E-commerce has been a major driver of supply-chain changes in the past two decades, growing from 1.3 percent of retail sales in 2000 to 14.2 percent in 2019.3 As consumers became more accustomed to buying everything from clothing to furniture online, leading companies developed new supply chains to reduce arrival times, from a week or more to same-day deliveries. This is not only an Amazon story—many other retailers have matched each service improvement.
These changes atomized traditional retail supply chains as the emphasis shifted toward small deliveries to homes. Recently, retail shipments under 50 pounds (suitable for parcels) have increased by nearly 5 percent a year while those over 1,000 pounds have stagnated. Shorter delivery times also created a need for more warehouses—often smaller than they had been in the past and located closer to the homes of consumers. Average warehouse sizes have fallen by 9 percent since 2016 and trucks’ average length of haul by 25 percent over ten years.
Meanwhile, reverse logistics has become an increasingly important part of supply chains; consumers return about 30 percent of online sales, versus about 8 percent for brick-and-mortar locations.
COVID-19 has prompted the even faster adoption of e-commerce, for consumers have had to shift nearly all nongrocery purchases (and even many of them) online. While some of these will probably shift back to in-person transactions as the economy reopens, two data points indicate that e-commerce as a whole has runway to continue growing. First, international comparisons suggest, for example, that by Chinese standards—25 percent of retail sales—e-commerce is actually underpenetrated in the United States. Second, the growth of e-commerce did not slow down after 9/11 or the global financial crisis (Exhibit 4). The freight trends sketched above should continue in the years ahead.