As we head into 2023, most retailers are finding it more challenging to hold onto the coattails of pandemic-induced spending. Among some of the main challenges is the big green word….

Sustainability.

It's the thing most people want but is bearish upon acting.

According to the Deloitte 2023 Retail Industry Outlook, three-quarters of Gen Z reported sustainability was more important than the brand when making a purchase decision. This survey analyzed the insights of 50 executives across $1+ billion companies. Along with higher ESG (environmental, social, and governance), more diversity values (DEI) are expected to be upheld by companies based on increasing diversity in the population.

Challenges of Environmental Social Governance

Even though 6 in 10 executives foresee the retail industry facing deeper scrutiny over ESG decisions this year, more than half of retailers don't have plans for ESG investments. Due to the growing crisis of economic uncertainty, retailers will remain sheepish in making investments that will not guarantee margin enhancements. Only 26% of the 250 global retailers have made commitments to carbon reduction.

Opportunities for Better ESG Practices

The pandemic forced many companies to accelerate their technological advancements by three to four years (McKinsey, 2020). Most of the workforce turned to remote work and relied on expedited delivery for material goods (Amazon), groceries, and food (Uber, Doordash...etc.). As such, seamless and frictionless all remain buzzwords this year as things favoured by the person working behind the screen and the end-user/consumer. The Amazon effect is real on the retail landscape and largely has to do with changing consumer expectations. Consumers expect the retail experience to be as seamless and convenient as possible from start to end. Although you might think increasing the delivery amount would be worse for the environment, most sustainable delivery options are lower in cost. Leading retailers could benefit from using last-mile delivery partners that offer more sustainable delivery options.

In a Descartes survey, 39% of consumers indicated that they "regularly" or "always" made purchasing decisions based on the company's or product's environmental impact. Examples of sustainable delivery include electric vehicles, green delivery time slots, dark stores, and the consolidation of deliveries.

Factor of Inflation

It's no secret that high inflation has both consumers and retailers more on edge. Retailers that benefited from the Covid boom will have to readjust their benchmarks for revenue. Consumers are expected to adopt a more price-conscious mindset and are easier to shift between brands based on peer recommendations and price comparison. Price transparency, another result of the Amazon effect, has made it harder for retailers and brands to price discriminate because consumers are becoming more adept at researching online. A quick Google search will bring up a side-by-side comparison between the same product and different brands. The seamless online shopping experience is powered by several secure payment options, giving people the flexibility and speed they desire when making purchases. Options like curbside pickup, store pickup, and expedited delivery were also popularized through the pandemic.

Retail Store Growth Amidst E-commerce Sprints

Despite the growing e-commerce sphere, the number of retail shops is not halting. According to the NRF report, State of Retail, retail sales have grown at unprecedented rates since the pandemic. Retail sales grew by 7% in 2020 and over 14% in 2021, a growth rate that has not been observed in over 20 years. In reference, retail sales grew an average of 3.7% annually from 2010-2019. In the United States, U.S. retailers announced twice as many store openings as closings in 2021. Physical locations remain critical, as stores fulfil a significant proportion of e-commerce orders. Therefore, e-commerce and brick-and-mortar stores work together to drive sales to each other. ICSC finds that opening a new store increases traffic to retailer websites by an average of 37%. 9/10 of the top e-commerce websites are run by retailers operating bricks and mortar stores. This is a prime time for companies to explore building a greater omnichannel presence.

Increasing Presence through Connected Multiple Channels

One factor that came up repeatedly throughout the literature was how consumer expectations are shifting towards experience. In this regard, retail stores are poised to have a greater advantage. When it comes to consumable goods and products, live demonstrations and informative staff can increase a store's revenue. However, the question of connection goes beyond what is done within stores but how brands can stay relevant on all fronts. How can retailers stay engaged with customers at all stages of the buying journey, even when they're not in the store? Email marketing stays at the top of the list of ways consumers desire to stay engaged with their brands.

Social media has played a significant role in terms of driving brand awareness. Smaller brands have an opportunity to level up their market ownership with increasingly sophisticated technologies and automation tools. Seamless and automated responses to customers are also made available through apps like Messenger and WhatsApp.

An example of a plethora of omnichannel marketing efforts occurring at the same time would be:

• Customer sees an Instagram contest featuring Brand A. The requirements are to follow the brand on Instagram and Facebook for one draw (Touchpoint 1)
• Customer walks into their favourite store and sees Brand A. on a monthly new product flyer (Touchpoint 2)
• Customer sees an ad for a free e-book from Brand A and subscribes to their email newsletter (Touchpoint 3)
• Customer receives a promotion for 20% off their first purchase in-store (Touchpoint 4)
• Customers takes a visit to the store to purchase (Touchpoint 5)
• Customer receives a text reminder thanking them for making a purchase and to give feedback for another 10% off their next purchase (Touchpoint 6)

Notice at all these various touchpoints, brands have the opportunity to present who they are and what their values are. A sustainable brand can make clear that its products are 100% organic, fair trade, vegan, made from ethically sourced products…etc., and can customize its assets in those various mediums to reflect its brand image. That is the power of omnichannel marketing—to meet the consumers where they are, wherever they may be.

ESG is a Collaborative, Multi-stakeholder Effort

Sustainability remains somewhat a pipedream for many retailers because many decisions often lie further up in the chain. When retailers receive products, they are at the end of a long and complex supply chain. As the intermediary between a brand and the retailer, Ecotrend has a strict vetting process to ensure that any brand or product that lands at the retailer's door are environmentally conscious and ethical. According to Bain, 95% of GHG emissions in retail are indirect emissions that retailers can't tackle without the help of upstream and downstream supply chain partners. A way retailers can work with their supplier partners is to provide more shelf space for alternative, eco-friendly products such as reusable bottles, vegan products, or biodegradable containers. When more options are available, this can also help positively influence the end user's perception of natural products—from "alternative" to "normal." In the U.S., one in five consumers relies on retailers to help them make more sustainable purchases, such as through increased availability of eco-friendly products or marketing campaign efforts.

Conclusion

Sustainability is becoming a critical factor in the retail industry, with three-quarters of Gen Z considering it more important than brand when purchasing. Despite the challenges of Environmental, Social and Governance (ESG) faced by retailers, technology advancements sprung on by the pandemic have opened new opportunities for better ESG practices. The lingering Amazon effect has raised consumer expectations for a seamless and convenient shopping experience. Despite the year-on-year growth of e-commerce, retail shops remain critical, and companies are exploring building more of an omnichannel presence. Technology has increased the number of potential touchpoints to purchase; thus, retailers must find opportunities to stay engaged with customers at all stages of their buying journey, whether through social media, email marketing or in-store advertising. The rise of inflation and price consciousness has made it harder for retailers to price discriminate, and they must adapt to these changes to succeed in today's retail environment. Ultimately, ESG is not only a responsible business practice but a wise investment for the future of retail.

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