Capital Ideas Blog

Black Friday, green Monday?

By Hal Weitzman
November 21, 2012

From: Blog


With Black Friday and Cyber Monday almost upon us, Jerry Storch, the CEO of Toys R Us, gave an interview to the Financial Times this week in which he slammed the notion that online shopping is less environmentally damaging than driving to the mall.

"[People are] just so enraptured with how cool it is that they can order anything and get it brought to their home that they aren't thinking about the carbon footprint of that," Storch told the FT. "But I do think that that will change … Driving a truck down a country lane in rural Connecticut to deliver a package is hardly the greenest way of product delivery to occur."

While academic research on the issue is not conclusive, the FT cites 2009 studies from Heriot Watt university in the UK and Carnegie Mellon, both of which suggest online shopping is more environmentally friendly.

Pradeep Chintagunta, the Joseph T. and Bernice S. Lewis Distinguished Service Professor of Marketing at Chicago Booth, has done his own calculations, which may make uncomfortable reading for Storch.

In a paper on grocery shopping habits co-authored with Junhong Chu of the National University of Singapore Business School and Javier Cebollada of the Public University of Navarra (and partly funded by Booth’s Kilts Center for Marketing), Chintagunta notes that online shopping orders tend to be much larger than the amount purchased in the average supermarket trip. Because online shoppers tend to take advantage of the fact that someone else will carry their heavy items into the house, they tend to buy in bulk online, so that one online order is equivalent to 3.5 in-store shopping trips by basket size.

Moreover, Chintagunta and his co-authors reckon it is reasonable to assume that a delivery truck can fulfill 20 online orders. The smaller carbon footprint from online grocery shopping would be significant, they suggest. While the 3,556 Spanish households in their sample made 5,721 online shopping trips, the authors reckon that they would have had to make 20,024 supermarket visits to buy the same amount of groceries. If only half of those were car trips (since many shoppers would use public transport), that would still be more than 10,000 individual car journeys, compared to 286 delivery truckloads.

Admittedly, Chintagunta and his co-authors assume that such trips to the supermarket are not combined with other activities that require using the car. They also note that theirs is a “back of the envelope” calculation. Still, the figures are compelling. Toys R Us (whose website offers free shipping) might want to think again before playing the green card in his battle with online rivals such as Amazon.

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