While online heavyweights are quick to boast about the environmental impact of e-commerce, this holiday shopping season millions of eco-conscious consumers face a largely unanswered question.
As the gift-giving season ramps up, so too does the battle between brick-and-mortar and digital retailers for holiday dollars. But given that consumers play an increasingly crucial role in the effort to combat global warning, is e-commerce or traditional retail greener?
Online heavyweights are quick to boast about the environmental benefits of e-commerce. On its site, Amazon declares: “Online shopping is inherently more environmentally friendly than traditional retailing.” While conventional knowledge might suggest so, several studies published in recent years indicate that the reality might not be as black-and-white as Amazon claims.
The carbon footprint (greenhouse gases emitted as a consequence of an individual’s activities) generated while shopping is dependent upon a range of factors, from IT infrastructure and packaging to vehicle emissions. For instance, brick-and-mortar shoppers in the cycling-friendly Netherlands may yield lower carbon emissions per person than in the American Midwest, where people are more dependent on their cars.
Unable to account for every particular hypothetical scenario, researchers have studied consumer patterns through the use of the following archetypes:
The Traditional Shopper is one whose shopping journey is conducted entirely in-person, from search to purchase to return. With no use of e-commerce, the Traditional Shopper represents a shrinking demographic. According to research from MIT’s Center for Logistics and Transportation, customer travel accounts for more than 75 percent of greenhouse emissions in this wholly-offline process, yielding approximately 3.1kg carbon dioxide per journey by the average Traditional Shopper in an urban centre.
More minor emissions come from packaging and the overheads of displaying goods in-store, as well as returns. According to Accenture, apparel will account for 78 percent of gifts in the US during the upcoming holiday, making returns a significant factor. While an optimised parcel pick-up for an online return yields a minimal contribution in greenhouse emissions, an individual physically driving back to the store is much worse for the environment.
The Cybernaut’s shopping journey is conducted entirely online: from researching products to payment, to arranging a return.
Despite the proliferation of e-commerce across the retail landscape, Deloitte’s research shows that only 12 percent of US consumers are not planning to visit any traditional retailers during the holiday season.
According to Dr. Alexis Bateman, director of the Responsible Supply Chain Lab at the MIT Center for Transportation and Logistics, “Major emission factors [for the Cybernaut] include greater IT infrastructure to support computing, [which supports] e-commerce, [and] increased packaging in some cases.”
Nevertheless, by completing all steps online, the Cybernaut bypasses travel to and from stores, greatly reducing greenhouse gas emissions, and yielding a carbon footprint approximately 50 percent lower than that of the traditional shopper.
While the above two models represent pure paths for the consumer, they are archetypes that fail to accurately reflect the majority of shoppers.
Engaged in an omnichannel experience, the Modern Shopper represents a hybrid between the Traditional Shopper and the Cybernaut. For this archetype, the research process might involve both brick-and-mortar and digital stores, before ultimately making a purchase online.
In a bid to counter the rise of e-commerce, many physical retailers are making efforts to increase foot traffic. But unfortunately for both them and the environment, more people in-store does not translate into a higher transaction rate. Deloitte’s research predicts that 48 percent of US consumers will check out products in a physical store before actually buying online.
The route to purchase is rarely a direct one, however. In the past, there was only one touch-point — the point of transaction — but today, consumers interact with retailers in multiple ways both offline and online, blurring the lines between entertainment and intent to purchase.
“Unfortunately, there is no straight answer to the question whether online or in-store shopping is better to the environment,” says Dr. Patricia Van Loon, a research fellow at INSEAD’s Social Innovation Centre and senior researcher at Viktoria Swedish ICT, a non-profit research institute that is part of RISE Research Institutes of Sweden.
Dr. Bateman echoes this remark. “E-commerce has lower total emissions because customer trips are greatly reduced. But there are caveats to this,” she warns. “Each situation is unique, so you can never really say e-commerce is always better for the environment.”
By participating in the process of “showrooming,” for instance — trying a product in-person before buying online — the Modern Shopper increases their carbon footprint in transportation, offsetting any deductions related to the ultimate e-commerce purchase.
“Associated physical trips by consumers can add significant amounts of carbon to the online purchase,” says Dr. Van Loon. “Picking up items after a failed delivery or a click-and-collect point, returning unwanted items, or other complementary shopping trips all increase the carbon footprint.”
According to MIT, transport-related greenhouse gas emissions for the Modern Shopper account for over 1kg of carbon dioxide emissions (over a third of the shopper’s total carbon footprint).
Modern delivery methods pose a significant toll on the environment too. In 2005, when Amazon introduced its ‘Prime’ membership, offering free two-day shipping on all eligible purchases for an annual flat rate, such rapid delivery was still novel. Since then, Amazon has amassed about 63 million Prime members globally, according to Consumer Intelligence Research Partners, and in major cities, free two-day shipping has become nearly as commonplace as online shopping itself.
The proliferation of high-speed delivery is not without environmental impact. This season, three-to-four-day shipping is not sufficiently “fast” for US shoppers, according to Deloitte, and they expect lower fees for expedited delivery — shifting consumer expectations and giving rise to the Impatient Modern Shopper.
“Obviously, same-day delivery and tight delivery slots make it more challenging for the delivery company to combine shipments in the same neighbourhood,” explains Dr. Van Loon. “It therefore increases the distance driven per item and consequently the carbon footprint.”
Indeed, the extra emissions of expedited freight transportations account for a nearly 0.75kg increase in carbon dioxide emissions per shopper, more than double that of non-expedited delivery methods and enough to offset the green benefits of not travelling to a physical store — rendering the Impatient Modern Shopper archetype the least environmentally friendly of the four.
For those who are serious about reducing their carbon footprint this holiday season, Amazon is right: the numbers show that e-commerce is better for the environment — as long as the entire process remains digital from start to finish. But this path might not be feasible for many consumers.
Consumers who find it necessary to purchase in-person can greatly reduce their carbon emissions by “webrooming,” or researching online. This shopping process emits only approximately 0.2kg more carbon dioxide than conducting the entire journey digitally, so even those who purchase at a brick-and-mortar retailer can cut their environmental impact by up to 50 percent.
The most green holiday shopper is digitally-savvy, researching and purchasing online well in advance — avoiding next-day or same-day delivery. They opt for eco-friendly packaging wherever possible, and if they do need to visit a brick-and-mortar store, they will coordinate shopping trips with other errands, reducing the total distance travelled by vehicle. Perhaps most fundamentally for the green holiday shopper, they also understand that what and where they buy is as important as how they buy it.
“Some of the biggest sources of environmental impact actually lie upstream in a supply chain (materials and producer level),” says Dr. Bateman. “So purchasing products from responsible companies can actually lead to some of the biggest savings, over online versus brick-and-mortar purchasing decision.”
*This story first appeared on Business of Fashion
E-commerce is changing the way people shop globally. Over the last two decades, multi-billion dollar e-commerce companies have come into being. Even as they see increasing scale and success, e-commerce companies have not turned their focus on environmental sustainability – in stark contrast to the initiatives on sustainable production and consumption undertaken by world’s leading retailers like Walmart and Ikea.
Realizing the acute need for the e-commerce industry to start thinking about their environmental impact, Sustainability Outlook delved deep into e-commerce operations to create an E-commerce Sustainability Quotient Matrix. The E-commerce Sustainability Quotient Matrix will help guide e-commerce companies to assess their preparedness and current state when it comes to environmentally sustainable operations. This matrix also provides an indicative path that e-commerce companies should embark upon to make their operations greener.
The E-commerce Scenario in India
E-commerce has suddenly exploded in the Indian marketplace. What was a non-existent concept ten years ago is now a $3.5 billion industry with about 20 million active users and an annual growth rate of 34%. Flipkart and Snapdeal have set targets of Gross Merchandizing Value (GMV) of $8 billion and $10 billion respectively for 2015 as the market gets ready to see even greater growth.
Environmental Impact of E-commerce vs. Brick- and- Mortar stores
Various studies have consistently underlined that e-commerce has a significantly lower environmental impact than physical retail stores. This is primarily driven by the reduction in consumer transport to and from the stores, which is replaced by last-mile delivery for e-commerce. Multiple products to different addresses are consolidated in the e-commerce last-mile delivery system and as the number of users of e-commerce grow the per-item footprint of last-mile delivery drops significantly.
To read the complete report, click here.
**This post originally appeared here.