Global Economics

E-tailing Not as Green as Hoped


It turns out 80% of online shopping still results in a trip—to view items in stores or even to spend that time saved in the malls on more pleasant travel

According to latest figures from IMRG, e-retail spending in the UK now amounts to £46.6bn (17.5 per cent of total retail shopping) – and online shopping is still increasing at a dizzying rate. In September 2008, online retail sales in the UK were up 14.8 per cent year-on-year, and up 9.9 per cent on the previous month. Fifty-four per cent of all shoppers shop online, projected to rise to 68 per cent by the year 2011.

At first sight, online shopping presents an attractive "green" alternative to physical shopping because it suggests that millions of shopping trips are being replaced by fewer, more efficient deliveries. The statistics for carbon emissions related to private vehicle use for shopping are staggering. Each person makes an average of 219 shopping trips by car a year, travelling 1,220km each and emitting 136 grams of carbon per passenger kilometre. Whether online shopping represents a green alternative, though, depends on the many and complex interactions associated with production and distribution of goods, the problems of "the last mile" – the final segment of the journey from company to consumer that include the need for repeat journeys if the customer is out – and the vagaries of human nature. The situation, it seems, is far from a simple substitution of one dirty shopping trip for a nice, clean mouse click.

According to the RAC, 80 per cent of online purchases still result in a physical journey. Apparently, many of us go to the shops to view a selection of the items we want (perhaps in more than one shop and on more than one occasion), and then go home to find and order it cheaper on the internet – which represents no green advantage whatsoever. Next comes the possibility that because we have bought online and cut out a shopping trip, we can use the car for something more enjoyable, like a day-trip to the seaside.

Because internet shopping allows us to purchase goods to which we could not possibly in previous years have had access, we are actually buying far more now than we ever did. In addition to major retail outlets increasingly providing online shopping facilities, the rise in the number of "amateur" online shops must also have an impact: with next to no outlay people are opening their own online emporia and advertising and selling their own particular brands of goods. Couple that with the sale of second-hand goods on online auction market places and it begins to seem likely that online shopping will result in increasing national and international distribution and transportation, as more and more goods are moved between vendor and purchaser.

As an indication of the increase in distribution traffic, in 2005 FedEx began round-the-world flights to provide faster and better connectivity among the major markets. The environmental impact of the increasing number of distribution journeys made in response to spiralling demand cannot be ignored in the question of whether or not internet shopping is green. (In 2003, with the release of JK Rowling's Harry Potter and the Order of the Phoenix, FedEx teamed up with Amazon.com and made over 400,000 retail and home deliveries in one day for that book alone.)

Neither is the environmental impact limited to the "last mile", since retailers have to acquire, distribute and warehouse their goods before they can begin to ship them out to customers, and postal services have to collect and transport packages into sorting centres before making mail deliveries. Taking all these factors into account, latest figures show that the UK market for freight transport and distribution services was around £74.45bn in 2006, up 6.1 per cent on the previous year.

The competition for distribution contracts is hot. The major players in the UK's "last mile" distribution now include DHL FedEx Express and Royal Mail's Parcelforce Worldwide. FedEx estimates annual revenues at $36bn (£24bn). Royal Mail Group's operating profit more than doubled from £86m to £177m in the first half of the 2008-09 financial year – and eBay, the largest online shop, has an automated shipping charge calculator in the UK linked to Royal Mail letters and Parcelforce Worldwide which assists its revenues. DHL is not doing so well with a net income of £196m – down 61 per cent from £497m a year ago due to problems at its US business.

Nonetheless, the will is there to increase efficiency and reduce the potential negative environmental impact caused by distribution chains. Growing awareness of the problems of global warming and increasing fuel prices has led many companies to review their green credentials – and one of the driving forces behind this is public opinion. We apparently want the companies from whom we make our multiplicity of purchases to act in the best possible interests of the environment. Sixty per cent of UK consumers want companies to provide more information on the impacts of their activities on climate change and 77 per cent want independent assurance of company claims on climate change. It is in a company's interests, too, to slim down their mileage and CO2 outputs – those companies that are more environmentally aware tend to have higher profits than those which are not.

Up to 75 per cent of a company's carbon footprint comes from transportation. In 2004, freight transportation accounted for 33.7 million tons of CO2 . Ninety-two per cent of this came from road transport and the majority of that from HGVs, but freight collections and deliveries by vans represented 13 per cent of the total transportation carbon emissions. In order to curb this environmental burden, 92 per cent of firms that spend 5 per cent of costs on transportation have completed a supply chain network design within the last three years to improve efficiency. Following a design analysis around five years ago, Parcelforce Worldwide is now investing in cleaner fuel-driven vehicles, centralised stock control, providing GPS navigation for drivers and telemetry systems for vehicles to reduce mileage and increase efficiency, and extending its fleet of double-decker trailers.

DHL Global Express operates a GoGreen Program that brings all aspects of its climate change initiatives under one umbrella, having set quantifiable targets to improve its carbon efficiency by 30 per cent by the year 2020 for all four of its logistical components – road, air, sea and buildings. One success story is the distribution company Ocado: it is now greener to shop online with them in terms of its carbon footprint than it is for customers to walk to a supermarket to make their purchases – and shipping goods to customers from centralised warehousing is the key to its success.

For Christmas 2008, Parcelforce Worldwide expected to deliver over 140 million items – twice the number it delivered three years ago. The "last mile" is the target for green improvement for most of the major delivery companies, with the Royal Mail operating its Local Collect system whereby packages can be left at specified addresses or post offices to reduce repeated delivery attempts, and DHL introducing the DHL@Home delivery service in 2007. What the consumer must not forget, however, is that despite distribution companies improving efficiency, reducing mileage and fuel consumption, and planning individual trips, these are not the only factors in the environmental equation. Consumers need to shop thoughtfully – and bear in mind the cost of delivery – as well.


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