Green E-commerce: Environmental Impact of Fast Delivery

34 Pages Posted: 17 Apr 2024

See all articles by Chenshan Hu

Chenshan Hu

Washington University in St. Louis

Xiaoyang Long

University of Wisconsin - Madison - School of Business

Jiankun Sun

Imperial College London - Imperial College Business School

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School

Date Written: March 18, 2024

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

Suggested Citation

Hu, Chenshan and Long, Xiaoyang and Sun, Jiankun and Zhang, Dennis, Green E-commerce: Environmental Impact of Fast Delivery (March 18, 2024). Available at SSRN: https://ssrn.com/abstract=4762848 or http://dx.doi.org/10.2139/ssrn.4762848

Chenshan Hu (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States
3142035446 (Phone)

Xiaoyang Long

University of Wisconsin - Madison - School of Business ( email )

Madison, WI
United States

Jiankun Sun

Imperial College London - Imperial College Business School ( email )

Imperial College London
South Kensington Campus
London, SW7 2AZ
United Kingdom

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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