Sustainability has become a top priority for many consumers. According to Deloitte, 55% of consumers surveyed recently bought a sustainable product or service. 90% of consumers, especially Generation Z, expect brands to address environmental issues.
In addition to a growing demand for eco-friendly products, merchants must pay attention to decreasing their impact on the environment by reducing waste, carbon footprint, and their influence on climate change as a whole.
What Can E-Commerce Expect from 2023 in Terms of Sustainability?
First, let’s talk about what sustainability means. Sustainability is defined by the United Nations as meeting the needs of the present without compromising the ability of future generations to meet their own needs. Put simply, this means caring for the environment and about our footprint, as well as preserving resources, not depleting them.
For brands and retailers, this lends itself to multiple areas affecting the entire value chain. Here are some major sustainability trends impacting e-commerce retail in 2023:
changing consumer behaviour leading to sustainability;
rise of the circular economy;
reducing the carbon footprint through sustainable product offerings;
use of innovative technologies to become sustainable.
1. Changing Consumer Behaviour Leading to Sustainability
Awareness on eco-friendly consumption is on a high: a survey on the state of consumer spending and the influence of Gen Z found that 75% of Gen-Z shoppers considered sustainability to be more important than the brand name when making purchase decisions.
Backing the sustainable mindset, we have the Global Buying Green report by Trivium Packaging, which claims that 86% of European consumers aged 45 and under were willing to pay more for sustainable packaging in 2022.
A similarly high share, 74%, of consumers want to use, not own products. Consumers value the experience they get out of using products. This is a step towards sustainability as consumers are willing to give up ownership in favour of using products.
E-commerce brands and retailers who want to seize this opportunity and lead, instead of following the market, need to act quickly. In fact, there are many innovative and sustainable options to meet the changing consumer behaviour. One way is introducing hardware or product subscriptions.
Product subscriptions allow users to consume products as a service - to use the product for a certain time and return it, while only paying for the time of using the product.
This behaviour is backed by financial incentives, i.e. the consumer only pays for the time he actually uses the product. After returning the product to the brand or retailer, the consumer can choose a new product to replace the previous as it is:
repaired and finds a new purpose and owner in the secondary market;
dismantled and used as spare parts to refurbish products that are already on the second or third consumption round;
2. Rise of the Circular Economy
The linear consumption cycle generates a massive amount of waste in the retail sector. If we take just electrical and electronic waste as an example, in 2022, 59.4 million tonnes of e-waste was generated and only 17% was properly recycled. For instance, this meant over 5.3 billion mobile phones being thrown away by consumers. The circular economy can reverse this cycle of trash generation and reduce waste.
The circular economy is centred around producing, consuming, and reusing products, thereby reducing excessive waste and the need for raw materials by extending products’ lifetime value.
That’s why it’s important for e-commerce brands and retailers to introduce circular offerings. Again, product subscriptions can bring a lot of value here as keeping products in use for a longer time allows to extract more value out of the same product, less new products need to be produced, and less end up in landfills.
Many big e-commerce brands and retailers are already implementing circular strategies, for example:
Ikea has pledged to become fully circular by 2030 by facilitating product buyback and resale and producing furniture from waste material or sold products;
McDonald’s and Starbucks have joined the tide and are trying out reusable cup programmes;
fast-fashion brand Zara has introduced demand planning to be able to predict the demand for seasonal items more accurately to reduce waste.
3. Reducing the Carbon Footprint Through Sustainable Product Offerings
Online shopping hiked during the pandemic. As a downside, so did carbon emissions from product deliveries. Returns play a huge role here as the average estimated return rate in retail across five main European markets – the UK, France, Germany, Spain, and Italy - is 23.44%. That is almost one in every four products.
The main concern in tackling carbon emissions is actually production. For example, production makes up as much as 95% of a smartphone’s carbon footprint. So, before jumping to conclusions, we must address the core of the problem.
A good way to reduce the carbon footprint is by introducing circular product offerings. By encouraging reuse and recycling of existing materials and products, sustainable product subscriptions can bring a lot of value to different stakeholders:
consumers get lower price points, access to the latest products, and peace of mind that their old product won’t end up in a landfill;
brands and retailers get loyal customers and recurring sales. They can create an additional revenue stream by selling returned and refurbished products or mining old products to produce new ones. This is accompanied by predictable renewal cycles which helps to plan production and the need for raw materials;
the environment is less depleted as fewer resources are needed to produce new products since old ones are kept in circularity;
banks who finance product subscription plans get infinite interests and payments as consumers are willing to pay for staying in a binding relationship, which subscription is by its nature.
4. Use of Innovative Technologies to Become Sustainable
Data and efficient use of technology fuel sustainability. For instance, PwC estimates that AI could reduce worldwide greenhouse gas emissions by 4% in 2030. But complex data structures tend to be an option for established brands and retailers. There are more accessible ways to embrace technology.
A positive environmental impact comes from using technologies that enable merchants to launch sustainable product subscription offerings, such as Fairown's payment platform.
The model relies on a three-way partnership:
Fairown will provide the platform and manage product renewal cycles;
the local bank will provide product financing;
the brand or retailer will sell products to consumers.
Fairown orchestrates this model making sure that merchants get paid 100% upfront, and local banks finance the subscription plans. Customers never pay the full retail price, if they return the used product.
If you’re curious about how product subscriptions can work for your industry, contact us already today!