What to do about Sustainability in Retail.

By Andrew Smith | Apr 22, 2021 | 0

I’ve written before about how being a retail strategist involves spending a lot of your time feeling dizzy. Being spun around by constant disruptions and trends coming from competitors, other industries, consumer expectations, and employees.  Last year it was all about logistics.  Who can deliver the fastest and for free?!  Now, in a time where the new administration is not only re-focusing but massively increasing the ambition for sustainability in the US, the calculation shifted from being about customer experience in speed, to the massive environmental cost of it.

The average online purchase of a traditional shopper releases 3.1kg of carbon dioxide equivalent[ii]., with this doubling if a purchase is returned. Approximately 15 to 40% of online purchases in the US are returned[i].  With over 2 billion online purchases in 2020, that equates to a minimum of 620,000 tons of carbon dioxide (that would require 31 million trees to offset) and we’re not even counting the returns in that figure[ii].

So, with momentum building from government, employees, and consumers, what does this all mean for how retailers should be focused on sustainability? (Warning: a heap of data is coming your way, but totally worth it for the conclusion.)

 

IT’S VALUABLE: The shift of the consumer calculation.

Analysis by Food business news shows that the sustainable product sales in the United States stand to grow significantly in 2021. From the projection, the expenditure would hit $150 billion by the end of 2020. The study also found that 48% of the United States consumers intend to change their consumption habits to adopt responsible habits[iii].

It’s also worth noting that it has been building longer than people think, with relatively consistent growth since 2014.  We also predict a growth spike will happen in 2021 and 2022 exacerbating the trend. Here is a pretty graph:

Figure 1: Sustainable product sales in the United States since 2014.

 

IT’S WHERE GROWTH LIVES: The over-achiever in growth numbers.

An analysis of the sustainable market index by New York University (NYU) Stern, indicates that while the sustainability market products took up 16.1% of the market, the products were 54.7% of the consumer packaged goods (CPGs) market growth level from 2015[iv]. This highlights the staggering fact that the purchase of sustainable products has registered a 7.1 times faster growth rate compared to products that were not marked to be sustainable. Those smart humans at Stern also found that the growth occurred even though the products enjoyed a significant price premium of 39.5% compared to other products that were not branded sustainable[v].  That’s a whole lot of value.

 

IT’S GOING TO IMPACT EVERYONE DIFFERENTLY: The different definitions of sustainable.

Figure 2: Projected market for sustainable products by the year ending 2021

 

The very fun graph above shows the forecast market value of the various categories in 2021.  You’ll notice that the trends are impacting different categories in different ways.  A big chunk of the reasoning behind that is likely the availability of sustainable alternatives in the market as well as their accessibility (both geographically and affordability).

On top of that, the state of sustainable market report shows that the value of the sustainable product is largely influenced by the size of impact the unsustainable product has on the environment.  In other words, a product that does not extensively affect the environment does not create as large a market for sustainable alternatives as those that are perceived to have a large impact (seems obvious, I know, but having objective data to help us is always a good thing).

 

SO WHAT TO DO ABOUT IT: Riding the sustainability wave.

It’s earth day, and we see a seasonal uplift in sustainable purchases as it remains top of mind for consumers this month.  However, that seasonal curve is flattening as it is clearly remaining a consumer choice more permanently.  Becoming sustainable isn’t easy either, though.  It isn’t just a case of changing your packaging to recycled materials and coloring it green (although many try that).  It must exist across the product, marketing, and operational elements of your brand, which can be incredibly daunting.  To help, break it down by evaluating what matters the most to your brand and your customers, and then choose initiatives that will deliver in a genuine way.   (Remember the 10% recycled toilet paper that claimed to be sustainable, yeah, don’t be them).   Firstly, here are some steps to take immediately that can help you define your direction in sustainability.  After that I will share some ideas about where to start.

  1. Workshop to find out the areas of sustainability that are relevant to your business. It could be product manufacturing, logistics and returns, energy consumption,  sourcing, technological infrastructure, anything that are areas of opportunity to improve.
  2. Find your ambition. Within the areas that are relevant to you, what are your baseline metrics for each of them.  Don’t choose an ambition out of the air, as tempting as it may be to say “50% reduction!”.  Focus on effort first.  Take each of the areas and workshop hypotheses on how you could positively impact them.   Then put a size of impact estimate on each hypothesis.  The sum of those should then help you create your ambitions.
  3. Test the hypotheses and see what’s possible. Nothing helps you feel confident about which ideas to pursue than those that are well tested, proven, and follow the golden rule (adds value to your business, adds value to your customer, and is aligned with the purpose of your brand!).  This will then form your sustainability pipeline. Good on you! Progress!

 

BUT I WANT AN OOMPA LOOMPA NOW, DADDY?!: How to take immediate action.

            I get it, I’m a retailer too, and I know that we never get today back.  So here are some areas of low-hanging fruit that can be implemented immediately to support growing your sustainable retail brand.

  1. Returns – simple as it is, if you reduce returns, you reduce your carbon footprint. 15-40% of online purchases are returned, which requires shipping and packaging and energy.  Reduce those and you can make a big dent (and improve your customer experience!) If you need help, find help. Brands like newmine (newmine.com) are focused entirely on this.
  2. Go paperless – it’s 2021! Paperless is possible but requires change and support. But plenty of brands have done it, and there is no reasons yours can’t be one of them.
  3. Packaging – simple, but effective. Look at not only how you can use recycled materials, but also how your package can be reused by your customers.
  4. Customer choice – offer customers the chance to offset their shipping or do it for them and let them know how you did it. It is a simple, but effective way to build sustainable trust, and do some good for the planet as well.  There are plenty of companies out there who help with that, check out Cloverly (cloverly.com) for one.   Choice can also expand, though, into realms like secondhand goods, or damaged packaging, that reduces waste.

 

Andrew Smith is the co-founder and Managing Partner of ThinkUncommon, a retail innovation consultancy that helps retailers with the process of innovation so they get more done, faster.  

[i] Finding a fix for retail’s trillion-dollar problem: Returns (cnbc.com)

[ii] https://ctl.mit.edu/sites/ctl.mit.edu/files/library/public/Dimitri-Weideli-Environmental-Analysis-of-US-Online-Shopping_0.pdf

 

[iii] Food business news

[iv] Stern NYU

[v] Stern NYU

Leave a Reply

No matter your innovation quest, say hello and let’s share stories of our adventures.

We work with retailers and providers big and small, and with individual leaders wanting to embark on an innovation quest. Start by simply saying hello.

What are you looking to make happen?

  • Let's Go

Login

Register

Already registered? Log in here

Please enter your email address, we'll send password reset instructions to the email address associated with your account.