up and down stairs and elevators to deliver all these packages.
There’s actually lots of testing going on around the world related to e-commerce delivery, and the US is pretty far behind. Amazon has some lockers around the US, but nothing at the scale of what is happening in other parts of the world. We still have a long way to go in modifying that final step of delivery.
So one set of challenges is that systems and spaces need to shift relatively quickly to accommodate and manage the growth of e-commerce. You mentioned a second set of problems, can you elaborate?
A second set of issues I look at in my research surrounds the question: does e-commerce actually deliver net environmental benefits? Put another way, is it the case that all of us shopping online and having things delivered to our home is actually more efficient in reducing VMTs (vehicle miles traveled) than if we still did our shopping in physical stores?
It’s a tricky question to answer, because we’ve observed that consumers rarely substitute the act of online shopping 1:1 for the act of in-store shopping. They might look online and then drive to a couple different stores to compare prices or products before clicking “buy”. In those scenarios, passenger VMTs aren’t reduced at all. On the freight side, one vehicle making multiple deliveries is more efficient than one vehicle making a single delivery. However, in general, freight becomes less efficient with e-commerce because we are substituting large lot deliveries to a few specific places (say, a big-box retailer) with small lot deliveries to doorsteps. That means more vehicles on the road. We need to figure this out if we really want to understand the breadth of impact that e-commerce makes on our ecosystems. As e-commerce increases, then theoretically, the freight delivery should become more and more efficient. But it will take systems engineers to figure out where and when we get to net systems efficiency.
Where do you see an opportunity to move the needle? Where is the sense of urgency about climate change pushing broad policy change?
We’re certainly seeing movement on the vehicle side. I’m in California—close to being a foreign country in the United States at this point, because it’s so far ahead of any other state in moving toward sustainability. Here we have a program to develop zero emission trucks. We have targets to meet; an entire zero emission passenger vehicles program; a series of supporting policies and regulations to achieve those goals. From the vehicular perspective—at least from a greenhouse gas (GHG) perspective—we need to clean up the vehicles that are doing all this traveling. If we can introduce lower emission vehicles, and eventually zero emission vehicles—and if our electricity supply for those vehicles is from a clean source (can’t do this from coal)—then we’re at least moving towards the GHG reduction targets.
Internationally, there are a few places in the world that have zero-emission zones—Paris has one of them. What that means is that if you want to operate commercially within a given area, you have to have a clean vehicle to do so. It’s not that everyone who operates in the core of Paris is using an electric vehicle—but it’s moving toward ever-more and ever-lower emission vehicles in a densely-built area. So, incrementally we’ll see changes—hybrid trucks before we get to reasonable electric or hydrogen trucks. Cargo bicycles—e-assist three wheel bikes—are feasible for last-mile delivery in very dense, compressed areas. The more we can find these little niches that can accomplish deliveries in something other than a diesel truck, the more we’re moving toward our targets.
These are policy shifts focused on systems rather than behavior.
Right, what I’m talking about has been less focused on individual behavior and more on modifying the tools we use. I don’t think we’re going to get anyone to stop going to the store. We aren’t going to make people promise they won’t price compare at the store when they do their online shopping. But we do have to look at—in the US anyway—our behavior around free delivery, and in particular free instant delivery. Of course delivery is not “free”; it is a subsidy offered to entice more customers. The fact is, if we don’t pay directly for it, and aren’t aware of the real costs, then we’re probably consuming too much of it. Maybe there’s some type of policy intervention we could think of to address this.
I see why your work is so important. If there were a policy intervention, you’d be studying whether implementation and results are playing out as intended.
Yes. For example, here in Southern California, the Ports of Los Angeles and Long Beach operate the “PierPass Program” which (until a few months ago) charged fees for companies picking up or dropping off shipping containers between 7am and 5pm. To avoid the fees, companies shifted the timing to pick up or drop off containers to nighttime. The program was implemented as a way to reduce truck congestion at the ports and on the local highway system, therefore reducing emissions. We did a study to test whether in fact those results happened. And the answer was, yes, it did. We modeled the impact of the program on the highway system. We saw that companies did move their trucks’ activities to different time periods. Our measures showed that congestion actually went down. I’m a great believer in this type of research because it’s the most effective way to test whether in fact our policy changes work. Otherwise we have no basis for assessing and adjusting our policy decisions.
How much time does it take to study a policy like this?
It depends, but in general, about one or two years. This timeframe may seem short for research, but on the other hand, how fast is the world changing? A researcher I know lives in a 300-person building in New York City. He’s been able to get package delivery records for his building from the past three years, and he’s been tracking the daily count of packages coming and going. His observations have shown that package traffic in his building has been increasing at a rate of about 15% per year. If I take two years to do a study, in that time the problem has greatly intensified. It’s a really tricky thing. We have to work fast.
What gives you hope?
I firmly believe that higher levels of government can and need to play a really profound role in creating change. In California, without greenhouse gas emission targets set by the state, local cities and towns wouldn’t be compelled to make changes, and we wouldn’t be seeing the scale of change that’s happening. Overarching national or a state policy can bring about change at scale, while letting localities focus on improving building codes, zoning codes, doing things that will facilitate more efficient delivery strategies so there’s less of a problem on the street. A locality can focus on the things that that are unique to their local context better than higher levels of government can. But I don’t want to let higher levels of government off the hook entirely. Every entity has to play their respective part.
Part of the trick here is making the case in plain financial terms, right? I’m reminded of the adage “if it hits them in the pocket, it’ll really motivate.”
I’m actually quite a stickler about the economics of particular strategies. It’s a lot easier to work with the market than against it. I think a lot of planners in particular don’t think about all of the economic considerations as they propose policies. If a policy poses a large economic burden on stakeholders, it will not be successful, and there will be some form of an unanticipated consequence. If the economics don’t work, then a firm goes out of business. We have to be careful of that. Resources are not infinite, so it’s important to carefully consider the kinds of costs and benefits of various policies. I mentioned the PierPass Program earlier—it did achieve its objective of reducing congestion, but on the flip side, it created a lot of negative effects. It affected labor in a big way—particularly labor associated with trucking. People who were working during the day previously had to start working at night as companies shifted their hours to avoid the fees. It affected warehouses who had to staff up at night to receive deliveries after hours. If you don’t look closely at all the winners and all the losers, then you don’t have a good idea of the overall effects that will play out.
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