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Global e-commerce is booming, but are consumers happy with the environmental cost?

What is the environmental impact of global e-commerce?

As part of The Drum’s Globalization Deep Dive, we take a look at the environmental impact of the global e-commerce boom, and what brands are doing about it.

The pandemic accelerated the uptake of e-commerce globally as people turned online in the face of lockdown restrictions. According to Forrester, there was a 25.7% surge in 2020 to make e-commerce worth $4.2tn and it expects retail sales worldwide to climb a further 16.8% in 2021.

It has also meant more customers than every are buying from retailers beyond their borders. Zion Market Research has found the global cross-border e-commerce delivered revenues to the tune of $562.1bn in 2018. By 2027 that figure is predicted to reach nearly $5tn.

This comes in the face of massively changing consumer expectations for product availability and delivery.

“The base level of shopper expectations have shifted. When Amazon launched Prime, shrinking standard delivery times from weeks to days, it was a game changer. However, it has only taken a few years for anything more than a couple of days to be completely unacceptable,” says Rob Sellers, head of retail at VCCP.

“Wherever products are manufactured or however complex the supply chain to get them to our houses, we expect almost immediate fulfilment.”

KPMG’s 2020 UK retail report found that 43% of consumers now select next-day delivery, a 4% rise on last year, while a massive 73% say they would have been dissuaded from a purchase if there had been a delivery charge associated with this, compared to 57% a year earlier.

The duration consumers are willing to wait for free shipping is also falling, from an average of 5.5 days in 2012 to 4.5 a year ago.

“But the average shopper has absolutely no appreciation of the complexities of the global supply chain,” continues Sellers. “They trust big platforms and retail brands, like Amazon, Nike and John Lewis, to handle that for them. What they care about is getting the product they want – when they want it and at a price they want.”

And at the moment, that comes at a huge environmental cost. According to Boston Consulting Group, transportation activities account for 17% of global greenhouse gas (GHG) emissions.

Over 90% of world trade moves by sea with maritime shipping accounting for 3% of all global emissions – a figure that could rise to 10% by 2050 according to experts.

Meanwhile, on land, the World Economic Forum estimates a 36% uptick in the number of delivery vehicles on our roads in the next decade.

But KPMG found that consumers also expect brands to be more sustainable in their supply chain. Over a third (37%) of shoppers now base their buying decisions on retailers’ ethical and sustainability policies, while 67% consumers claim to care more about the environmental impact of the goods they buy today than they did five years ago.

Nearly half (43%) of shoppers were frustrated or dissuaded from the purchasing process due to the packaging used, and with a growing expectation for lower-emission delivery and logistics procedures, KPMG urges that this is one area in which retailers have no choice but to move with the times.

Yet the trade off for speed is that orders can’t be consolidated, meaning more packaging waste. There’s also fewer packages dropped off per mile, and therefore more delivery vehicles on roads.

In an effort to maintain its delivery targets, Amazon has been building its own air fleet to rival the likes of UPS and FedEx.

“Most people say they are willing to pay more for sustainable brands, but many also wonder why they should have to,” says Michelle Whelan, chief executive of VMLY&R Commerce.

“The bottom line is that consumers are torn three ways. They want it cheap, they want it now and they’d also like it guilt-free. They do care, but they won’t necessarily do anything about it. The onus is therefore on brands to remove the friction of guilt in a way that keeps life convenient and affordable for customers, or make it a truly meaningful part of the experience.”

In response to the spotlight on the damaging impact of cargo shipping, last week a raft of brands including Ikea, Patagonia and Unilever signed a pledge to only use zero-carbon ships by 2040.

There are other brands trying to do e-commerce globally differently. Luxury marketplace Farfetch, for example, has baked sustainability into its business plan, creating several features including carbon-neutral shipping and return, with the brand taking responsibility for offsetting emissions. It has also built-in circularity, selling pre-owned products as well as in-season items and enabling easy donation to charities. It has established a Positively Conscious initiative, which enables shoppers to buy brands according to ethical and environmental criteria. Sales via this are growing faster than the overall Farfetch marketplace.

“It’s difficult for the consumer to truly understand the supply chain as there is not enough transparency from the brands and retailers. We even see that within companies there is not a holistic understanding of sustainability throughout the supply chain,” says Neda Eneva, global marketing director at Arch & Hook.

Arch & Hook is an Amsterdam-based startup that’s working with retailers to provide sustainable alternatives on things like hangers, furniture and fixtures, and transportation.

Eneva continues: “​​There is a gap between a consumer’s awareness of the environmental impact of the brand they buy and its sourcing and supply chain journey. There is also usually a gap between pricing for locally designed/sourced goods and imported goods from Asia for example.”

Brands like Everlane, H&M-owned Arket and Reformation are approaching this through the lens of “radical transparency”. When you shop on their sites, you’ll be given a breakdown of every part of the supply chain and how it factors into the end cost of the product.

Reformation has developed a methodology called ’RefScale’, which measures and shares the environmental impact of every garment it sells, such as volume of carbon dioxide and amount of water used in production.

“Other brands, including Allbirds and Veja, have found cultural kudos and justified premium pricing because of ethical behavior, not in spite of it,” continues Sellers.

“Projection of personal value through brands we choose to wear has always been a truth of fashion, but now those values are as likely to be broadly beneficial to the planet or society as much as they might be about other social standings.

“So the hope is that the standout behavior of some beacon brands, and some broad improvements from some of the biggest players, will stack up to a total reduction on the negative impact – either societal or environmental – that the total category has.”

For more on how technology and trends are bringing the world together, check out The Drum’s Globalization Deep Dive.

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