By Monica Nickelsburg
Despite high costs and logistical challenges, Amazon is speeding ahead with one-day shipping, a benefit increasingly available to millions of Prime members.
“It’s a big investment, and it’s the right long-term decision for customers,” Amazon CEO Jeff Bezos said in a statement last month. He then went on to make the environmental case for super-fast shipping.
“Although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer — it simply becomes impractical to use air or long ground routes,” he said.
The claim goes against conventional wisdom about the environmental impact of shipping. Researchers at MIT found it can be more environmentally friendly to order goods online, if a shopper would otherwise drive to a brick-and-mortar store. Think of it as the difference between driving yourself to work and taking the bus.
But experts say the shift to faster shipping times complicates the picture and can reduce the environmental benefits of e-commerce. That’s because the need for speed makes it more difficult for retailers to optimize their logistics infrastructure to ensure that packages bound for similar destinations are shipped together.
So why is Bezos claiming that one-day delivery will reduce carbon emissions? Anne Goodchild has some ideas. As director of the University of Washington’s Supply Chain Transportation and Logistics Center, she’s been studying urban goods delivery systems for years.
“He’s changing other variables … he’s not including the complete door-to-door cost of the package,” she said. “They had to pre-position inventory closer to you but we still have to account for the carbon emissions of that pre-positioning.”
In other words, many goods that are readily available to customers in warehouses near them still have to travel long distances from their place of origin.
In general, rising consumer demand for delivered goods is correlated with increased carbon emissions, according to a 2018 sustainability report from UPS, one of Amazon’s delivery partners. UPS said e-commerce growth is “driving a need for increased capacity across our network, including fleet expansion and facility automation, both of which require more energy and generate more emissions.” The company’s emissions in 2018 increased 6.2 percent over a 2015 baseline.
“We’re driving more miles, using more energy, and generating more emissions in response to market demands and to serve the growing supply chain needs of our customers,” Crystal Lassiter, UPS senior director of Global Sustainability & Environmental Affairs, wrote in the report.
That demand doesn’t show any signs of slowing. Consumer spending online will hit an all-time high of $143.7 billion this holiday season, a 14 percent jump over last year, according to Adobe Analytics.
There’s also huge growth potential in e-commerce. Only 10 percent of all retail transactions in the U.S. happened online in the first quarter of 2019, according to Census data compiled by the New York Times. That’s up from 4 percent a decade ago.
Goodchild said Amazon would have to make big tweaks to its supply chain in order for one-day delivery to actually reduce carbon emissions.
“To provide one-day delivery and simultaneously rely less on air would require pretty substantial other changes in their supply chain that increase costs or reduce customer service,” she said.
The most effective strategy would be to reduce the number of goods that are transported by air to warehouses near customers, according to Goodchild. Air cargo is a top source of carbon emissions in e-commerce delivery. In 2018, it accounted for 75 percent of FedEx’s total direct emissions.
Goodchild said that if Bezos’ claim means Amazon will reduce the number of packages shipped by air, “that’s a reasonable basis for saying it’s less energy-intensive.”
“But they use air because it’s faster and they can be more responsive to the market,” she noted.
Amazon would not say whether it will reduce air dependence or make other changes to its supply chain. Sam Kennedy, a spokesperson for the company, provided this statement when asked about Bezos’ comments:
“Reducing carbon emissions from air transport is an important challenge for Amazon and all companies focused on sustainability in their operations — airlines, shipping companies, manufacturers, retailers, etc. Industry will need to invest in and create technology and fuel types that aren’t widely available or don’t exist yet — and that’s a big market opportunity because there are a lot of big companies that are going to need this invention.”
In June, Amazon announced an expansion of its air delivery network, adding an additional 15 Boeing 737-800 cargo planes. The company plans to have 70 aircraft in its network by 2021. Last month it opened a new regional air hub in the Dallas area — the “first build-to-suit airport project of its kind in the Amazon Air network.”
Amazon also has thousands of Prime-branded trailer trucks that move packages across the country. Last year it rolled out a “Delivery Service Partners” program that features blue Prime vans you’ve likely seen on city streets.
While it doubles down on traditional, fuel-intensive delivery methods, Amazon is also working on new delivery technologies. This summer the company debuted its newest electric delivery drone at an event in Las Vegas. Jeff Wilke, Amazon’s CEO of worldwide consumer, told the crowd they could expect “this new drone delivering packages to customers in months.”
Amazon is making other sustainability investments, too, like working toward 80 percent renewable energy for its global infrastructure within five years and 100 percent renewable power by 2030. The company plans to be carbon neutral by 2040. As part of Amazon’s Climate Pledge announced in September, the company is purchasing 100,000 electric vans from Rivian.
Those initiatives come as employees at big tech companies demand climate action from their employers. Amazon workers held a protest in September at the company’s HQ; more than 1,000 Google employees signed an open letter this week calling on the search giant to reach zero emissions by 2030.
Amazon is spending big on one-day shipping but it isn’t clear whether those expenses will go toward reducing carbon emissions. Amazon plans to invest nearly $1.5 billion into its one-day shipping initiative in the fourth quarter alone, which covers the busy holiday shopping season.
It’s one of several changes Amazon has been implementing to make the delivery experience more seamless for customers. For example, in the past, Amazon required low-priced goods to be bundled together for customers to receive free shipping. But the company has been removing that barrier over the past few months, allowing shoppers to more easily buy inexpensive items, like shampoo or toothpaste, and have them delivered in a day or two.
That change, coupled with the free grocery delivery Amazon is now offering for Prime members, brings the company in more direct competition with brick-and-mortar retailers such as CVS or Walmart.
But speedy delivery can come at a cost, even if customers aren’t feeling it in their wallets. Beyond the effect on city infrastructure and the human toll — which a recent BuzzFeed investigation highlighted — super fast delivery could lead to an increase in carbon emissions, despite Bezos’ claim.
“The details matter a lot,” Goodchild said. “We can’t say as a blanket statement it’s better to shop online than go to the store. We can’t make that kind of conclusion because it depends on where the thing you’re buying came from.”
Amazon is currently rolling out one-day shipping first in North America and then internationally. The company said in June that free one-day shipping was available to Prime members on more than 10 million products, with no minimum purchase amount.
Amazon’s push for faster shipping has reshaped the retail industry, with many competitors such as Target and Walmart now offering their own free two-day delivery options. Walmart in May unveiled free one-day delivery on more than 200,000 items with a minimum order threshold of $35. Best Buy announced its own free next-day delivery offering last month.
Amazon’s overall shipping costs have ballooned in recent years as the company aims to speed up delivery, both with products purchased on Amazon.com and via Prime Now, such as Whole Foods orders. During Q3, Amazon spent a whopping $9.6 billion globally on shipping, up 46 percent year-over-year. It’s a safe bet that shipping costs will eclipse $10 billion this holiday quarter, adding to what could be more than $35 billion spent on shipping over 2019.
Update: Amazon sent an additional statement after this story published:
Currently, the vast majority of inventory that is moved throughout the world is done without air transport, and we expect the percent of total shipments to customers utilizing air transportation to reduce from year to year as we significantly increase one and same day shipments — we are doing this by building new fulfillment centers closer to customers, innovative inventory placement supply chain systems, and investing in an expansive ground transportation network.