Tuesday, November 26, 2019

econlife - The Hidden Side of Amazon Prime by Elaine Schwartz


Last week I realized that I immediately needed a tiny stapler. So, like you probably would have done, at my kitchen table, I spent $5.95. Two days later, Amazon Prime deposited the stapler (with 100 staples) on my doorstep.

My decision involved so much more than instant gratification.

Amazon Prime Problems

With the average Prime member placing two orders a week, Amazon wouldn’t want to curtail our impulsive shopping. Instead, almost 1.25 million U.S, shipments (2017) directed their attention to packaging and transport:





Packaging

Because of multiple Prime orders, Amazon has had to think more about packaging. Recognizing some customers’ “wrap rage,” they are using more bubble envelopes. Aware that the excessive space occupied by smaller inexpensive items increases transport costs, they’ve been developing algorithms that match box size to contents to avoid “over-boxing.” And they want manufacturers to know that online packaging needs to be compact rather than attractive.

Transport

In addition, Amazon reputedly wants us to bundle our items. If we choose one “Amazon (delivery)  Day,” then they can combine what we order. Similarly, those Amazon stores and “lockers” are a single destination for many purchases.

Environment

Then, to all of this, we can add environmental concerns. My new mini-stapler brought a white van with the delivery to my quiet neighborhood. Then, further adding to congestion and pollution, Prime requires a fleet of medium and large trucks. But it’s not that easy. To truly know an environmental impact, we shouldn’t forget how many trips we make to comparison shop before placing an online order, the volume of orders in our area, the parking spaces, whether the trucks are “stuffed.”

This is an Amazon NYC delivery during last February:




Our Bottom Line: Externalities


Defined as the impact on an uninvolved third party, an externality can be a plus or a minus. It can be positive or negative. A vaccine is the perfect example of a positive externality. When someone gets a flu shot, the transaction is between patient and doctor. But many of us benefit because that individual does not get sick. On the negative side, we could cite the loud music in a dormitory that stops a faraway student from studying. The music is the negative externality that leads to a low grade for an unknown individual.

Somewhat similarly, Amazon Prime generates externalities that range from the time we save to the orders we create for corrugated boxes. In ways that are rarely obvious, they affect us, other businesses, and our environment.

My sources and more: These WSJ articles, here, and here, were the perfect complement to Vox, here and here and to a Fast Company look at Amazon Prime. The article that I found most fascinating though was on urban congestion from Wired.

Please note that my externalities definition was in a past econlife.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.