Is sustainability sustainable in retail?
Well, the results are in…according to a recent study by First Insight, on average, 75% of ALL generational groups, from Gen Z to Baby Boomers, care that retailers are sustainable and offer sustainable products.
Do you expect retailers and brands to become more sustainable?
The same report shows that consumers are NOT willing to pay enough more for sustainability to cover the costs.
Additionally, the information indicates that the industry has not done a great job of educating consumers on what sustainability means or how to properly identify it so that a consumer can properly relate to the initiative or product. .
Is it a surprise? Not really…..
What it does is beg the following question: if consumers are unwilling to shell out money to buy sustainable products, do retailers and brands have the guts to maintain the path to a sustainable future or is this just another interesting trend to pass by the wayside?
In order to understand what might happen, I think it’s best to look at what might happen if a retailer or brand were to invest (or not) in a sustainable future and how customers are likely to react given the reaction of the competitive landscape. What does that mean? Let’s take an example.
If Brand A decides to go the extra mile in sustainability and absorbs 5% more cost to bring a more sustainable product to market and consumers just keep buying from it at the same rate, it has lost 5% gross margin. This assumes that nothing changes in the competitive landscape. But let’s say their competitors follow. It’s likely that the overall cost will drop and then everything will fall back to the same balance that existed before assuming advancements in manufacturing etc. that usually occur. The difference is that consumers and society as a whole have benefited.
However, if their competitors do not follow, they could potentially gain market share and the gross margin percentage could drop, revenue and customer acquisitions increase. In the long run, they win.
If the company chooses not to follow the customer’s sustainability desires, while it may in the short term earn the 5% gross margin, it risks losing to competitors who adopt it and it also risks lose long-term customers and revenue.
Given this conundrum, what should a retailer, brand or manufacturer do?
It seems clear that understanding and anticipating how consumers are likely to REACT by testing the strategy would be far superior and more prudent than executing either side and then reacting.
That said, many executives continue to say that consumers don’t know what they want, and it’s their job to figure it out for them. While I agree that it is the responsibility of a leader or decision maker to make these decisions completely – and they should – my view is that we should arm them with the best facts and possible data to take them. Testing, testing and testing… this is the best form of listening and seeking understanding. The alternative is competitive and much riskier DISADVANTAGE.
