The environmental cost of online shopping
The digitalization of modern life and innovative technologies has completely transformed the way people shop. However, this significant increase in e-commerce logistics also comes with some hidden environmental costs.
Since the outbreak of COVID-19, online shopping, which was already growing at a steady pace, has become a popular shopping alternative for consumers around the world. In June 2020, at the peak of the pandemic lockdown, global retail e-commerce traffic reached a record 22 billion visits monthly with USD 26.7 trillion in sales.
Figure 1 shows the global e-commerce logistics market size between 2020 and 2027. Despite challenges of persisting lockdowns and inflation in previous years, the market reached a value of USD 532 billion in 2023. That is about a 27% increase since 2020.
This growth marks a significant rebound from the previous year's downturn, where a negative year-on-year growth of 5.2% reduced the market to USD 495 billion. Between 2023 and 2027, the market is predicted to increase by 48%, reaching USD 788.
Top e-commerce producing countries
Figure 2 shows the top 10 markets of e-commerce revenue worldwide in 2023. The market was led by China with USD 1.1 trillion, followed by the U.S. with 669.5 billion. In contrast, Indonesia is at the bottom of the top 10 ranking with 31.79 billion, showing a difference of about 1 trillion USD to China.
While Asia-Pacific countries continue to exhibit strong growth, the European e-commerce market is expanding at a steady pace with an expected value of USD 745 billion by the end of 2024 and USD 955 billion by 2028.
Within the last five years, the pandemic has pushed the sector even further, triggering changes in consumer behavior and leading to huge records in sales. Big companies such as Amazon, Alibaba, and Walmart have ruled online shopping sectors and played a huge role in increasing consumers’ expectations around the world (Figure 3).
The driving factors of global e-commerce logistics growth
Customers mainly look for price, fast shipping, and convenience when buying online. Nowadays, the field has advanced so much that customers expect goods to be delivered the next day and to return without cost if they don’t like them.
Big giants, such as Amazon have catered to the desires of their customers by adopting fast shipping options. Consequently, smaller retailers are obliged to mimic this approach to remain competitive. So considering this trend, here are some top reasons for the growth of e-commerce logistics:
Discovering the best deals: Initially, online shopping was primarily about securing the greatest bargains. However, innovation and technological advancements have evolved the sector further to meet the expanding demands and expectations of consumers. Over time, convenience has become a central focus.
Advancements in digital technology: Innovations such as real-time tracking, automated warehousing, blockchain for supply chains, and the integration of AI have revolutionized the sector. As an increasing number of logistics firms embrace technology and expand their capabilities, the outcomes are poised to enhance both scale and efficiency.
Increase in international e-commerce: In addition to shopping within their own countries, online consumers are increasingly participating in cross-border e-commerce.
Related: How do digitally transformed companies drive sustainability to new heights?
The industry has harnessed digitalization and technological advancements to reach the point that was once deemed impossible merely decades ago. However, this revolution carries significant environmental costs for our planet.
Research conducted by MIT revealed that traditional shopping activities produce twice the carbon footprint of online shopping. Nevertheless, selecting fast delivery options significantly escalates emissions, surpassing those generated by in-person shopping.
One significant factor contributing to this phenomenon is that delivery companies frequently cannot delay shipments until all products have arrived or been ordered. Consequently, they often dispatch trucks that are only partially filled, resulting in increased emissions.
Related: Eco-friendly packaging and sustainable practices in the gift-giving season
How harmful is return policy?
However, shipping is not the sole concern. A study on consumer habits indicated that 79% of consumers prefer free return shipping, with 92% of them inclined to make future purchases if returns are convenient. Still, customers return at least 30% of all purchased goods for various reasons.
By 2022, retail returns in the U.S. amounted to approximately USD 817 billion, with online retail accounting for a quarter of this total. In the same year, the country recorded about USD 1.3 trillion in online sales, approximately 16.5% translated into returns.
In 2020, shipping and product returns contributed to 37% of the total GHG emissions generated by e-commerce sectors. Figure 4 illustrates the escalation in delivery vehicles and their associated emissions from 2019 to 2030. Projections suggest that by 2030, the fleet of delivery vehicles will expand by about 36%, totaling around 7.2 million vehicles. This surge is anticipated to yield an additional 6 million tonnes of CO2 emissions.
The e-commerce revolution has brought enormous advantages without a doubt. However, its environmental impact must not be ignored. Although many companies try to become sustainable, consumers have the final say as their behavior and choices ultimately shape the impact of the e-commerce industry. Nowadays, most buyers choose convenience over principles. A shift in mindset is imperative for both producers and consumers.
Related: Supply chain strategy for a sustainable and innovative future
For businesses, particularly those in customer-facing industries, end-to-end supply chain emissions often surpass the direct emissions from their operations. By implementing net-zero supply chain strategies, companies can significantly amplify their environmental impact, and drive emission reductions.
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