The Hidden Geography of Ecommerce
Why Geography still matters when everything is online
With lockdowns and restrictions occurring all over the world due to Covid-19 we have seen an acceleration in the trend towards online, whether that is online meet ups, at home working online, or online shopping. While it may feel like these trends are resulting in shifts away from physical formats, such as office spaces, stores and cafes, the shift towards online still is still affected by geography in a variety of ways. This is especially so in the case of ecommerce, notably in the grocery sector whereby access is still heavily mediated by the physical infrastructure in place.
Firstly, geography affects the level of access you have to the internet. As it stands, access to the internet is still mediated by physical, on the ground infrastructure which can affect the strength and the consistency of the internet you have. While this may no longer be an issue in the future when access to the internet is provided by satellites which can be accessed all over the world (see Google’s Loon project or Space X’s starlink), we are not there yet. This may not be a problem if you are in some of the big cities of the UK, such as London, Manchester and Birmingham, which all benefit from superfast fibre broadband, this level of connectivity still does not stretch across the entire country. This can especially be seen in more rural areas and smaller towns where the costs of the infrastructure have so far prohibited going into these areas with superfast internet, or in some cases even moderately fast internet greater than 2Mb. Consequently, if you don’t have strong, consistent access to the internet, you may be unlikely to utilise it for things such as shopping whereby you can travel to the nearest store and you know what you will get consistently.
This is also mediated by the infrastructure that ecommerce platforms operate. While the golden triangle in the UK, in between Leicester, Coventry and Milton Keynes is where multiple firms have large logistics warehouses, whereby a lorry driver would be able to reach around 85% of the UK population within four and a half hours drive time (the maximum time a HGV driver can go without taking a break), not all firms have this infrastructure in place [1]. Furthermore, even if firms do have this infrastructure in place there is still the issue of being able to deliver the products to peoples homes or businesses whereby you don’t often get the large HGV lorries travelling down a residential street to deliver a top from Boohoo or Topman. This has led to the development of a hierarchy of delivery systems whereby firms operate large warehouses, such as those located in the golden triangle, whereby goods are then delivered to regional hubs. Depending on the company and the product, these regional hubs can be the final stage before delivery to your home and business, or there can be further local delivery hubs. This can be seen in the case of small scale local delivery systems, such as Amazon taking space in a city of London car park to be able to deliver packages the ‘last mile’ by modes such as electric scooter or bike [2], with small scale transport increasingly being utilised to increase efficiency in the delivery system.
This is especially a problem for businesses that operate in markets where goods are perishable and must be delivered in a timely manner such as in the grocery sector. This has meant that in this sector at least, there is a reliance on existing built infrastructure to service ecommerce demand. This can be seen in the presence of click-and-collect drive in attached to brick-and-mortar stores, or delivery services that allow you to purchase goods that are available in your local store. In some cases you will see workers going around the store, at the same time as normal consumers, filling up baskets to serve these online orders. This reliance on brick-and-mortar stores can even be seen in Amazon’s foray into physical built stores for its grocery arm in the US whereby people can shop just like in a normal grocery store. While there has been the development of some ‘dark stores’ that are purposively built to meet online demand and don’t serve any in person customers, these are still the exception rather than the norm and this is unlikely to change anytime soon. Thus, your access to grocery ecommerce is still linked to the geography of physical stores.
There has also appeared two competing theories as to how geography may influence who interacts with ecommerce platforms and why: The efficiency theory and the innovation diffusion theory [3]. The first of these theories suggests that people at the greatest distance to physical stores, in most cases those in rural communities, should be more likely to utilise ecommerce. This is because, if they want access physical stores then they would have to travel a long distance, spending both time and money travelling to these places. Hence, for these individuals, access to ecommerce would save that time and money cost of travel, shifting it onto the company you are buying from, and hence increasing your own efficiency. This is compared to those who live in urban areas who live in close distance to shops and so their cost of visiting these stores is much less, so they have less to gain by utilising ecommerce. Thus, in theory the majority of ecommerce users should come from inaccessible areas.
However, the innovation diffusion theory argues that, with ecommerce still being a relatively new technology as the majority of the population still do not use ecommerce channels consistently (although this is changing rapidly), then its use should follow the typical trajectory of new innovations. This is such that uptake occurs in larger cities across the country as these are the places whereby people get access to new innovation first, either because they were invented there or because they have a much larger market and thus providing a high marginal profit line. As such, access and use of innovations would spread from large cities to peripheral areas over time, meaning that the first customers should be those located in large cities, with people living in rural or peripheral areas not accessing this until much later. Thus, the majority of ecommerce users should be located in the city.
There is ambiguous evidence as to each of these theories as multiple papers have found evidence in favour of either one. To definitively separate these out it would take a longitudinal study covering a variety of industries, which has yet to be undertaken. However, both of these forces are likely to remain in play as ecommerce continues to grow.
So geography still has a key role to play in the development of ecommerce. As the current pandemic accelerates the trend towards the online platform for shopping, it is likely to accelerate the construction of infrastructure to support this, creating its own geography, but geography is still likely to play a key part in its future.
[1] Moore, R (2018) A shed the size of a town: what Britain’s giant distribution centres tell us about modern life, The Guardian
[2] Brashaw, T (2021) The pandemic tech boom is reshaping our cities, Financial Times
[3] Hood, N; Urquhart, R; Newing, A; Heppenstall, A (2020) Sociodemographic and spatial disaggregation of e-commerce channel use in the grocery market in Great Britain, Journal of Retailing and Consumer services
