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Impact of E-Commerce on Urban Freight

Article  in  SSRN Electronic Journal · January 2018

DOI: 10.2139/ssrn.3258392

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 International Conference on Urban Sustainability: Emerging Trends, Themes, Concepts and Practices

IMPACT OF E-COMMERCE ON URBAN FREIGHT

Mr. Rahul Shukla* and Prof P.M. Raval**

*
Mr. Rahul Shukla (Research scholar, COEP & Assistant Professor, NIRMA University),
**
Prof Dr. P.M. Raval (College of Engineering, Pune)

ABSTRACT: Since the advent of e-commerce in the last decade of the 20th century, Internet technology
has penetrated into every detail of our lives. People opt for e-commerce instead of making long trips to the
market, banks etc. because of which a decrease in the number of trips can be seen as the goods are delivered
at people’s doorstep. A variety of goods are delivered by websites, converting physical trips into virtual ones.
This has resulted to significant increase in the use of three wheelers and two wheelers as freight transport.
This paper focuses to study the impact of e-commerce on the freight movement pattern.

I. INTRODUCTION

1.1 Background

India has seen rapid urbanization over the past few
decades. As a part of this process of urbanization, the
cities in the country have seen unprecedented
development. These cities have grown very large both
in terms of population and size. One of the major
sectors that advanced as a part of the process of
urbanization if the information and telecommunication
sector. And in this sector, the domain, which has taken
a dramatic leap forward, is e-commerce. E-commerce
has made huge success as it helps people in decreasing/
completely avoiding their long trips as the goods and
services are delivered at their doorstep.
2.1 Status of Global E-commerce Industry
Over the years the e-commerce industry has evolved
significantly around the world. The penetration of
internet in people’s lives plays a major role in giving a
push to the e-commerce industry. India is a country,
which adopted technology and Internet usage faster
when compared to other developing countries. India's
Internet clients are short by just 36 million when
contrasted with the United States of America. Web
clients' populace is 279 million, which is higher than
other creating countries like Japan, Braziland Russia.

The paper aims to recognize the impact of e- commerce

on the freight transport, analyzing the changes that have
occurred in recent years.

1.2 Classification of E-Commerce

E-commerce can be classified into two parts:

A) E-Services: This includes the e-commerce services
such as online ticket booking, Internet banking, online
transactions, social networking, matrimonial portals etc.
these services do not have any major impact on the
urban freight.
B) E-Retail: This is the fastest growing segment of e
commerce. This basically deals with the transactions of
sellers and buyers online. It includes transcending
physical boundaries to deliver the required goods and
services to the consumers’ doorsteps. This includes
online shopping of electronics, fashion, etc. and various
online food delivery options such as zomato,
foodpanda, swiggy. Etc.
Fig 1. Internet users by countries in millions (2014)
Source: IAMAI, CRISIL, Gartner, PwC analysis and
industry experts.
As far as entrance as rates of populace just 19% Indian
uses the Internet. This rate demonstrates the capability
of Internet use in India and as Internet infiltration
expands, the capability of development for the web
based business industry in the nation likewise
increments.

Electronic copy available at: https://ssrn.com/abstract=3258392

 International Conference on Urban Sustainability: Emerging Trends, Themes, Concepts and Practices
Fig 2. Internet users by countries in millions (2014)
Source: IAMAI, CRISIL, Gartner, PwC analysis and
industry experts
Fig 3. E-retail sales CAGR Forecast
Source: Statistica, B2C e-commerce sale CAGR
forecast for selected countries.
As per the Statistica, Malaysia will rank first as far as
internet business extension with a compound yearly
development rate of 23.7 in the foreseen period. India is
positioned second with an online business CAGR of 23
percent, trailed by Indonesia and the Philippines.
2.2 India’s E-commerce Growth Potential
The e-commerce industry has been rising at a very fast
rate for the past few years. This area has developed by
34% (CAGR) since 2009 to contact 16.4 billion USD in
2014.
Fig 4. India's E-commerce and E-retail Growth
Electronic copy available at: https://ssrn.com/abstract=3258392
Source: IAMAI, CRISIL, Gartner, PwC analysis and
industry experts
If we look at the e-retail growth, we can say that e-retail
has increased extremely rapidly from 2009-2015, but
the share of e-retail in the Indian retail has not been
very significant.
Fig 5. Share of E-retail in Indian Retail
Source: Technopak; Accel Partners
Fig 6. Distribution of Online purchases across cities
Source: Indian E-commerce Trends Q3/2016
The dominators of the online purchase scene in India
are the Tier-1 cities. These cities are Delhi, Mumbai,
Kolkata, Chennai, Pune, Hyderabad, Ahmedabad, and
Bangalore as per the revised HRA classification given
by the Government of India. 8 out of every 10 orders
are placed from these cities. The Tier-2 and Tier 3 cities
have Average Order Values (AOVs) 62% less than that
of the Tier-1 cities.
Fig 7. Average Value Across City Tiers
Source: Indian E-commerce Trends Q3/2016
 International Conference on Urban Sustainability: Emerging Trends, Themes, Concepts and Practices

Some retailers are trying to indulge in their future
investments that would attract the Tier-2 & Tier-3
shoppers, e.g. regional languages interface but they
should also address the fundamental problems for
improving services to meet the demands peculiar to a
Tier-I shopper. This can be done by improving the user
interface, by more personalized approach includes
better personalization, faster delivery options, and a
better user experience, etc.
II. LITERATURE REVIEW
1.1 Demand for Infrastructure due to E-commerce
The way to achievement in internet business is a
proficient last-mile system to guarantee time-bound
conveyance while keeping up nimbleness in the
coordinations chain. The up-stream foundation will
then should be worked as a layer over this last-mile
connect with key area decisions of satisfaction focuses
proximal to conveyance modes. The harmony amongst
stock and production network costs is in this way a
dynamic choice to be taken, considering both cost and
administration level contemplations. (PwC, Price
waterhouse Cooper Pvt. Ltd., 2014)
Late years have seen a striking change in the way India
shops and exchanges. Web based business has
overwhelmed the universe of retail and enthralled the
creative ability of a whole age of business people, with
online business wanders with different business and
business models. Coordinations and framework in e-
retailing turns into the specific spine of the satisfaction
arrange and the premise on which stringent
administration level desires are set and met, and client
mind-space among contending options is won. In India,
these are seemingly the weakest connections, and along
these lines the upgraded requirement for more
prominent consideration and administration data
transmission to these basic capacities. (PwC, Price
waterhouse Cooper Pvt. Ltd., 2014)
the earlier research that whether the impact of e-
commerce was positive or negative but the further
research revealed the complexity of e-commerce
distribution system along with increasing frequencies
and transport distance.
1.3 Difference Distribution Models in Retails
The conventional retail model is a straightforward
model where the suppliers at domestic as well as
international level supply their products to the master
warehouse, which then gets distributed in the region,
and the customers reach the products at the retail stores.
The e-tail model is much more complex than the
conventional one. Domestic suppliers are involved in
more than one stages of the chain and e-fulfilment
centre is the component to emphasize. Parcel hub also
known as sortation centre are the distribution centres
where the parcels are stored. They are then either
delivered at the customer’s address or at the pick-up
points, whichever is more convenient for both supplier
and customer. Sheer volumes of deliveries cannot be
the only solution to increasing competition in e-
commerce companies. This has augmented the demand
for manpower and distribution vehicles.
Fig 8. Conventional Retail Model

1.2 Relation Between E-Commerce deliveries and

Urban Traffic
As the last mile deliveries of e-retail products are
mainly covered by road, there is a close relation
between the delivery trips and the urban traffic. The
traffic has major influence on the routes of operations
and the travel time required for each parcel. This also
indicates the need to understand the component at
which the freight vehicles are contributing to the urban
traffic. Thus there is a need to properly integrate the
freight transport with the transport system of the city
under consideration. There were no firm conclusions in
Fig 9. E-commerce Model
III. CASE STUDY – PUNE CITY
The population of Pune according to census 2011 is 31,
24,458 and the registered number of two- wheelers is
approximately 22 lakhs. It has followed the e-
commerce trend that the country has shown. Pune has
grown as an IT hub over the past decade and continues
to advance in the field of Technology. Hence this city is

Electronic copy available at: https://ssrn.com/abstract=3258392

 International Conference on Urban Sustainability: Emerging Trends, Themes, Concepts and Practices

considered appropriate for the research. freight generation rate.

1.1 Data Collection

The primary data required for the study was collected
from e-commerce distribution centres and delivery
persons. The universe for the sample was identified
with the help of a pilot survey out of which 5% was
taken up as the sample size and surveyed. From the
literature study following parameters are identified.

Table 1: Parameters for Data Collection

Figure
Fig 10. Utilization of Area for E-retail
S. Distribution Centre Interview of Delivery
No Inventory persons Source: Primary Survey 2017
Number of vehicles Mode of transport
1
1.3 Existing Scenario of Freight Generation Rate of
Number of Staff Deliveries per day e-tail companies in Pune City
2

Capacity of distribution Delivery fails

3 centre
The distribution centers are classified in three
categories on the basis of the area. For example,
Deliveries per day Fuel expenses Amazon and Flipkart come under Category III (more
4
than 3000 sq. ft.). The current area per distribution
5 Working hours center is 3600 and 3000 sq. ft. respectively, while the
current freight generated per sq. ft. are 0.87 and 2.38
respectively. The total freight can be calculated as the
The companies surveyed include Flipkart, Amazon, total area * freight/sq. ft. which comes for Amazon as
Myntra, Xpress bees, GoJavas, Delhivery, Ecom 9400 and for Flipkart as 50000 deliveries per day.
express, Bluedart, India Post, etc. Comparison of the Hence the total freight for category III is 59400
data collected for e-tail companies and food chains is deliveries per day while the total area under the same is
shown in the table below. 31800 sq. ft. Therefore, the average freight generated
per sq. ft. by the Category III companies is 1.87.
Table 2: Key findings of Primary Survey
Table 3: Freight generation rate table for existing e-
Data tail market in Pune city
E-tail Food chains

Total Deliveries per day 1.14 lakhs 10200 Types of Area per Freight Number Total Trip Fuel
distribution distribution generated of length per Requireme
Number of two wheelers 2230 1630 centre centre (s.ft) per sq. ft. vehicles sq. ft. nts per
per sq. ft. (km) sq.ft. (litre)

Total distance (km) 78185 37625

Category I 500-1500 0.48 0.01 0.37 0.01
Distance per parcel(km) 0.68 3.67
Category II 1500-2500 1.63 0.03 0.82 0.05
Distance per vehicle (km) 35 23
Category III > 2500 1.87 0.03 1.00 0.03
Source: Primary Survey 2017
Source: Primary Survey 2017
1.2 Utilization of area

The following chart shows the deliveries generated per
sq. ft. area for all the e-tail companies. Flipkart and
Bluedart utilize the area to the maximum with 2.38 and
1.81 deliveries/sq. ft. respectively. It is observed that as
the area percentage increases, the freight generated/sq.
ft. also increases. Smaller companies with around 1000
sq. ft. distribution centres show comparatively low
IV. RECOMMENDATIONS AND SUGGESTIONS
1.1 Best Practices – Mobile Depot and Cyclocargos
in Brussels
Dynamite Express tried an inventive idea of Mobile
Depot (MD) in Brussels, Belgium for a time of three

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 International Conference on Urban Sustainability: Emerging Trends, Themes, Concepts and Practices
months in 2013 as a component of the European FP7
venture STRAIGHTSOL. Mobile Depot with
warehousing capacity of around 200 parcels, 3
electrical cyclocargos and one office. The Mobile
Depot stands stationary at the parking space till the
deliveries are over.
After the pilot study they found that Distance per parcel
was reduced from 1.34km to 0.52km. A total of 24%
less CO2 and 78% less Nox emission was observed.
But the limitations of this concept are that the
operational cost of mobile depot was twice as
expensive as before and additional time was required
for loading of cyclocargos. But with appropriate
financial management these can be reduced.
1.2 Use of Cargo Cycles for Deliveries
By 2021, even if we assume that 20% of the e-tail
deliveries take place within 3-5km range, more than
25% CO2 emission can be reduced. Large e-tail
companies such as Amazon have already taken the
initiative, which can be key to this transformation.
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The survey carried out for food chains indicates that
almost all the deliveries are within the range of 5km
from the distribution centre. Even if we assume that
half of the trips can be made with cycles, more than 100
tonnes of CO2 emission can be avoided in the year
2021 itself. The survey also identifies that many of the
food deliverers welcome the concept of cargo bicycles.
REFERENCES
[1]. ARAI, T. A. (2008). Emission factor development for
Indian vehicles. India: The Automotive Research
Association of India.
[2]. ENS, E. B. (2013, October). E-commerce firms' sale
season begins with minor glitches. ENS Economic Bureau.
[3]. PwC, Price waterhouse Cooper Pvt. Ltd. (2015). e-
commerce in India- Accelerating growth. Price waterhouse
Cooper Pvt. Ltd.
[4]. PwC, Price waterhouse Cooper Pvt. Ltd. (2014).
Evolution of e-commerce in India. ASSOCHAM India
[5]. IAMAI, CRISIL, Gartner, PwC analysis and industry
experts