6 ■ Transportation Research Record 1763 Paper No. 01-2802 The advent of the Internet and e-commerce has brought a new way of marketing and selling many products, including books. The systemwide effects of this retailing shift on costs and the environment are still unclear. Although reductions in inventories and returns provide significant envi- ronmental savings, some major concerns of the new e-commerce business models are the energy and packaging materials used by the logistics net- works for product fulfillment and delivery. This study analyzes the dif- ferent logistics networks and assesses the environmental and cost effects of different delivery systems. The definition of analysis system boundaries determines the overall assessment of economic and environmental effects of e-commerce for book retailing. With a return (remainder) rate of 35 percent for best-selling books, e-commerce logistics costs less and has fewer environmental effects, especially if private automobile travel for shopping is included. Excluding the need to return books, costs and environmental effects are comparable for the two delivery methods. Shopping via the Internet [i.e., business-to-consumer (B2C) retailing] is increasing rapidly. In the fourth quarter of 2000, retail e-commerce sales were up 70 percent, yet represented only 1 percent of total retail sales (1). It is tempting to assume that selling products via the Internet benefits the environment. For example, emissions from vehicles driven to shopping malls can be avoided, retail space can be decreased, and inventories and waste can be reduced. However, a product ordered online may be shipped partially by air- freight across the United States and require local truck delivery. Also, the product is likely to be packaged individually, and the packaging may not be reused. The adverse environmental effects of such trans- portation can be significant, and the net effect of different logistics systems is not obvious (2). The book publishing industry is an excellent industry to study when assessing the environmental effects of e-commerce. Books are regularly purchased online as well as in retail stores. The high num- ber of remainders (books that remain unsold) also makes the pub- lishing industry an interesting case study. After sales have peaked, these remainders are either discarded, recycled, or sold to discount bookstores. Selling books by e-commerce allows for lower invento- ries (because there is only one inventory point) and a smaller num- ber of remainders, thus benefiting the environment by avoiding book warehousing and paper production. The environmental implications of e-commerce have not received much attention to date, at least relative to the economic and social implications of this new commercial paradigm. E-commerce warrants attention because of its widespread effects and its susceptibility to cor- porate and public policy. Further, there are potential implications from business-to-business (B2B) e-commerce systems as well. For exam- ple, the movement toward virtual warehousing has large potential in environmental benefits as companies outsource such processes to companies with more efficient economies of scale (3). COMPARISON FRAMEWORK Two generic models of logistics networks are considered in this case study. First, traditional retailing involves selling a book through a brick-and-mortar retailer (e.g., a mall bookstore). A book is shipped from the publisher through various distributors and warehouses and finally to a retail outlet. The customer purchases the book at the retail store and brings it home. Second, the e-commerce model involves shipping a book from a publisher to a single warehouse by truck and then air freighting to a regional airport or hub, from where it is transported by delivery truck to the customer’s home. The monetary costs incurred in each model are evaluated first. The calculations are based on the comparative costs in selling $1 million worth (at production) of books, or approximately 286,000 books at an assumed production cost of $3.50 apiece. Each book is assumed to be 23 × 6 × 16 cm in size (9 × 2.25 × 6.25 in.) and weigh 1.1 kg (2.4 lb). Remainders are especially significant for best-sellers because of the extra volume of books printed, and the calculations focus on the costs associated with best-sellers. The environmental effects of each of the logistics models are estimated. TRADITIONAL RETAILING METHOD The traditional method of retail, by which books are sold through retail stores, can be modeled as a series of transport links among organizations and facilities, as shown in Figure 1. The books are transported from the printer to a national warehouse and then shipped again to a regional warehouse. From the regional warehouse, the books are transported to a retail store, and a customer purchases a book and takes it home. Also, there is a return link for unsold copies, because some 35 percent of best-sellers are not sold (4). An assumption of the model for this method is that all transporta- tion is by truck in the traditional distribution network. The distance between all destinations (e.g., warehouses and stores) is assumed to be separated into 805-km (500-mi) segments. Thus, the model can be easily adjusted for different distances. The average consumer lives 16 km (10 mi) away from a bookstore (5). However, as con- sumers tend to buy more than one item at a bookstore (or as part of a Environmental and Economic Effects of E-Commerce A Case Study of Book Publishing and Retail Logistics H. Scott Matthews, Chris T. Hendrickson, and Denise L. Soh H. S. Matthews, Graduate School of Industrial Administration, and C. T. Hendrickson, Department of Civil and Environmental Engineering, Carnegie Mel- lon University, Pittsburgh, PA 15213. D. L. Soh, Department of Mechanical Engineering, Stanford University, Stanford, CA 94305.