Impact of E-Commerce Development on Urban Logistics Sustainability

The Impact of E-Commerce Development on Urban Logistics Sustainability

Abstract

The purpose of the present paper is to present some sustainable solutions for urban logistics. The approach is to identify the present challenges for urban logistics caused by the increase of freight volumes due to the development of e-commerce. To meet them, companies’ sustainable practices were analyzed and the utilization of new electric power train technologies seem to offer interesting results for reducing carbon emission impacts. Using methods of literature review and experiences from ongoing electric mobile research projects, this paper argues that electric vehicles in urban distribution are a yet underestimated element towards more efficient transport processes—hence economic advantages for companies, towards the reduction of a company’s foot-print and even towards an increased service level for the customers.

1. Introduction

Sustainable urban logistics has received much attention in recent years, due to continuously increasing freight volumes in e-commerce. Online shopping is a modern retail channel which, in alignment with the global trend of urbanization, leads to increased commercial traffic, congestion’s and hence pollution in areas with dense population. Many companies already introduce sustainable initiatives in order to reduce their ecological footprint both in terms of sustainable production and sustainable distribution. Simultaneously new electric power trains in vehicles provide an opportunity towards emission free transport. However, this new technology is mostly not considered within companies’ sustainable initiatives, yet.

The present paper presents key challenges of e-commerce and an approach towards sustainable urban logistics by using electric vehicles and by further integration of all participants within the transport chain, which corres-ponds with companies’ sustainable initiatives.

2. E-Commerce and Its Challenges

E-commerce currently appears to be one of the fastest growing marketing channels for different kinds of prod-ucts and services for consumers. Buyers and sellers that engage in E-commerce retail trade are no longer

How to cite this paper: Schöder, D., Ding, F. and Campos, J.K. (2016) The Impact of E-commerce Development on Urban Logistics Sustainability. Open Journal of Social Sciences, 4, 1-6. http://dx.doi.org/10.4236/jss.2016.43001

stricted by store hours, geographic marketing areas, or catalog mailing lists. In Figure 1, it is expected that the global B2C e-commerce trades are going to reach the value of 2.356 trillion dollars and the percentage of the global GDP account for 1.61% in the year 2018, almost nearly twice with year 2013. According to the eMarke-ter’s forecast, Asia-Pacific, which just about 16% of the total population but account for as many as 46% of all digital buyers in the world, is now expected to become the leading region for e-commerce sales in 2015, representing a 33.4% share next year, compared to 31.7% in North America and 24.6% Western Europe (Figure 2).

Furthermore, due to the development of communication technology, mobile e-commerce and social media will rapidly gain in importance. Mobile traffic to e-commerce sites has increased from 3% to nearly 37% in the last four years. Social media is evolving in much the same way, in 2015, 5% of all online retail revenue is forecasted to be attributable to social media, representing a sizeable $ 14 billion [1]. Moreover, cross-border online shopping is worth $105 billion in 2013 with 94 million consumers regularly buying from overseas websites. By 2018, this will increase nearly 200% to $307 billion with 130 million cross-border online shoppers [2].

The reasons for the stated developments in online shopping are better prices, larger selection, convenience, and time savings [3]. However, because the online products is likely to be packaged individually and hard to re-turn them, a further increase of internet shopping will lead to more deliveries and an increasing freight volume in residential area. It may have some negative effects like congestion issues, environmental concern and traffic safety etc. To solve this problem, sustainable urban logistics solutions are required in the city centers [4].

Distinct from offline business models, e-commerce is characterized by higher interactivity, 24/7 availability and hence an increased importance of logistics processes. The logistical systems of many companies are not sufficient to manage the new challenges.

Figure 1. Global B2C E-commerce sales and percentage of GDP from 2013 to 2018 (in billion U.S. dollars) [1].

Figure 2. B2C E-commerce sales share worldwide, by region, from 2013 to 2018 [1].

• Fast and flexible deliveries: A positive delivery (or return) experience is essential in order to create cus-tomers loyalty to e-retailers. Concerns with delivery remain a barrier for consumers shopping online for physical goods, specifically when looking to shop cross-border. In addition, flexibility in delivery location and flexibility in delivery time slots are becoming increasingly relevant to consumers. Furthermore, tends to favor faster trans-portation modes can increase fuel consumption exponentially and may lead to inefficient utilized transport ca-pacities.
• Home delivery: The most important consequence of e-commerce is the changed sink of transport chains. Highly bundled shipments to retailers are substituted with far less bundled shipments to end consumers. There-fore, retailer and manufacturer will have to reconfigure their established logistics systems from consolidated shipments to small packages. This development is often criticized for causing increased traffic.
• Reverse logistics: The increasing challenge in reverse logistics today is the growth of returns resulting from the rise of e-commerce. In most countries, more than half of all online shoppers have returned an online purchase. The highest incidence is in Germany where 77% of online shoppers have made a return. The high return rate in Germany is favored by the fact that most returns are free of charge, especially in the fashion segment. As a result, e-commerce development cannot ignore efficient operations of reverse logistics [5].

The global trend of urbanization is aggravating the challenges in e-commerce. Due to the increased freight volumes, the majority of all sinks in e-commerce caused transport chains is located in urban areas. Smaller lot sizes and increased freight volumes are increasingly causing congestion and pollution in areas with dense population. Therefore, the general public demands to restrict the urban access of freight vehicles, resulting in a bottleneck for the further development of e-commerce. The logistics need a sustainable solution.

3. Sustainable Supply Chain Practices

Using the Framework for Managing Sustainable Supply Chain Practices [6] as a background, data from six companies were collected in order to better understand which strategies and practices have been implemented to overcome the sustainability challenges into their logistics processes caused by e-commerce operations (Table 1) . The selected companies are included either in the Newsweek Green Ranking or in the Global Social Ranking, representing, thus benchmarks of the consumer goods industry. Information about companies’ practices towards a more sustainable supply chain was searched in their website as well as available free self-publications [7].

The findings provided some interesting insights about the current behavior of companies from consumer goods industry, especially the lack of certain investments that might result in more sustainable operations when considering the challenges intensified by e-commerce. The first finding was a lack of collaborative initiatives with suppliers, despite the fact that the selected companies invest significantly in supplier selection and assess-ment practices such as requiring them to comply with specific sustainability guidelines. Some changes were visible such as the use of “nearshoring” or “backshoring” which means to return operations to their home country or closer to home [8]. This strategy helps reducing costs and overall emissions from inbound transport. Fur-thermore, practices related to the governance were vast. All companies have clear environmental and social standards such as code of conduct, and manage sustainability though specific departments or cross functional committees. The investments in employees’ training, reward systems according to their results and social corporate benefits were extensively reported. Most of the companies are internationally certified which might require

Table 1. Researched companies.

	Company	Headquarter	Main products	Main documents used
				Sustainability Progress Report 2013 ,
	Adidas	Germany	Sportswear	Health & Safety Guidelines 2010,
				Guide to best environmental practices 2005
	Beiersdorf	Germany	Cosmetics	Sustainability Review 2012
	Bayer	Germany	Medicines	Integrated Annual Report 2014
	Henkel	Germany	Cleaning and beauty care products	Sustainability Report 2014
	Natura	Brazil	Cosmetics	Natura annual report 2013,
				Annual Report 2011
	BRF-Brasil Foods	Brazil	Food and beverage	Annual Sustainability Report 2014

the establishment of measurement systems capable to measure risk and safety, as well as control the KPIs and internal improvement targets. As operations are enlarged due to e-commerce trade, customers are demanding more transparency in companies’ operations. A well established, corporate governance system help firms to standardize procedures, increase control and therefore meet the demands.

Procurement initiatives focus on obtaining sustainable materials and packaging, specially recycled and reusable ones. Some countries require packaging to be designed for recovery and reuse, with a minimum recyclable rate. Others entirely ban or restrict certain materials, such as United States and South Korea. Regarding production management, all companies are investing in developing more sustainable solutions. However, they seem not to invest in involving customers during this process. Efforts to reduce overall consumption, including energy and water, as well as attempts to use of alternative energy sources were cited by the researched firms. Lastly, after products are ready to be delivered, it was clear that these benchmarks from consumer goods industry are not considering the distribution process and even less the last mile as an opportunity for reducing costs, emissions and improving supply chain sustainability. Initiatives related to network design; transport modes, equipment, vehicles and overall distribution processes were considerably few. Except for investments in greener constructions, none of the selected companies seems to be involved in processes that are mostly outsourced for logistics service providers (LSPs). Beiersdorf was the only company that published some efforts to optimize container loading, truck capacity utilization and transport routes. According to the company’s website, since June 2012 truck utilization has dropped by 27% and CO₂ emissions by 32%. The company seems to be one step ahead the others as it uses the collaborative platform together with some carriers for reporting CO₂ emissions and standards for the monitoring process.

As described previously, e-commerce is requiring companies to deliver products faster and closer to the customers, in other words, in urban centers. Changes towards less pollutant modes or vehicles could be supported and encouraged by manufacturers, through a combined investment and benefits sharing culture. In an attempt to im-prove network and processes optimization, collaborative approaches may improve simultaneously service quality and profit to all members. The reverse logistics problem, intensified by e -commerce, may be also solved with alternative solutions which may not require governmental strict changes in regulations.

4. Urban Logistics and Electric Vehicles

The recent technological developments in electrifying automotive power trains are largely caused in political decisions to reduce GHG-emissions caused by traffic. Currently, 18% of global GHG-emissions are caused by the transport sector [9]. Pollution, especially in urban areas, is becoming a global challenge and is increasingly affecting the quality of life—the so called urban well being—by urban residents. The e-commerce caused challenges of increased freight volumes, reduced lot sizes and an increased number of delivery points (e.g. house-holds) can be overcome by a transport technology with zero (local) emissions. Various research projects have shown that the electrification of last-mile distribution is possible and has the potential to reduce costs of distribution [10]-[13]. In combination with modern tele matics technologies and an integration of those with order management and vehicle routing systems, the positive effects of electric vehicles (EV’s) have proven to increase dramatically [13]. This approach of an integrated, smart last-mile distribution results in a triple-win situation. At first, an improved service level for customers can be realized, trough more flexibility in terms of delivery loca-tion and time slots enabled by dynamic vehicle routing and improved communication with the customers. Secondly, electrified urban distribution is characterized by reduced vehicle operating costs, due to reduced maintenance and fuel costs. In fact, an increased utilization of EV’s leads to further savings in regard to transport costs per delivery. The third positive effect of electrified urban distribution is the already mentioned zero emission transport, especially in combination with dynamic vehicle routing which takes current congestion’s and traffic situations into account. A further potential of electrified urban distribution is risk reduction for the transport executing company by ensuring unlimited future access to inner city areas, despite increasing governmental initiatives to restrict access to city centers for vehicles with internal combustion engines. In addition, companies with a strong strategic focus on sustainable products are regarding EV and sustainable distribution as a unique selling proposition in the market. This development is likely to continue, especially in regard to the LOHAS (lifestyle of health and sustainability) trend in (yet mostly western) customers attitudes [14].

Various research projects have shown that the application of EV’s in distribution can cause a cascade of positive effects, but also allows restructuring entire distribution systems in B2B deliveries of consumer goods.

Night-time delivery of stores for instance, could reduce rush hour congestion’s in commercial transport because of the reduced noise of EV’s. In regard to the reduced operation costs of EV’s, new business models—e.g. in the CEP (courier, express, parcel) sector—with multi shift operations are possible. Despite all positive effects and potential new business opportunities, the implementation of an electrified urban distribution is a challenge for companies. Even considering future improvements in electric power trains and the possible utilization of EV’s in medium range distribution, the initial investments for companies into the needed infrastructure for EV will stay a hurdle. Conventional distribution with internal combustion engine powered vehicles currently possesses a system lock-in effect, which is even strengthening the hurdle. Latest experiences have shown that investments in charging infrastructure, EV’s and modern disposition tools are rather high, due to the current market prices of the mentioned items [11] [13]. But pioneer companies, such as DHL and UPS, who did these investments in electrified distribution start experiencing the above explained benefits and state, that overcoming the system lock-in effect was worth the effort.

5. Conclusion

In recent years, e-commerce development has changed the retail sector. The increasing importance of this distribution channel leads to increased freight volumes—especially in urban areas—, hence to increased traffic and pollution within these areas. At the same time, sustainability is becoming increasingly important for the custom-er. Due to the growing environmental awareness in the society, companies are adopting this awareness by starting sustainable initiatives in order to measure and reduce their ecological footprint and to meet customers demand. Analysis have shown that most companies focus on internal process development and resource utilization in order to meet their sustainability goals, but a holistic and supply chain wide approach which includes suppliers as well as the distribution to the customer, is still rare. The utilization of new power train technologies and the integration of all supply chain participants by collaborative initiatives are two powerful levers to face the challenges of e-commerce in urban areas. Despite rather high initial investments in electric vehicles and the related infrastructure, this technology opens further possibilities towards a zero emission distribution in urban areas, hence meets the demand of the customers for faster and more sustainable transport. In addition, the reduction of transport related emissions is about to become a key element of companies’ sustainable objectives. Fur-ther more, a keen interlink between all participants of a supply chain as well as an integrated approach in fleet management and vehicle routing have the potential for more efficient logistics processes. The mentioned holistic sustainable approach will result in economic advantages for companies, ecological advantages by a reduction of traffic volume and advantages for the customer by an improved service level.

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Adoption & Use of Internet Banking in the Sultanate of Arab

Adoption and Use of Internet Banking in the Sultanate of Arab:An Exploratory Study

Abstract

The aim of this paper is to explore the drivers and inhibitors of customers’s Internet banking adoption in the Sultanate of Oman. Data from 225 respondents were used to address the aim. Our preliminary findings indicate that, in Oman, only two banks offer Internet banking services to customers. The main drivers of adoption appear to be compatibility, usefulness and ease of use. The extent of use is affected by lack of government support, poor quality of connection and page loading speed. Trust and face -to-face personal banking preference have been found as major inhibitors of IB adoption. Some preliminary implications for practitioners are highlighted.

Introduction

The Internet is transforming the banking and financial industry in terms of the nature of core products and services and the way these are packaged, proposed, delivered and consumed (Sathye, 1999). Subsequently, consumers’ adoption of Internet banking (IB) has received significant research and practitioners attention (Al-Ashban and Burney, 2001; Guru et al, 2000; Polatoglu and Ekin, 2001). In this paper, we explore the factors that affect Omani consumers’ adoption and use of IB.
The National Bank of Oman (NBO) pioneered the Sultanate’s first Internet banking service in February 2002. Bank Muscat (BM) followed suit by launching online service in June 2002. As of September 2003, these two banks are the only banks providing IB services in Oman. However, other banks such as Oman International Bank, Oman Arab Bank, and Central Bank of Oman maintain an informational Website with basic interactive capability (Guru et al, 2003). 

 Theoretical Background

Adoption of innovation has a well-established research tradition. Rogers (1983) suggested five important characteristics of an innovation that influence its adoption. These are relative advantage, compatibility, complexity, observability and trailability. Subsequent studies have expanded this list and it is now possible to find as many as 15 items describing the characteristics of an innovation affecting its adoption. Davis (1989), on the other hand, used the theory of reasoned Action (TRA) and developed the technology acceptance model (TAM). TAM and TAM based studies posit that two sets of beliefs, i.e., perceived ease of use (PEOU) and perceived usefulness (PU) determine individual’s acceptance of a technology. While PEOU refers to the degree to which an individual believes that using a particular system would be free of physical and mental effort, PU is related to users’ perception of the degree to which using a system will be beneficial. In another related work, Ajzen (1985) developed the theory of planned behaviour (TPB) which was later decomposed by Taylor and Todd (1995) and posits that intention to adopt and use a technology is affected by attitude, subjective norms and perceived behavioural control.
The theories mentioned above informed most of the studies that looked into the drivers and inhibitors of consumers’ IB adoption and usage (Polatoglu and Ekin, 2001; Mattila, 2002; Tan and Teo, 2000). Some of these studies have also introduced perceived risk, trust, security and privacy concerns and IB cost structure as additional variables affecting consumers’ adoption of IB. We have used the findings and research instruments from previous studies as basis in conducting our research.

Research Method

Data were collected through a survey administered in Oman during September- November 2003. Based on the literature review, we developed a questionnaire containing 25 major questions and several items. Some of the questions use dichotomous scale whereas others use Likert type scale assessing the degree of agreement or disagreement. The questionnaire was initially prepared in English and later translated into Arabic by a professional translator. To ensure readability, we pilot tested the questionnaire with 16 users.
Our intention was to get as many responses as possible from customers with bank accounts but with or without IB experience; hence we followed convenience sampling to distribute the questionnaire. 500 bank customers were approached in three places, i.e., shopping malls, voting polls and bank branches. A total of 225 usable responses were collected.

Demographic Profile

The respondents’ demographic profile (Table 1) shows mainly young, educated group, employed either in the private and public sector. 78% of them have used the Internet. Therefore, the rest of the analysis will proceed with 175 dataset.
Table 1: Respondents demographic profile

		Frequency	Percentage
Gender	Male	135	60%
	Female	90	40%
Age	20- 35	147	65%
	36-50	50	22%
	>50	28	14%
Occupation	Public sector	101	45%

	Private sector	79	35%
	Others	45	20%
Education	Completed primary education	25	11%
	Completed secondary education	42	19%
	Diploma holder	51	23%
	First degree holder	73	32%
	Post graduate degree holder	34	15%
Monthly Income	<200	5	2%
(in Omani Rial,	200- 600	108	48%
1OR=$2.5)
	600-1200	91	41%
	>1200	21	9%
Internet User	Yes	175	78%
	No	50	22%

Internet Banking Adoption

Of the175 Internet users dataset, 85 (49%) are banking with the two banks- National Bank of Oman and Bank of Muscat- offering consumer IB services. However, only 25 respondents actively use Internet Banking. Table 2 shows the length of IB use and the most frequently used IB services of the 25 IB users.
Table 2: Internet Banking Use

		Frequency	Percentage
Duration of IB	< 6months	9	36%
use	6months ¨C 1 year	12	48%
	> 1 year	4	16%
Frequently used	Statement enquiry	22	88%
IB services	Utility payments	19	76%
	Loan application	12	48%
	Paying school fee	10	40%
	Debt or credit card application Inquires	10	40%
	and complaints	8	32%
	Fund transfer
		6	24%
	Bill payments
		5	30%

	Check book order	3	12%
	Card lost informing
		2	8%
	Check stop order
		2	8%
Frequency of IB	Daily	1	4%
use	Bi-Weekly	3	12%
	Weekly	6	24%
	Fortnightly	9	36%
	Monthly	3	12%
	Once in a while	3	12%
IB Access	Home	12	48%
	Work place	9	36%
	Public Internet access points	4	16%

Drivers of Internet Banking Adoption

We asked respondents who have adopted IB (n= 25) to express their degree of agreement or disagreement about the factors that motivated their decision on a five-point, 14 items, likert type scale. In addition, to identify the factors affecting intention of IB adoption, respondents banking with banks that are not offering IB but that have expressed interest to adopt IB, if their bank starts offering it (n=21) were asked about the same 14 items. The results are summarized in Table 3.
Table 3: Drivers of Internet Banking Adoption

	Adopters (n=25)	Intention to adopt
		(n=21)
	Weighted Mean	Weighted Mean
	score	score
IB is compatible to my banking needs	3.92	3.84
IB is easy to use	3.68	2.95
IB is a cheaper way to conduct banking	3.64	2.84
IB is self service	3.56	3.26
IB makes conducting banking transactions easier	3.52	3.63
IB is a convenient way to manage my finances	3.36	3.58
My family members are using IB	3.28	2.89

IB is compatible to my life style	3.24	3.79
My colleagues are using IB	3.24	2.84
My friends are using IB	3.04	3.05
IB offers greater control over my finance	3.04	2.53
Using IB is a sign of modernity	2.64	2.68
My bank offers additional benefits for IB users	2.32	2.79
My bank encourages me to use IB	2.00	2.26

Scale: 5=Strongly agree; 4= Agree; 3= Neutral; 2= Disagree; 1= Strongly disagree
Table 3 indicates compatibility, relative advantage and ease of use as the most important factors affecting IB adoption (intention to adopt). On the other hand, external influence in the form of peer pressure and supply push don’t appear to play a major role in adoption decisions. However, respondents who have adopted IB have indicated that clear government support and policy would motivate them to use more IB services than the one they currently use. In terms of actual benefit and constraints, while time saving (100%) and better service (40%) have been rated as the most experienced IB benefits, frequent interruption of connection (50%) and longer page-loading times (25%) are rated as the primary constraints affecting IB usage.

Inhibitors of Internet Banking Adoption

Inhibitors of IB adoption were identified from the respondents of the two banks offering IB services but that haven’t adopted IB (n= 60) and those that haven’t expressed interest to adopt IB even if their banks start offering one (n= 69). Table 4 summarizes the results.
Table 4: Inhibitors of Internet Banking Adoption

	Non Adopters	Intention not to
	(n=60)	adopt (n=69)
	Weighted Mean	Weighted Mean
	score	score
I am concerned about the security of IB services	4.7	4.6
I don’t trust IB services	4.5	4.8
I am concerned about the privacy of IB services	4.0	4.7
My bank doesn’t offer incentive to use its IB service	3.8	—
I don’t know how to use IB	3.8	3.8
My bank is conveniently located	3.5	3.1

I prefer personal and face to face banking	3.4	4.7
My bank doesn’t offer training to use its IB service	3.7	—
IB is not relevant for me	3.1	3.7
My bank doesn’t offer IB	2.7	3.4

Scale: 5=Extremely Important; 4= Very Important; 3= important; 2= Less important; 1=Not important

Discussion

The findings of the study indicate that IB in Oman is in its early stages of development. In addition, Omani customers appear to make their IB adoption decision based on its compatibility, usefulness and ease of use. This result is consistent to the findings of previous studies. Hence, the combination of diffusion of innovation theory (Rogers, 1995) and technology acceptance model (Davis, 1989) seems to be applicable in the context of Oman. The implication for practitioners is that they need to sensitise and educate customers about the what, how and why of IB.
The extent of IB usage in Oman appears to be influenced, among other things, by the quality of connection and access. For banks offering IB (and those that consider it in the future) this implies that their Websites should be reasonably simple and less graphics- intensive. Another issue affecting level of usage is the perception of government support. In Oman, the value of information and communications technology in national development is well recognised. This is reflected in the sixth development plan, which among other things, set up Oman’s information technology task force. Hence, the government need to be very vocal about its plans and intentions.
Perceived security and trust have emerged as the top issues inhibiting IB adoption. Banks along with the government need to address the perception of risk and build the confidence of customers in Internet use in general and IB in particular. Preference of face-to- face persona banking is another inhibitor of IB adoption. This could be due to either lack of awareness or the contextually rich nature of Omani’s culture. Hence, banks should make their IB sites as customer friendly as possible and develop relevant marketing strategy to win the trust of customers.

Conclusion

Internet Banking is still a relatively recent phenomenon, especially in Arab countries (Guru et al, 2003). A number of banks in Oman are considering going on-line. However, the wider diffusion of IB and its business value depends on customers’ IB acceptance. In this study, we have illustrated some of the factors that drive and inhibit IB adoption and that affect its usage
The relatively short history of Internet Banking in Oman and the limited sample size of the study don’t allow generalization of the results. Hence, our findings could only be considered as preliminary and should be explored further with a more rigours study.

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