Blog Post - Frank Kochenash , Feb 18 2020

Sustainability in eCommerce

Sustainability in eCommerce

Generally, I find that eCommerce gets a bad rap for sustainability. The assumption seems to be that eCommerce is less sustainable and less environmentally friendly than legacy retail models. In some cases, it’s true. But at a certain scale and when done in certain ways, I contend that eCommerce is (or can be) more environmentally friendly than traditional retail distribution. The grounding principle is efficiency. Distributing products to consumers requires energy and material. Less energy used and less materials used = more efficiency = more environmentally friendly. In summary, it’s more important than ever to optimise for efficiencies and communicate them to consumers.

How eCommerce Wins

1. ECommerce could incur lower transportation costs

Thought starter: Say you have 20 households that desire a basket of groceries each. Assume each household is 3 miles from the nearest store or distribution centre. What is more efficient in terms of energy consumption, traditional retail or eCommerce home delivery? Answer = eCommerce. As the chart below describes, energy consumed by one delivery truck running an efficient route is better than 20 consumers self-optimising. There is a scale below which this answer reverses. The key is drop density: the greater the scale of eCommerce and the more drop points that can be fitted onto a route, the more efficient it is relative to traditional retail.

2. ECommerce probably incurs lower picking costs

Point 1 above only addresses transportation costs. There is also energy expended in picking products and putting them into bags or boxes. Specifically-designed fulfilment centres are almost certainly more efficient at this task than individual consumers going through a store, especially when the store is designed to be inefficient (e.g. placing commonly purchased products in the back of the store).

3. ECommerce could reduce packaging materials

Packaging is the current bane of eCommerce. Even with recyclable corrugate, the costs to produce, ship and recycle the corrugate are all additive to a consumer putting stuff in the trunk of her car. On the other hand, packaging optimised for shelf presence and theft reduction is often inefficient too (oversized, plastic finishes, blister pack). ECommerce products (meaning products to be sold online and distributed by centralised fulfilment) don’t need those inefficiencies. They can be smaller, plainer, more regularly shaped. Consider the photo below while in an Amazon Go store. This is probably what eCommerce friendly packaging looks like. Thin, low weight, not much printing, no waxy glosses, no plastic, no blister packs, basic shapes to easily maximise packing density. It looks undifferentiated on a shelf, but it may be more sustainable. (Compare the packaging of the Energizer 6-pack of AAs with the Amazon Basics 6-pack of AAs). The packaging of Colgate’s new recyclable tube of toothpaste also seems to me a good example of what an eCommerce-friendly package could be.

4. ECommerce probably incurs lower storage costs

At scale, eCommerce, as demonstrated by models like Amazon, enjoys very high inventory turns. This effectively means less space is required to store the same amount of sold product. Less space needed for storage means less space to build, heat, light, clean, etc.

Implications for brands

Here are a few ideas brands should consider to improve sustainability and provide environmentally friendly options to their customers.

1. Create eCommerce specific and exclusive SKUs that are differentiated by their sustainable packaging

  • Reduce weight, reduce ink, reduce bubble pack and plastic, and reduce gloss. Here are some great examples from Amazon’s Frustration Free Packaging initiative.
  • Use more efficient shapes. It is an interesting mathematics problem to determine how to most efficiently tile a surface or pack a box.
  • Make picking easier. Consider visual as well as non-visual (e.g. RFID) cues to enable more efficient stowage, storage, and picking.
  • BTW, this also creates unique SKUs to better manage channel conflict and avoid price matching.

2. Promote your sustainability creds on the eCommerce detail page

As your physical packaging is being optimised for efficiency (rather than shelf appeal), your eCommerce product page needs to pick up the slack. Describe how and why the SKU is more sustainable than alternatives. Consider something like a “green score” to describe how sustainable your product is and include this in your product details.

3. Incentivise greater drop density

Run promotions associated with programmes like Amazon Day, which aggregates a customer’s orders into one delivery. Promote efficient delivery, not necessarily fast delivery.

4. Enable sustainable commerce with product metadata

86% of consumers believe there’s not enough information on products for consumers to assess how sustainable they are. So add details to the product data that you provide Amazon and encourage/aid Amazon in making these filterable so consumers can better conduct “sustainable shopping” or Values Based Shopping. For example, if your packaging is 100% recyclable, help Amazon make that a left-nav filter option.

5. Tune your supply chain to make smaller, just-in-time replenishment to e-retailer fulfilment nodes

Want to explore this further?

Contact one of our Amazon specialists here or visit our Amazon service page.