Retailers: Sustainability is Not a Challenge, It’s an Opportunity Descartes Research Report

Descartes Systems Group, Inc. | www.descartes.com | Sustainability is Not a Challenge, It’s an Opportunity

22Descartes Systems Group, Inc. | www.descartes.com | Sustainability is Not a Challenge, It’s an Opportunity

Introduction

The environment is becoming an increasingly important issue to consumers. So, what are retailers doing to address sustainability? Not that much, according to consumers. Research conducted on Descartes’ behalf revealed that only 38% of consumers thought that most retailers were doing a good job using sustainable delivery practices. Despite this low rating, we wanted to know if consumers are really making purchasing decisions based upon the sustainable practices of retailers and will the importance of sustainability on buyer behavior increase in the future? Does sustainability importance change by age group and country? Is sustainability a challenge or opportunity for retailers? SAPIO Research surveyed 8,013 consumers for Descartes across 9 countries in Europe, the US and Canada to address these important questions.

Percentage of online orders being delivered to the home is increasing

With few exceptions, consumers intend to buy more online and have it delivered – 46% today, and 47% in the future. Understanding and addressing consumer sentiment about the environment will be key to capturing more market share and improving bottom line performance. Online purchases with home delivery is still maturing in much of the Nordics and France, so there could be even more opportunity in those countries if retailers are able to demonstrate more environmentally-friendly home delivery operations than the competition (see Figure 1).

Understanding and addressing consumer sentiment about the environment will be key to capturing more market share and improving bottom line performance.

Figure 1: Percentage of online orders delivered to the home*

Netherlands

53% 53%

Canada

50% 49%

US

50%49%

Belgium

46% 45%

Sweden

42% 48%

Norway

38% 42 %

Denmark

38% 39%

France

33% 34%

Finland

29% 33%

Germany

49% 49%

UK

54% 52%

In the last 12 months In the future*Average

33Descartes Systems Group, Inc. | www.descartes.com | Sustainability is Not a Challenge, It’s an Opportunity

Importance of helping the environment

Helping the environment is an important issue for consumers, but do their purchasing decisions support that sentiment? Overall, 45% of respondents say that helping the environment is quite/very important in their daily life with only 3% saying it wasn’t important at all. However, there is a wide variation by country with France the highest at 56% and Denmark the lowest at 27% for importance (see Figure 2). It’s interesting to see Denmark rate environmental importance so low with its history with sustainability programs and top rating by 3rd parties such as the Yale Center for Environmental Law and Policy, Yale University & Center for International Earth Science Information Network, Columbia University. It might be that protecting the environment in Denmark is a “given” and baked into everyday purchasing decisions. That’s why it is important that retailers use the data to help ensure they are in tune with consumer importance and base expectations.

Figure 2: Respondents by country that thought helping the environment is quite/very important

Germany

France 56%

52%

52%Finland

Belgium

Canada

US

Netherlands

UK

Norway

48%

43%

Sweden 43%

42%

42%

41%

37%

Denmark 27%

44Descartes Systems Group, Inc. | www.descartes.com | Sustainability is Not a Challenge, It’s an Opportunity

42% of respondents aged 25–34 made purchasing decisions based upon environmental impact.

Purchasing decisions are based upon environmental impact

However, only 39% of respondents regularly or always make purchasing decisions based upon the company’s or product’s environmental impact. Only 11% never made a purchasing decision based upon the product or company’s environmental impact. There was again a wide variation by country with France the highest at 49% and Norway the lowest at 27% (see Figure 3). Age also plays an important part in this decision with 42% of the respondents aged 25-34 making purchasing decisions based upon environmental impact, but only 34% of those over 65 years did.

Figure 3: Respondents by country that regularly/always made purchasing decisions based upon environmental impact

Germany

France 49%

48%

46%Belgium

Canada

Denmark

Sweden Netherlands 39%

37%

34%

US 35%

34%

Finland

UK

Norway

33%

32%

27%

55Descartes Systems Group, Inc. | www.descartes.com | Sustainability is Not a Challenge, It’s an Opportunity

Consumers are interested in environmentally-friendly deliveries

The two product categories causing consumers to think twice about the environmental impact of online buying and home delivery were grocery (35%) and clothing and footwear (35%). Germany had the highest concern for groceries at 46% while The Netherlands was the lowest at 21%. Consumers cited grocery (52%) and clothing and footwear (45%) as the top product categories for store pickup as opposed to home delivery if they thought it would help the environment. The implicit challenge for ecommerce pure plays in those markets is that they need to show that their home delivery approach is as environmentally friendly, if not more, than “bricks and mortar” competitors to maintain or grow their business.

However, consumers also indicated that they would buy more grocery (40%) and clothing and footwear (39%) from companies that demonstrated their supply chains were more sustainable than the competition. Canada was the highest at 47% and The Netherlands was the lowest at 29%. These numbers point to a significant opportunity to take market share based upon demonstrated supply chain sustainability efforts.

Half (50%) of consumer respondents were quite/very interested in an environmentally-friendly delivery method. In fact, three of the top four answers involved combining orders or having the seller recommend the most sustainable delivery option (see Figure 4). Eco-friendly delivery options present a significant opportunity for retailers as they are more cost-effective than traditional deliveries because they drive delivery density. They combine increased customer satisfaction related to sustainability efforts with a positive impact to the bottom line.

Figure 4: Consumer Interest in Environmentally Friendly Deliveries

Combining all my orders over a period into a single delivery

at the end of the week

Having the seller recommend the most environmentally

friendly delivery option

Picking up the order at a store

Combining all my orders over a period into a single delivery when

there are multiple deliveries in my area

Having the seller rate the environmental impact of all delivery options

Using a drop box facility at a central location

Slowing down to make them more

environmentally friendly

Quite important Very important

29%

21%

29%

19%

28%

19%

28%

19%

27%

15%

25%

16%

25%

14%

66Descartes Systems Group, Inc. | www.descartes.com | Sustainability is Not a Challenge, It’s an Opportunity

Provide convenience and show greater sustainability

Companies that do a good job getting themselves branded as environmentally friendly stand a better chance of achieving more profitable home delivery operations. A significant number of consumers (54%) indicated they would be willing to accept longer lead times from an environmentally friendly company. Longer lead times provide more options to improve the efficiency of the delivery which almost always results in a lower carbon footprint. In addition, 20% of respondents indicated they would pay more for a delivery from an environmentally friendly company. This may not sound like a lot, but the experience of companies that offer premium delivery pricing says that it represents millions in incremental revenue. In addition, age plays an important part as Gen Z and Millennials (27%) more willing to pay a premium than 55+ (14%).

Consumers rated convenience (40%) much more important than environmental impact (23%). However, there was a large group (37%) that said that convenience and environmental impact were equal. Looking at it in aggregate, 60% of consumers have environmental importance expectations for their home deliveries. The “Holy Grail” will be online retailers that can provide convenience and show greater sustainability.

Consumers are looking for not only more eco-friendly home delivery strategies, they also plan to raise their expectations for the vehicles that deliver them. While expectations are much lower today (20% quite/very important) about retailers or their delivery agents employing electric vehicles, the number rises dramatically in 5 years (53% quite/very important). Surprisingly, there is very little difference in consumer sentiment between Europe and North America today (tied at 20%) and (54% and 52%, respectively) in the future.

Whatever method retailers use to get their deliveries to homes, consumers will be expecting to understand the carbon footprint of their delivery. Today this expectation is somewhat nascent at 23% quite/very important, but rises to 51% quite/ very important in 5 years. Again, there is little difference in the future expectations of consumers in Europe and North America (51% and 50%, respectively) in the future.

Consumers are looking for more eco-friendly home delivery strategies, and they are raising their expectations for the vehicles that deliver them.

77Descartes Systems Group, Inc. | www.descartes.com | Sustainability is Not a Challenge, It’s an Opportunity

Conclusion

Consumers don’t believe that most retailers are doing a good job with their home delivery sustainability efforts. Given that ecommerce purchases and sustainability expectations are going to rise, now is the time for retailers to improve their home delivery and sustainability efforts. Rather than viewing sustainability as just another challenge, retailers need to see it for the huge opportunity that sustainability presents. Consumers intend to buy more from retailers that are perceived to be more sustainable. Many are willing to take delivery options that are more economic to the retailer and even pay more for the product or delivery service.

The biggest challenge to retailers is to abandon the monolithic approaches to home delivery that don’t take advantage of opportunities with more sustainable delivery. Consumers will expect sustainable delivery options – and this will grow over time. Not all consumers will care, but the numbers that do can represent a great opportunity to improve bottom line performance and do the right thing for the environment.

Rather than viewing sustainability as just another challenge, retailers need to see it for the huge opportunity that sustainability presents.

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About Descartes Systems Group

Descartes (Nasdaq:DSGX) (TSX:DSG) is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses. Customers use our modular, software-as-a-service solutions to route, schedule, track and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world.

Learn more at www.descartes.com and connect with us on LinkedIn and Twitter.

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