Green E-commerce: Environmental Impact of Fast Delivery

Abstract

It is well-established that faster delivery in e-commerce increases consumer demand. However, the impact of faster delivery on how consumers place orders (their order frequency and basket sizes) and the subsequent environmental implications are not known. To investigate these questions, we leverage a quasi-experiment involving the opening of a new local warehouse by Alibaba Group, which led to a half-day improvement in the delivery speed for local orders. Through a difference-in-differences analysis, we find that the delivery speed improvement not only increased consumers’ monthly purchasing amount by 6.70%, but also increased monthly order frequency by a higher percentage (i.e., 7.74%) and reduced the average order basket size by 0.79%. These results collectively suggest that with faster delivery, consumers purchase more on the platform but do so in more frequent and smaller orders, which implies more packaging and transportation costs for each unit of product sold. Based on these results, we conduct a detailed calibration using both public and company-specific data to estimate the increase in the platform’s carbon emissions due to faster delivery. We also explore and identify two mechanisms contributing to the phenomenon: order-splitting and category expansion. We combine these insights with heterogeneous treatment effect analysis to derive managerial implications for the e-commerce platform. In particular, we find that for a platform that implements a threshold shipping policy, raising the free shipping threshold may be more effective than raising the shipping fee to reduce the environmental and operational costs associated with faster delivery.

Keywords: E-commerce Logistics, Sustainable Operations, Platform Operations, Delivery Speed, Carbon Emissions, Shipping Policy