Category: E-Commerce adoption

What will E-Commerce growth and adoption be

AVs and Streets – A Guide to Potential Impacts

We have been asked numerous times about how the introduction of AVs (and E-commerce) might affect streets.  As cities make plans for future expansions, changes to their street network, the inclusion of various modes/complete streets, and overall street design – what should they be considering when they include thinking about AVs?

Here is a short list:

Curbside space allocation for pick-up and drop-off – This will become a large issue as demand for this space will increase substantially – especially at peak travel times.  It could also cause significant disruption to transit and bike networks as AVs compete for curbside access and cut across bike and transit lanes.

E-Commerce Delivery – Similar to above, as e-commerce expands, there will demand for curb space and places to temporarily park vehicles as deliveries are made.  In addition, we will probably be seeing a large increase in delivery vehicles (an expansion of a specific kind of freight) which will affect streets and corridors?

Separation of Modes – As AVs have algorithms that don’t allow them to hit people (a fantastic development), a corollary will be that anyone walking or biking in the street can cause mass disruptions to the transportation network.  A “critical mass ride” of one.  This had led to calls for stronger separation between modes – a disastrous proposal – imagine our streets starting to look like China’s where there are fences between modes.

Drones on Streets – Not the flying kind (those are probably further off in the future) but the terrestrial ones.  Picture an Amazon truck parking in a neighborhood and sending off twenty delivery AV rovers.  Will those drive in the street? On the sidewalk?  How will they affect other modes? What should we suggest or try to regulate?

Micro Transit Corridors – Lyft and Uber are pushing shared rides (Lyft-Line and Uber Pool) and are already incentivizing people to make their pick-up and drop-offs happen along arterials or more heavily travelled routes to reduce the vehicles efficiency (see this earlier post).  This will define micro-transit routes throughout the city.  Where will these be? Should cities help define the routes? How will it affect all modes moving through these areas?

Reduction/Elimination of Parking – We are already seeing a reduction of parking use in some venues as Lyft and Uber takeoff (see this earlier post, and this one).  As this happens more and more – research says we will need 10-15% of current parking spaces – what happens to the onstreet parking?  Is it transferred to other modes or additional lanes?  What happens to the buffering role it currently plays in many streets?

Changes to Available ROW – Building on this last point, if AVs need narrower lanes (they are better drivers than we are) and potentially can increase throughput through some streets (see point on this below) and therefore allow a reduction in necessary lanes – how will we use the available ROW.  This is especially critical as available ROW seems to be one of the larger limitations to increasing dedicated infrastructure for transit, bikes, and pedestrians.

Increase in VMT – Most modeling of AVs we have seen show an increase in VMT, but this is more dramatic in scenarios where we all have our own vehicles vs shared fleets.  This is especially so if we don’t tax empty cars (zombie cars) driving around as they wait for their owner or go do errands on their own.  How will this increased VMT affect other modes, congestion, etc? How can we make sure we limit it?

Efficiency of Streets (for cars) – AVs in theory will be more efficient, require less space and be able to move faster.  Many models have been created that show connected vehicles zooming towards each other at intersections and just barely missing as they efficiently move people and goods.  What this fails to recognize is that one of the larger impediments to this type of free-flow movement is the fact that multiple users exist in the right-of-way.  Pedestrians and bikes would not work well in these scenarios.  This leads to thinking that there may be two worlds of cars on streets – those where they dominate (definitely freeways, but will that also start including arterials and collectors…) with free flow of vehicles and other areas where other modes are considered as well.  Will the mixing of modes be frowned upon because it is such a limitation to this efficiency?  Will some areas ban bikes/peds?

Street as a Utility – This is more of a meta-concept, but the idea is that we need to stop thinking of the street as a public space that we can all use whenever and however we want, but instead should think of it as a utility that has limited capacity.  Related to how we pay for the amount and time of our electricity use (in places), we can think of streets similarly.  This might lead to something like a geometry tax (you are charged for how much space you take up on the roadway divided by the number of people in the vehicle – a great deterrent to zombie cars).  — Stay tuned for an upcoming post focused on this topic!

Finance – We have done a quick pass at how these technologies will be affecting municipal revenues and – in short – it will not be pretty or easy (see our report here and see analysis of parking/car related revenue impacts here).  A lot of disruption (for example the drastic reduction of parking fees and traffic tickets while we are needing to pay for retraining large groups of the population who used to work in retail or driving jobs). Limited budgets will affect everything else government tries to do and services it provides – streets included.

 

Parking garages are already becoming dinosaurs

I’m seeing a giant meteor coming that will, metaphorically speaking, put a huge hole in municipal budgets. This meteor will be AVs. The meteor that pushed dinosaurs to extinction may have done so with one big hit, the AV evolution might be a bit slower. A recent article in Governing Magazine provides us with evidence that the impact of AVs is being foreshadowed by the likes of Uber and Lyft (often collectively referred to as TNC or transportation network companies).

Airport managers nationwide are expressing concern in how the TNC are disrupting the budget models that airports have long had in place. Carter Morris (VP with the American Association of Airport Executives) has stated that “airports need to adapt and do it quickly.” Many airports have seen dramatic drops in fees collected from taxi companies and car rental companies because so many people are just using the TNCs instead. So now more than 200 airports nationwide are charging pick-up and/or drop off fees for the TNCs, just as they might have with taxis—though the exact revenue models are quite varied. As fee revenues decline, airports may look to airlines to pay more, which could drive them away from the small/medium size airports.

And if you are wondering how much of an impact TNCs are having on the ground transportation game, look no further than “San Francisco International Airport, where TNCs accounted for more than two-thirds of commercial ground transportation in May.” Lyft and Uber are preparing for an AV future, airports should too!

To learn more about the impact of AVs on municipal budgets in the Urbanism Next report coming out in late July. You’ll find a link to the report here on the blog.

Will AVs bring doom & gloom or a big boom to the economy?

Intel and Strategy Analytics researchers are claiming the impact of AVs will yield a $7 TRILLION boost to the economy. They feel that the effect of AVS “could add as much as $2 trillion to the US economy alone by 2050,” according to a recent article in Wired magazine. Much of the money will, expectantly, go to manufacturers of the vehicles but “mobility-as-a-service will supplant the value of vehicle sales as core sources of shareholder value creation” in the long-run the report says.

How do they suggest you get a share of the benefits?

  1. Work in data (“Storing, organizing, and analyzing that data will be a big job”);
  2. Work in IT (“someone needs to tend to these data architecture beasts—not crunching the numbers themselves, but making sure the systems are humming along as they should”);
  3. AV mechanic (“Robocars won’t need you, but they’ll still need mechanics”)
  4. Something we don’t yet understand (“No one has yet predicted how many jobs the autonomous future will create, and that’s partly because the future is so messy”)

Brick and Mortar Retail Continues to Vanish

To add to the sobering news on brick and mortar retail in our earlier post, new articles point to continued weakness in the retail market and more store closing.  A recent WSJ article lays out what is currently happening and compares it to more historic trends to highlight its magnitude.  As this article is not publicly available, we are going to list a few of the key quotes below:

  • More than 2,880 stores closed from Jan – early April 2017.  That is twice the amount closing last year for the same period
  • If that trend continues, there will be 8,600 store closings this year – much more than closed during the 2008 recession.
  • 10 Large retailers have filed for bankruptcy as of mid April 2017.  This compares with 9 total large retailers in ALL of 2016.
  • Last year, E-Commerce sales increased from 10.5% to 15.5% of all retail.

Retail is experiencing a large transformation – and this will have a strong impact on brick-and-mortar stores – forcing many to close.  This will result in loss of property tax revenue, sales tax revenue, and will force communities to deal with abandoned buildings that bring down values and often increase crime.

Online Retailing Giant Amazon to Start Collecting Sales Tax Nationwide

Amazon is going to start collecting sales tax in all US states that collect sales tax on products it sells. Roughly half of all goods sold on Amazon are sold directly by Amazon (and something like half of e-commerce goes through Amazon, so this yields about ¼ of online sales), so this will have some seriously positive impacts for state and local governments across the nation. One of the largest complaints that brick & mortar retailers have had for years is that e-commerce retailers like Amazon have an unfair price advantage because they were not charging sales tax.

It is reported that “This tax loophole also means states are missing out on an estimated $23 billion annually.” That is a big hole, and the move by Amazon is going to slowly plug that hole and start to level the playing field.

As Amazon moves to same/next day delivery they have needed more distribution centers, thus making the sale tax dodge harder and harder for the online giant. The move by Amazon is a foreshadowing of what is to become of online retail and what it means for state and local governments. So while the demise of big box retail seems eminent, the revenue projections may get rosier for governments that are dependent on sales taxes.

E-Commerce is Shifting/Closing Traditional Retail

A series of articles together paint a dire picture for traditional brick and mortar retail.  Overall, the structure of retail is changing – online sales are growing, stores are becoming showcases for sales that will happen on mobile devices, and warehouses are continuing to boom.  E-Commerce is continuing its influence and increased its rate of growth from $30 billion per year from 2010-2014 to $40 billion per year in the last three years.  This has led to a disappointing jobs report in March with retail losing nearly 35,000 jobs in that month alone.   This is part of a larger trend of job losses and store closing.  The US currently has more than six times the amount of retail space per capita than Europe and that historic trend is starting to feel like a bubble.  Since October, the US has sees a loss of 89,000 jobs in the retail – more than all of the employees in the US coal industry that was the poster child of economic hardship during the presidential campaign.

All of this, coupled with a booming economy, seems to suggest that we are seeing a categorical shift in retail and not a momentary blip.  Brick and mortar stores will continue to close – and this will continue to create issues for land use, urban activity, tax revenue, and labor.

 

The Blight of Failing Malls – A Rising Burden of E-Commerce

A new article from Business Insider looks at the continuing decline of indoor malls around the country.  Of the 1,300 malls in the US, a staggering 310 are ‘in high risk of closing’.  The largest culprit is the loss of anchor tenants like Macy’s, JC Penny, and Sears – all of which have been seeing large numbers of store closings in part due to the rise of e-commerce (see earlier post about this).

The article discusses the range of consequences of these closings including a rise in crime, increasing blight in the surrounding area, and the loss of municipal revenue coupled with a rise in costs for needed fire and police services.  Dead malls – and the e-commerce that is contributing to their demise – have large repercussions for cities.

As e-commerce expands and potentially reduces the number of strip malls as well (in addition to enclosed malls), these repercussions will amplify.  A recent conversation with the planning director of a suburb city focused around the devastating effects the reduction of strip malls and commercial activity in his city would have on municipal revenues.  This was especially difficult as he saw limited abilities, compared to more urban locations, for suburban cities to redefine themselves and create vitality, draws, and their associated revenues.

Drone Delivery Model from UPS

Drone delivery is on the horizon and could take a bit off the edge of the congestion cliff that will come with increased AV use and increased E-commerce.  UPS just tested a delivery model where a drone, attached to the top of a truck, can deploy to deliver a package while the driver continues on to do their own delivery at another site.

Some large caveats exist with the ability to use this in urban areas (as opposed to the rural example they describe).  That said, this is one step closer to the package delivery model where trucks become mini-distribution hubs and a fleet of drones go to and from a parked vehicle.  Obvious implications for trip generation, for potential design changes to buildings (say hello to your new rooftop mailbox!), and for distribution of warehouses in cities.

Graphic of how this would all work is below.

Walmart vs. Amazon II

Walmart seems intent on not losing out to Amazon and is investing heavily in E-Commerce to keep themselves competitive.  The WSJ article states that while brick-and-mortar sales are slowly rising, online sales have skyrocketed up 16% over the last quarter (and that quarter was a 21% rise from the quarter before).

In a separate article from SupplyChain247, Walmart’s CEO talks about the future of retail.  In short, in his view we will all be shopping online, will want to know the sourcing of our products and will want to make sure social and environmental sustainability is being considered.

 

Walmart vs. Amazon

In a continuation of how investment may be a sign of things to come (see two previous posts), Warren Buffett just divested from nearly $1 Billion of Walmart stock.  He cited the rise of e-commerce as part of his reason for doing this and said “Its a big, big force, and it has already disrupted plenty of people, and it will disrupt more.”

The article goes on to wonder is the US is not ‘over-stored’ with “23.5 square feet of retail space per person compared with 16.4 in Canada and 11.1 in Australia.”

Of note in the article as well was the graph below, showing the change in share price of Walmart vs. Amazon.  The picture is even grimmer if you look back 10 years.  Walmart stock has risen 48% during that time versus Amazon’s 2,024% increase.

Warehouses Will Be Everywhere

As we continue to trend towards e-commerce and a range of delivery methods for products, warehouses – one of the key infrastructure elements of delivery – are going to both shift and proliferate.  A report from Colliers looks at these shifts broadly, but pertinent to this blog, there are sections on First Mile and Last Mile of delivery that outline the changes we will be seeing in the built environment.  Some takeaways:

  • Large consolidation of distribution facilities is happening as this facilitates logistics and the implementation of automation
  • Due to this consolidation, the size of facilities is greatly increasing – ‘First Mile’ facilities (these are distributions centers that are first accepting parcels from suppliers)  greater than 1 million square feet are becoming more commonplace. — Picture a single facility as large as 4-5 New York City blocks or 16-20 Portland blocks.
  • ‘Last Mile’ facilities (distribution centers that ship directly to customers) – on the other hand are locating in order to shorten and speed up final deliveries.  This is leading to smaller distribution centers (50-75,000 square feet) scattered around urban areas.

A great graphic that shows the complexity of new shopping and delivery methods is below.  Many forms of delivery and each has its own land use and transportation implications.

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E-Commerce?? – Depends on What you Are Shopping For

A new study in Transportation Research Record by Zhen et al. looks at the relationship between online versus in-store shopping based on the types of good you are shopping for.  Based on a survey of shoppers in Nanjing, China, they differentiate between experiential goods (ones with “traits that cannot be determined until the product is used” – such as clothing) and search goods (ones  “that consumers can ascertain fully before use” – such as electronics).  Unsurprisingly, they found more online purchasing happening with search goods than exchange goods.  A few other takeaways:

  • Cost consciousness is related to lower in-store clothing and electronics purchases
  • Shopping enjoyment increases in-store purchases for daily goods, but not for electronics – so “a particular shopping attitude does not always affect purchasing behavior for different products in the same way.”
  • More education is related to less in-store shopping and more online shopping for books and clothing

In terms of the effect on the overall transportation system, the results are not clear cut.  They state that “If returns of unsatisfactory products and freight transportation are considered, online purchasing generates even more travel demand. Therefore, transportation planners should expect growing challenges associated with the proliferation of Internet sales.”

E-Commerce: Brick-and-Mortar Slide Continues – 12% Drop in Store Trips This Past Holiday

A recent article in the Wall Street Journal documents the continued rise of e-commerce coupled with the inevitable slide of brick-and-mortar stores.  A few key numbers:

  • Overall, online holiday sales increased by 11% over the previous year while brick-and-mortar sales increased only 2.7%
  • JC Penny brick-and-mortar sales dropped by nearly 1% while its online sales grew by double digits.
  • Amazon was the clear leader in online sales with 38% of all online revenue

Probably the most striking number for the subject of this blog, brick-and-mortar shopping traffic (as in the number of times people went into stores) declined by 12%.  That number – if it continues – will inevitably lead to a drop in the amount of brick-and-mortar stores and major shifts in land use and transportation demand.  This will potentially also decrease the vitality and activity around commercial areas.

E-Commerce and the End of Department Stores…

Macy’s and Sears are closing stores throughout the country (250 stores in total) as trends continue to push against traditional bricks-and-mortar retailers.  While nobody suggests bricks-and-mortar will completely disappear, this is yet another step in the continuing shift away from traditional retail.  Previously considered anchor tenants that drove (almost literally) shoppers to large malls, the retail landscape has shifted towards smaller, more nimble, and often e-commerce linked retail.  This will have large implications on the amount of retail in the country, its distribution, and the size of parcels/spaces.  From recent discussions we have been having with industry experts, it seems that a quality sort is just beginning, where size and location of retail may start to give way to quality of experience and place.

The Amazon impact – more delivery trips and person-less stores

As online shopping continues to become commonplace, so do the number of delivery trucks delivering those goods directly to consumers, rather than centralized stores.  While there clearly is convenience in this approach, the increase in delivery vehicles on our streets is significant as 10-30% of the time the same package must be delivered more than once because no one is home and many goods are also returned this same way.  The space of our streets is limited – can space-efficient forms of transportation such as bicycles be designed into the center of urban delivery systems?

And at the other end of the spectrum, Amazon is experimenting with personnel-free shopping in urban areas where goods can be purchased without the help of a cashier at all – whether human or self-service machine.  This type of technology may have dual effects on the future of cities – there may be lower need for space for employee parking  (there are none), but what might it mean for cities to lose part of its entry-level workforce option?

AV’s, E-Commerce and Retail

This article talks about how the combination of AV’s and E-Commerce will create havoc for the retail industry.  More of our shopping will go online while bricks and mortar stores will start to act more like distribution warehouses as AV’s are sent to run errands and pick up things we need.  This will have large implications for how retail works in urban areas – where it is located, how much of it we need built, and a shift (already occurring) from retail being based on a need to retail being proposed as an experience.

Large implications for activity centers throughout urbanized areas as many of them have retail as a core vitality generator.