By Marvin Tort
“Build it and they will come,” was the old paradigm for retail. Without a physical store, a retailer could not expect to sell much. It was an imperative that to put a store with shelves fully stocked with products in high traffic areas. And thus, the management emphasis on “location, location, location.” Being at the right place was key or central to business success.
The internet, in a way, changed that. A physical store was no longer necessary to ensure retailing success. Amazon, Alibaba, Shopee, Lazada, and the like are “concrete” examples, minus the brick and mortar, of online retailing success. Use of space was practically redefined. Real estate or use of expensive square-meters shifted from stores and shelves, to warehousing and logistics hubs.
The reality, however, is that the store or retail outlet simply moved from private space to public space. The store and its front and window disappeared from privately owned real estate. It simply moved to a “public” space called the worldwide web or the internet. As such, those who used to commute to the malls to window-shop could now simply “browse” the same windows from the comfort of their homes.
For retailers, the cost of maintaining a store (real estate, utilities, staff, construction, etc.) was replaced by the cost of maintaining a website. Warehousing and logistics are still retained, but skewed towards delivering directly to customers rather than to physical stores. While for customers, the “cost” of window-shopping (fuel, vehicle maintenance and parking or public transportation fare) was replaced by the cost of browsing (electricity and cost of internet access).
Likewise of interest to me is the fact that physical stores have become “moving” stores given the significant surge in delivery services, and that from privately owned real estate, goods are now mostly moving about in the public space: publicly owned highways and city roads. The unintended consequence, of course, of this massive and constant movement of goods is traffic congestion.
In September, global logistics company United Parcel Service, Inc. (UPS) announced that it would hire 100,000 seasonal workers in the United States prior to the Christmas season, to help with delivering packages. This is to avoid a repeat of 2017, when about 8% of packages handled by both UPS and FedEx were delayed. This totalled about 98 million packages.
In 2018, UPS and FedEx and the US Postal Service handled to total of 2.15 billion packages for the Christmas holidays. So, one can only imagine the number of couriers and delivery vehicles on the road during the month-long season — from Thanksgiving in late-November all the way to New Year’s Day.
Those 2.15 billion packages, instead of being on store shelves and with customers going to stores to get them, more likely came from warehouses and then couriered from point to point. They probably went to distribution hubs, from where UPS and FedEx and USPS vehicles and drivers delivered them to people’s doorsteps.
Having changed the way goods are moved, capital spent on infrastructure have instead moved to logistics services. Moreover, as one New York Times feature report noted, with 1.5 million packages moving daily in New York City, this paradigm shift in retailing — which emphasizes “convenience” — had the unintended consequence of the internet bringing “chaos” to city streets.
In an Oct. 28 report by Matthew Haag and Winnie Hu, the New York Times noted: “But to deliver Amazon orders and countless others from businesses that sell over the internet, the very fabric of major urban areas around the world is being transformed. And New York City, where more than 1.5 million packages are delivered daily, shows the impact that this push for convenience is having on gridlock, roadway safety and pollution.”
“Delivery trucks operated by UPS and FedEx double-park on streets and block bus and bike lanes. They racked up more than 471,000 parking violations last year, a 34% increase from 2013. The main entryway for packages into New York City, leading to the George Washington Bridge from New Jersey, has become the most congested interchange in the country. Trucks heading toward the bridge travel at 23 miles per hour, down from 30 mph five years ago,” it reported.
“While the rise of ride-hailing services like Uber has unquestionably caused more traffic, the proliferation of trucks has worsened the problem. As a result, cars in the busiest parts of Manhattan now move just above a jogger’s pace, about 7 mph, roughly 23% slower than at the beginning of the decade,” it added.
The NYT report also noted that “the average number of daily deliveries to households in New York City tripled to more than 1.1 million shipments from 2009 to 2017,” and that residences or households now “receive more shipments than businesses, pushing trucks into neighborhoods where they had rarely ventured” in the past.
As for growth potential, the NYT reported that “10% of all retail transactions in the United States during the first quarter of 2019 were made online, up from 4% a decade ago,” citing data from the US Census Bureau. So, if online retail continues to grow, one cannot help but wonder what the implications will be in terms of what the NYT report referred to as “gridlock, roadway safety and pollution.”
To an extent, I believe we are now suffering from the same problem. While I don’t have the data to back this claim, I am inclined to believe that the growth in online retailing, and ride-hailing (using online technology for public transportation), is also having a big impact on Metro Manila in terms of “gridlock, roadway safety and pollution.”
That there is a need to address these unintended consequences is obvious. What is not apparent, however, is whether we even realize the emerging problems and if we are thinking of ways to resolve them. The fact of the matter is, we already do not have enough road space and parking options to accommodate all motorists, what more an increase in deliveries and “shared ride” services. Moreover, I am guessing that pollution levels in Metro Manila have gone up in recent years.
We shouldn’t clamp down. Economic activity is necessary, and consumption is a major contributor to economic growth. However, we should consider regulatory efforts aiming not to impede business but to deal with negative externalities — the unintended consequences that have negative social and economic and developmental impact — particularly in highly urbanized areas. Going electric, for instance, may not address congestion but will mitigate pollution, while stricter enforcement of traffic and parking rules can help minimize gridlocks.
We support the removal of market vendors from our streets downtown because we believe that roads and sidewalks are public spaces that are supposed to be beyond the “commerce of man.” But the simple reality is that uptown streets are now also occupied by vendors, but on “wheels.” And while their presence and footprint are not as permanent as those whom we have removed from Divisoria, they are still a constant presence in public space — contributing to congestion and pollution. They are using public roads for private business, just in a more sophisticated fashion. Thanks to technology.
Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council.