UPS Longitudes | How to Make E-Commerce More Sustainable in the Age of COVID-19
Online shopping has become an essential way consumers access goods during the coronavirus pandemic. But many retail chains generate up to 75 percent of their revenue from brick-and-mortar stores in non-pandemic times — meaning they’re now looking for other ways to sell and move their inventory.
During this time of social distancing and mandated store closures, retailers and brands are leaning into e-commerce strategies. E-commerce spending in the U.S. increased by more than 40 percent year-over-year in March.
As consumers depend more on e-commerce and become increasingly accustomed to the convenience of online shopping and delivery, we’ll likely continue to see e-commerce grow in the coming months and years.
E-commerce and the environment
Meanwhile, consumer demand for sustainable commerce is also increasing. In early April, several weeks into the pandemic reaching the United States, 83 percent of consumers said they took the environment into consideration when making purchases.
E-commerce comes with its own set of impacts on the planet that differentiate it from brick-and-mortar retail, especially in two areas:
E-commerce relies on a complex logistics and delivery network. According to the World Economic Forum, last-mile delivery vehicles could emit an additional 6 million metric tons of carbon dioxide by 2030 — an estimate made before recent events sparked growth in e-commerce deliveries.
If consumers continue to turn to e-commerce for retail and grocery deliveries after the worst of the pandemic is over, we may see the emissions from last-mile shipping increase from current projections. If this occurs, it will become even more critical for retailers to choose a delivery company with an integrated network that offers more sustainable last-mile delivery solutions.
For example, UPS allows consumers to direct their packages to UPS Access Point locations (such as The UPS Store, CVS Pharmacy, Michaels or Advance Auto Parts) where consolidated deliveries take place for multiple consumers, preventing several delivery attempts to a single residence.
Every year in the U.S. alone, millions of pounds of returned and excess inventory go to landfills, and that’s during business-as-usual circumstances — not to mention the impacts of cardboard boxes used for packaging and shipping.
Returns are a growing problem for retailers. On average, e-commerce can have three times the return rate of brick-and-mortar retail.
Preliminary data from Optoro’s platform indicate a decrease in the rate of returns when comparing mid-March to February of this year. This means that consumers could be less likely to return unwanted products right now, possibly due to social distancing restrictions keeping them from visiting storefronts to make a return.
As stores and warehouses begin to reopen amid the lifting of social distancing requirements, many retailers could see a surge in returns and exchanges of items consumers purchased while quarantined.
In addition to all the returns consumers are waiting to send back to retailers, there are also stacks of inventory building up in warehouses and stores — much of which is seasonal and will be increasingly difficult to move in a month or two.
Minimizing environmental costs
The path forward for retail should consider how we can minimize the impacts of e-commerce, especially as retailers look for growth in the face of this pandemic.
Recommerce — the buying and selling of open-box or non-new inventory — will be a necessary strategy in the coming months for retailers looking to find the next best homes for their inventory while also keeping goods out of landfills. Consumers will also be looking for better deals in the coming months as we see the full extent of the economic impacts of COVID-19.
“In early April, several weeks into the pandemic reaching the United States, 83 percent of consumers said they took the environment into consideration when making purchases.”
Such strategies also reduce out-of-stock items, making inventory available when it's most relevant and reducing the chances it will end up in landfill.
Retailers can engage a new consumer base while also ensuring their unsold products find a second home by offering open-box or refurbished goods. Prolonging the lifetime of products and reducing the number of new products manufactured will contribute to a more sustainable retail industry.
From smart routing to fleet electrification, there are many ways for shipments to be more sustainable while also saving money in the long term.
At UPS, technology ensures UPS drivers take the most optimized delivery routes. A reduction of just one mile per driver per day during one year can save the company up to $50 million. That’s an example of a win for customers, the planet and UPS.
A consortium of leading consumer product companies has partnered with UPS and TerraCycle on Loop, a sustainable packaging system that eliminates the reliance on single-use packaging. According to a recent article in Fast Company, the platform is now expanding to the entire U.S. this summer after a huge surge in interest during the pandemic.
“Prolonging the lifetime of products and reducing the number of new products manufactured will contribute to a more sustainable retail industry.”
Carbon neutral shipping is another way to offset the carbon footprint of e-commerce shipments. Programs like UPS’s carbon neutral shipping option allow retailers to support projects that purchase and retire carbon offsets equal to the amount of carbon emitted during shipping. Several retailers and brands such as Etsy and Reformation have already made their shipments carbon neutral.
A variety of solutions
Reselling products via recommerce and optimizing logistics are just two of the strategies that retailers and brands are using to make e-commerce more sustainable.
As we continue to adapt to this changing world, retail leaders will face the challenge of assessing the best way to deal with e-commerce shipments, excess goods and returns as efficiently as possible.
By employing a variety of solutions, retailers and brands can work toward a financially sound future while also minimizing damage to the environment.
Originally published on UPS's thought leadership blog, UPS Longitudes.