E-commerce companies, like Amazon, have allowed Marylanders to shop online for products ranging from airline tickets, books and music to clothes and even cars. Not only do customers have access to a large variety of products, but they can get them at cheaper prices.
Rather than traveling from store to store to search for a product with the right taste, size and price point, customers can easily find and buy these products with a click on a website or swipe on their phone.
Services like Amazon’s two-hour delivery reduce customers’ need to dash to the nearest store when they run out of dishwashing liquid or toilet paper. Instead, a touch of Amazon’s Dash button can start the delivery process.
Thanks to such fast delivery services, customers no longer need to choose between their need for instant gratification and getting the right product at the cheapest price, since they can have it both ways. Quintessential modern-day American experiences like a weekly trip to the nearest grocery store are slowly being eliminated by services like Peapod and Amazon Fresh.
Similarly, services like OrderUp, Grubhub or Amazon’s restaurant delivery service help us enjoy restaurant meals within the comfort of our homes.
Doing It Online
In addition to increasing shopping convenience for customers, the digital economy has transformed the business landscape since the beginning of the millennium. A few companies, like Blockbuster and Circuit City, misjudged the potential and were lost in the rising tide of the new economy; others, like Barnes & Noble and Best Buy, had to reduce their retail presence due to economic pressures. The changing economy has caused several Baltimore stores to close, most recently a Walmart Supercenter location in Port Covington.
The news is not all gloom and doom, however. Companies like Warby Parker, Harry’s, Blue Apron and Trunk Club are providing niche products to customers through online sales. Larger firms, like Baltimore’s own Under Armour, have an online presence, allowing them to sell their products across the country.
From a logistical standpoint, it has never been easier to start a new company. With an innovative product idea, an entrepreneur can set up a website, market products through social media outlets and deliver to customers within a matter of weeks if not days.
E-commerce has changed the service sector as well. Baltimore’s high population density makes it a perfect environment for shared services like Uber, Lyft and Airbnb. These services have increased opportunities for self-employment and have enabled Baltimoreans to be part of the economy and have flexible work schedules.
While these are the more visible, immediate effects of the digital economy, there is a quiet transformation happening in the back end of many supply chains. Warehouses, like Amazon’s fulfillment center off Broening Highway, are being automated to perform daily operations. Using robots to pick products stored across a million-square-foot warehouse can considerably reduce lead time. Customer orders can be received and products can be picked from shelves, packed and shipped within an hour or two, instead of the usual three-to-four days. In addition, the new warehouse created jobs in Baltimore.
The next few years hold some exciting changes in the world of transportation. The Panama Canal is undergoing expansion to allow for larger ships, increasing the potential for ship traffic to Gulf shores and eastern ports. Anticipating these changes, the Port of Baltimore expanded to become one of two ports equipped to receive these ships. This has the potential to increase employment opportunities in the area.
Compounding the changes are autonomous vehicles and drones, technologies that sound futuristic, but are really just around the corner. Driverless trucks are the most visible example of the economic impact of autonomous vehicles, with companies like Volvo leading the way. Current laws restrict truck drivers from working long hours and require them to take breaks before getting back on the road. In addition, there are speed restrictions imposed on the trucks to maximize fuel efficiency.
Even with these laws in place, there are numerous accidents reported every year. Driverless trucks have the potential to reduce costs and increase road safety. Truck speeds can be reduced considerably to increase fuel efficiencies. Without driver restrictions, these trucks can be on the road longer to make up for reduced speed.
Although these technologies can increase trucks’ efficiencies and reduce their carbon footprint, they can have an impact on 41,000 truck drivers in Maryland and about 1.6 million drivers in the U.S.
Getting the Goods
Delivering products to customers’ doorsteps (last-mile delivery) has been a difficult problem for many companies. Over the years, companies like UPS, FedEx, DHL and the U.S. Postal Service have invested resources and technology to solve this problem. Companies such as Amazon, which are dependent on these services, have experienced a double-digit increase in delivery costs during the past few years, prompting them to start their own delivery services.
Recently, both Amazon and Google have announced plans to develop drone technology to deliver products to customers. With 86% of packages delivered by Amazon weighing under 5 pounds, drone technology has a huge potential for cost savings.
These developments can dramatically change the transportation landscape in the next few years. Policymakers in Maryland will need to be ready for these changes so that they can increase employment opportunities for our citizens.
Ravi Srinivasan is an assistant professor of operations management for Loyola University Maryland’s Sellinger School of Business, which has a campus in Columbia. He can be contacted at 410-617-5484 and [email protected].