Sunday, December 19, 2010

Internet Delivery Services Are Green

I'm carless in Los Angeles at the moment, so I'm thinking about how to handle that, and it made me realize something: Internet delivery services from to Zappos (with in between) are all better for the environment, in a widely spread out city like Los Angeles, than the pre-internet physical stores model. The reason is hidden transportation costs.

Assume for the sake of argument that environmental damage is a "cost" we're looking to minimize. It's much more expensive, in that sense, to ship every package individually to the consumer than it is to ship all the packages en masse to a store - but only if you're not paying attention to the hidden costs. Consider, for example, the cost of driving to the store, not finding what you wanted, and driving to the other store where you finally find it; then multiply that cost by every single unit sold. For all units not sold, add the cost of shipping them back to the manufacturer. Stores leverage economies of scale, but you can use distribution centers in a more sophisticated hub-and-spoke model to do the same thing, but better; and if every single person in a city gets in their car and drives to the store to buy Item X, that's obviously going to cost you much, much more environmental damage than it would to have a small fleet of delivery vehicles deliver Item X to every home in the city.

It'll also cost you more in lost productivity from the time wasted in traffic, physical and psychological health problems from the stress of the traffic, civic engineering costs to build roads, traffic lights, and other systems to handle the traffic, cops to police it, ambulances to handle the traffic accidents, and last but most certainly not least, injuries and deaths from some percentage of those accidents. Delivery services reduce the number of people driving per Item X, and they make a qualitative shift as well, in that they increase the probability that somebody driving is going to be a trained professional rather than a distracted amateur.

Although these shifts are small, they are likely to be noticeable in aggregate, especially if Internet delivery services continue to replace traditional brick-and-mortar retailers.