Delivering Sustainability.

What brands & retailers can do to become more sustainable.

For new generations — millennials and generation Z — the impact of climate change and living a sustainable lifestyle 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 much ‘green startups’, brands are shifting rapidly towards carbon neutrality and (most) governments are working on climate goals.

At the same time, consumer behaviour is also highly driven by a bias of instant gratification which 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 super-fast (instant) delivery, excessive packaging and ‘try before you buy’ schemes that are only encouraging consumers to return (parts) of their delivered parcels.

What if we can do both; delighting your customers AND being responsible for the planet? To understand the environmental impact of delivery, we’ve explored how sustainable our current methods actually are and how the e-commerce industry could (and already is) adapting 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) travelling to a store compared to one vehicle delivering 30 items directly to the consumer seems pretty straight forward. However, customer shopping and browsing behaviour patterns are actually far more complex.

How sustainable is our shopping behaviour?

Consumers’ buying journeys are more fragmented than ever before. A great study made 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 anymore than a linear (pure) online or linear (pure) offline shopping process.

The MIT Centre for Transportation & Logistics analysed the environmental impact of various shopping techniques and categorised customers into different profiles, ranging 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, 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. 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’s plenty of other initiatives happening around packaging, like this initiative (in Dutch) from PostNL in smarter packaging for better protection of goods, less air (= less emissions) and being able to streamline its packaging system. And Amazon just launched new boxes that can be recycled into cat condos, forts and other creations.

Online shopping has the edge over offline in terms of sustainability. But ultimately whether online or offline shopping is more sustainable will 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 is one of the two main stumbling blocks that disrupt the sustainability of online shopping, according to Dutch economist Walther Ploos van Amstel (the other one is transporting air because of excessive packaging as discussed earlier).

Before (and probably after) a pandemic world, most consumers are not 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.

Research carried out by 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; 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 tends to be on the outskirts of urban areas to allow for easy truck access and so this is potentially quite a significant journey for the customer. The journey itself if taken by car can produce more carbon emissions than further delivery attempts would. The research showed that 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. 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., but in some verticals (like fast-fashion) we still see return-rates higher than 40% (!) Some of the consumers order 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 what was previously 30 customers versus one delivery-van has now become one delivery-van plus 30 customers with their 30 cars. Read that again: returns really make no sense.

Adam Minter, a columnist for Bloomberg is writing about a real crisis because the impact of returns go way further than the actual return itself: easy returns policies are increasing sales (and therefore increasing returns) and 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 of their own brand. But despite the fact that these initiatives come with the best intentions, it won’t help the environment 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 and 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 find the right balance between decreasing (costs of) returns, making sure you won’t lose checkout conversion (and losing potential new repeat customers) while trying to work on their long-term sustainability ambitions.

Conclusion

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.

Whilst online shopping tends to have the edge over offline, the main issue in e-commerce is that speed of delivery can cause what is usually an efficient delivery process to cut corners in the mission to get the item to the customer as fast as possible.

It is exciting to see that delivery carriers are committed to improving their processes to reduce the amount of emissions that they produce, I’ll write more about this in the second part of this article. There’s a lot of things happening: new innovations are being launched and new carriers are going to market. But also existing carriers are always trying to come up with new services to delight their customers.

Brands & retailers themselves could do more to tackle the inefficiency in e-commerce delivery. 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.