[Intern Insights] Digitolution: Is e-commerce sustainable?

E-commerce has been an interesting trend but it has always been more on the side of retail. Especially during the past 2 years, commerce and e-commerce have merged more and more.

For the ever-busy consumer of today, it’s convenient, time-saving, provides goods at lower costs, just to name a few advantages. The best thing is that with one click an item is delivered directly to the house door. Same day deliveries are already the norm and free return options of goods expected to be natural to even consider ordering. To not frustrate consumers, this whole shipping process needs to be smooth.

So, is shopping online or at brick-and-mortar stores more sustainable?

Out of all factors that play a role to truly be able to answer this question, let’s cut out factors such as energy used to heat or cool warehouses and so on, focussing on two important factors that are valid for both models, the impact of transportation and the impact of packaging on the environment:

Transportation:

Over the years, supply chains of traditional retailers have been optimised and refined: packed goods are designed to be loaded onto trucks using the least space possible, maximising the volume of goods transported from warehouses to retailers. Next, to the utilised logistics capacity, the routes are optimised as well, resulting in greater fuel efficiency and less CO2 emissions.

E-commerce deliveries, on the other hand, are often less energy-efficient. They tend to involve product orders sent to a warehouse, there individually packed and then delivered in partial loads from point-to-point, thus not always having a refined route. Deliveries are easily missed when customers aren’t home, or returned due to damage, all of which increases the amount of transportation. The increasing number of packages delivered to residential areas – instantly – leads to industry players’ sacrificing efficiency for convenience. This, of course, comes at the cost of the environment. It is more challenging to combine instant deliveries that go to the same neighbourhood [WEF, 2016].

From the consumer perspective, the increase of the carbon footprint whilst shopping is driven by several factors ranging from the state of IT infrastructure used for computing which supports e-commerce – click here to read more about data centres and the impact on the environment –, to the means of transportation used visiting a store.

The means of customer’s transportation is one of the main factors for the carbon footprint increase. For example, when biking to a local store, offline shopping probably is the best way to go. However, shipping a 10kg parcel by truck still could use up to 40% less fuel than a single person that lives in the suburbs driving 20 miles to a store.

A study conducted by the MIT Center for Transportation and Logistics that is summarised clearly in a blog written for Business of Fashion found that bypassing travelling to and from stores by completing all steps online, not requesting instant delivery, the carbon footprint of a shopper would be 50%lower, compared to doing the whole shopping journey offline.

However, in reality, the whole buying process needs to be considered. Consumers have a multi-channel nature of shopping, online and offline. Aside from shopping online, people travel to stores as much as they did in the past. With consumers leveraging traditional shopping to their online buying behaviour – showrooming and returning online ordered packages –, trips to stores remain frequent.

In this sense, the carbon footprint is increased online and offline.

Packaging:

With the increase of frequency in deliveries, package usage that protects the product increases too, thus, more cardboard is used. The amount of waste this creates is immense.

Often goods are packed in a way too large boxes, multiple boxes within one package or unnecessary extra wrappings.

It is a common belief that e-commerce uses more packaging material, but might the disposal of packaging have just shifted from retailers to consumers?

Packaging wastage is a serious problem that needs to be tackled in general. In the USA, 30% of total solid waste generated comes from packaging, [WEF, 2016], with e-commerce companies certainly contributing to an exponential growth in cardboard use.

But why? Doesn’t traditional shopping also use packaging?

The supply chain for brick-and-mortar stores if fairly linear, a lot of products are efficiently stored are shipped from suppliers to warehouses to the retail stores, where the consumer buys the product and takes it home. The packaging is optimised for freight, forklift and pallets and includes three forms of packaging:

  • Primary packaging: The packaging that is in direct contact with the product, protects the product and includes branding and regulatory attributes.

 

  • Secondary packaging: Groups multiple primary packages into a larger unit to safely and efficiently transport to retailers.

 

  • Tertiary packaging: Groups multiple secondary packages together for shipping, including pallets, strapping, banding.

The e-commerce supply chain, however, is more complex.

The involvement of more service providers and the high return rate results in reaching more touch points. In traditional supply chains, a product is handled roughly five times, while in e-commerce it’s up to about 20 times.

The consumer replaces the retailer as a drop-in centre, which results in a more complex logistical process. Bulk products are sent to fulfilment centres, where individual orders are broken down for shipments directly to the consumer. Sortation centres of transport providers then take care of deliveries to regional location reaching the consumer.

The three forms of packaging as used in the traditional supply chain, now are not efficient anymore. The promotional purpose of primary packaging is less of importance, instead mainly needs to meet the functional needs of a product. The secondary packaging is used as the delivery vehicle and serves as a product protector whilst the bundling purpose of tertiary packaging is often not needed anymore.

The role of the consumers

Consumers want an easy disposal of the often-bulky packages that come along with online deliveries. A study conducted by the American Institute for Packaging and the Environment found that ”50% of consumers noted that their biggest frustration with e-commerce was related to the ease of, and access to, disposal of packaging”. Consumers are willing to recycle packages, but often only if recycling is made easy for them.

The same study stated, “over 77% of consumers note that the packaging a company uses for e-commerce was viewed as being reflective of its environmental values.” Designing recyclable packaging is one way for a brand to demonstrate that they work on sustainable solutions, which could improve the brand image.

The future

The growth of e-commerce provides a platform for innovations as companies adapt to the transformation of e-commerce, optimising new logistic systems and packaging.

New policies, regulations, developed infrastructure for recycling as well as technological developments will influence the development of e-commerce and hopefully work towards a more circular economy, minimising the impact e-commerce has on the environment.

As online shopping will continue to grow, retailers will continue combining online and offline offerings. Retailers need to take responsibility, optimising the strategies to lessen the environmental impact by understanding consumer behaviour and geographies. Furthermore, they should be educating the consumer about the impact a certain shopping behaviour has on the environment.


This post is brought to you by one of AQ’s Undergraduates, Alexa Vollmar. As part of our internship programs, undergraduates and classic interns are encouraged to take part in company culture. Alexa’s primary focus is in digital marketing.