Ecommerce Causes Last-Mile Networks To Creep Closer To Consumers

As consumers become increasingly accustomed to the ease of purchasing online, the growth of ecommerce over the next decade is nothing short of certainty. Then again, the mainstream adoption of ecommerce was gradual, tracing back to the times of the dot com rage, when Amazon was nothing more than just an online bookstore. 

But now, the "Amazon.com, Inc. AMZN effect" has disrupted the logistics industry in profound ways, automating large swathes of supply chain operations and forcing them to work leaner and thereby be more efficient. However, the growth of ecommerce comes at the cost of road transportation networks that are getting increasingly clogged due to last-mile delivery vans that have exploded into relevance. 

"For Amazon to compete with Walmart Inc WMT, it needs to get closer to the consumer. And Amazon is doing just that, as it recently announced that the time it takes for delivery would go from two-day shipping to one-day shipping. This shows that Amazon is getting closer to Walmart's business model, while Walmart is also looking to get closer to the Amazon business model," said Rick Stein, head of the Urban Decision Group, an urban planning firm specializing in leveraging data for town planners and decision makers. 

Getting closer to consumers means building more warehouses. However, Stein pointed out the issue of retail space, mentioning that it has already been overbuilt by as much as 50 percent. "You can see that in the increase in vacancies and the decreasing rent pretty much across the U.S.," he said. 

"These retail centers are primarily located in the suburban environment. We think that the last-mile is going to creep closer to consumers and eventually, things like one-day delivery is going to be an outmoded concept, with one-hour delivery being the norm," Stein continued. 

To get this done, it is essential to look at retail storefronts as an option of stocking inventories, rather than building new warehouses on the city outskirts. And since retail storefronts are peppered all across the city, it would be easier to repurpose them to being fulfillment spaces, rather than remaining a customer-facing individual retail space. 

"Taking the example of Walmart, a 100,000-square foot store currently is 80 percent aisles and 20 percent storage. But if we flip that and make it 80 percent storage and 20 percent aisle space, the traditional retail space will effectively be turned into the origin nodes of last-mile delivery," said Stein. "The centers wouldn't need nearly the amount of parking they have currently. They will also have to re-examine their circulation patterns, and the pace at which this will occur is going to increase in direct proportion to the implementation of the technology."

Stein contended that the U.S. many cities have expanded out of their historical boundaries, expanding outward in a way that it takes daily commuters more than an hour to get to work and back home. This is an issue because there is a saturation point in terms of transport networks – even with the advent of autonomous vehicles in the future. "Everything we're talking about hinges on the concept of time, because we are in danger of isolating people in vehicles for hours at a time each day," said Stein. 

As consumers increasingly enjoy ordering online or realize the ease of sitting at home and getting their needs delivered to their doorstep, this will inevitably cause pressure on cities to reinvent how transport networks function. "I've spoken with government officials, planning and zoning folks, and it is an eye-opener for them when I show them how supply chains have historically been the primary driver of how cities develop, and how these changes in technology are affecting supply chains today, which will have a great impact on cities," said Stein. 

The need now is to look at distributing the pressure on transport networks onto other stakeholders like delivery services and the consumers themselves. Several cities are now exploring their options on charging for curbside parking and regular parking spaces, and even on the possibilities of taxing vehicles that move idly around the streets. 

"If you are charging for parking, that means you should be charging for curbside space and the time spent delivering goods. My bet is that if consumers want something delivered within an hour, they will have to pay for it," said Stein. "This can be a politically sensitive matter. But once people see the proliferation of vehicles competing for space with cars, buses, pedestrians and cyclists, citizens are going to demand a change in the way we fund this infrastructure and manage this traffic. They are going to see the impact directly themselves."

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