Delivering Sustainability: what can brands & retailers do?
The truth about shopping:
“Traditional offline shoppers have a carbon footprint of almost twice that of online shoppers.”
For new generations (millennials and generation Z) the impact of climate change and practicing sustainability is more important than for (most of the) generations before them. People are becoming more conscious about the products they consume. There have never been as many ‘green startups’ as there are today. Also, brands are shifting rapidly towards carbon neutrality and (most) governments are working on climate goals.
At the same time, consumer behavior is also highly driven by a bias of instant gratification. This seems to be more important (or stronger) than their consideration for the environmental impact of their purchase. People want it all, and they want it now.
It’s an interesting paradox. Brands launch initiatives to become more sustainable, while at the same time they’re delighting their customers with many options. For example: super-fast (instant) delivery, excessive packaging, and ‘try before you buy’ schemes that are only encouraging consumers to return (parts) of their delivered parcels.
But what if we could both delight customers AND be responsible for the planet? To understand the environmental impact of delivery, we’ve explored how sustainable our current methods actually are. How could the e-commerce industry (further) adapt to an increasingly conscious market?
Is online actually the most sustainable way to shop?
It is widely reported that online shopping is more efficient than doing purchases offline. After all, the environmental cost of 30 customers (and potentially 30 cars) traveling to a store compared with one vehicle delivering 30 items directly to the consumer seems pretty straight forward. However, customer shopping and browsing behavioral patterns are actually far more complex.
How sustainable is our shopping behavior?
Consumers’ buying journeys are more fragmented than ever before. A great study by Google in 2011 called the Zero Moment of Truth is more relevant than ever. Consumers conduct their research online and then go into a store to make their purchase, or the other way around. There is no such thing as a linear (pure) online or linear (pure) offline shopping process anymore.
The MIT Centre for Transportation & Logistics analysed the environmental impact of various shopping techniques. They categorised customers into different profiles. This ranged from the very traditional shopper who conducts all of their shopping (linear) offline and makes multiple visits to a store before making a purchase, to the online shopper who completes their entire shopping process online and – as Google already predicted – all the shoppers in between (non-linear shopping process).
The study revealed that traditional offline shoppers have a carbon footprint of almost twice that of online shoppers. Although the carbon footprint of an online shopper does increase when they opt for express delivery. Online shopping has a lower carbon footprint because the delivery carrier uses an optimised delivery process. Whereas the offline shopper’s carbon emissions are mainly due to their transportation and multiple trips to store.
The study also revealed that the further away the customer lives from the store the more inefficient their transportation method tends to be. Customers that have a large distance to travel are more likely to do so by car. In urban areas where the distance to the store is shorter, customers are more likely to opt for greener modes of transport such as walking, cycling and public transport. With this in mind the further away the customer lives from the store the more environmentally efficient it is for them to shop online.
The carbon footprint of packaging
Packaging is important for the customer in terms of experience. That sounds weird, right? Well, according to the “peak-end-rule”, a bias described by Daniel Kahneman in his book Thinking, Fast and Slow, the most intense and the last-moment of any experience has the most effect on how people feel about that experience. In terms of e-commerce, receiving and unwrapping your package has a major effect on the (memorable) shopping experience of consumers. It’s understandable that brands invest in great packaging, but how does that play with sustainability?
But even under normal circumstances, home-delivery already produces a lot more packaging than wholesale deliveries to retail-stores. Adding additional “luxury” packaging for a great unwrapping and product presentation doesn’t make it any better. Apparently, the packaging industry has been responsible for more than 40% of plastic pollution in the world and a third of all household waste.
So who has the solution?
Luckily, there’s been a lot of innovation in packaging over the last few years and there are plenty of non-plastic options available. More brands also work with reusable packaging for their e-commerce parcels, like online shoe retailer O’MODA, who developed their own reusable shoebox and are using this as a key brand differentiator. There are plenty of other initiatives happening around packaging. This initiative (in Dutch) from PostNL introduces smarter packaging for the better protection of goods, less air (= less emissions) and being able to streamline its packaging system. Amazon just launched new boxes that can be upcycled into cat condos, forts and other creations.
Online shopping has the edge over offline in terms of sustainability. But whether online or offline shopping is more sustainable will ultimately depend on the customer in question. If an offline shopper travels to the store by bike the environmental cost of their transportation will decrease. So in that situation, online shopping could be a less efficient option. However, if an offline shopper lives in a rural location travelling to the store will cause more emissions than if they shopped online and the carrier delivers the item.
The sustainability of missed deliveries
Missed deliveries are one of the two main stumbling blocks that disrupt the sustainability of online shopping. This is according to Dutch economist Walther Ploos van Amstel. The other being transporting air because of excessive packaging as discussed earlier.
Before (and probably after) a pandemic world, most consumers won’t be home to collect their deliveries during working hours. Still, the majority of delivery carriers work during business hours when most people are not at home. In fact, up to 60% of customers miss their first delivery attempt and alternative arrangements need to be made to get the item into the hands of the customer.
The University of Heriot-Watt in Edinburgh analysed exactly how much extra carbon a delivery van produces when a percentage of their deliveries fail. If a carrier vehicle fails to deliver half of their packages, and then attempts to deliver them all a second time during the same working shift, their carbon emissions will be 50% higher than if all items had been delivered successfully the first time. The table below is based on information collected in the study.
The research also assesses the environmental effect of what is often an inevitable outcome of missed deliveries. That being further failed delivery attempts, and ultimately the customer collecting the item from a warehouse (this is less applicable in urban areas or highly populated countries such as the Netherlands).
The location of carrier warehouses tend to be on the outskirts of urban areas. This allows for easy truck access and so this is potentially quite a significant journey for the customer. If the customer’s journey is made by car, it can produce more carbon emissions than further delivery attempts would. In the most extreme circumstance that they tested, the environmental cost of a customer travelling 40 kilometers to a warehouse and back produces the same amount of emissions as 26 delivery attempts.
To combat the number of missed deliveries a number of retailers have worked on packaging their products into letterbox-sized bundles. For items that don’t fit through a letterbox, another solution is simply to conduct the deliveries outside of working hours. Evening and weekend deliveries are becoming an increasingly common and desired delivery option. Especially for consumers with an eye for sustainability. Pick-up points are another alternative to combat missed deliveries or to make sure your delivery has a 100% hit rate.
What about returns?
Returns are inevitable in e-commerce. There are many great tools available for consumers to make sure to buy the right colour, the right size, the right model, etc. However in some verticals (like fast-fashion) we still see return-rates higher than 40%. Some consumers will return their online orders in a local store, some will ship their return back to the retailer while others drop it at a pick-up point. With so many possibilities, that which was previously 30 customers versus one delivery-van, has now potentially become one delivery-van plus 30 customers with their 30 cars. Read that again. In sustainability terms, returns really make no sense.
Adam Minter, a columnist for Bloomberg writes about a real crisis. The impact of returns go way further than the actual return itself. Easy returns policies are increasing sales, and therefore increasing returns. Only an estimated 10% of returned goods actually ends up back on the shelves.
Companies like Patagonia and Levi’s have launched platforms to re-sell second-hand & vintage products from their own brand. Despite the fact that these initiatives come with the best intentions, it won’t help the environment. Not as long as 5 billion pounds of returned items end up in the trash heap each year.
Other companies also launched trying to decrease the number of returns. ASOS for example, announced a change to its returns policy last year which could lead to “serial returners” having their accounts deactivated. Online supermarket Picnic is offering to pick-up DHL returns when they deliver their groceries to their customers.
It’s a tough decision for brands. How to strike the right balance between decreasing (the cost of) returns, making sure you won’t lose checkout conversion (and losing potential new repeat customers), all while trying to work on their long-term sustainability ambitions.
The efficiency of online and offline shopping comes down to (last-mile) transport. The method that ensures the fewest number of carbon-producing vehicles on the road is often the most efficient.
Online shopping tends to have the edge over offline. But the main issue in e-commerce is that speed of modern delivery can cause usually efficient delivery processes to cut corners in the mission to get the item to the customer as fast as possible. Even at the cost of sustainability.
It is exciting to see that delivery carriers are committed to improving their processes to reduce the amount of emissions that they produce. We will share more about this in the second part of this article. There are a lot of things happening. New innovations are being launched and new carriers are going to market. But existing carriers are also always trying to come up with new services to delight their customers.
Brands & retailers could do more to tackle the inefficiency in e-commerce delivery themselves. Customers are more environmentally aware than ever before and are crying out for ways to be more sustainable. If the brands themselves communicated to their customers the carbon footprint of their various delivery methods, customers would be more likely to opt for more sustainable practices.
Paazl is a leading shipping service provider (SSP) for brands & retailers in e-commerce. Its all-in-one, multi-carrier platform unburdens the delivery process across webshop, warehouse, customer service and returns. Paazl enables logistical flexibility, consumer loyalty, cost transparency and (inter)national growth. Customers include industry leaders such as G-Star Raw, Rituals, VanMoof, Tag Heuer, Leenbakker and Under Armour.