Reduce Complexity, Maximize Sustainability

By Filippo Battaini, Research Manager, and Sofia Poggi, Research Analyst, IDC Retail Insights Europe

Consumers Want Sustainable Shopping Journeys

Sustainability has become a key factor to inform consumers' purchasing decisions. A consumer survey conducted by IDC reveals that 46% of shoppers value retailers' sustainability records. This reaches 51% among younger adults aged 26 to 40. 

Only 16% of shoppers would be reluctant to pay more for sustainable products, according to the survey — showing how today's consumers are willing to pay extra to ensure they buy sustainably. To appeal to increasingly environmentally conscious shoppers, retailers need to show their offering is sustainable by effectively measuring and communicating their achievements in reaching sustainability goals. 

Navigating Through Complex Omni-Channel Operations

Retailers shouldn't just rely on the goodwill of shoppers to pay a premium for sustainable products to make environmentally friendly operations economically viable. Luckily, for retailers, operational efficiency and sustainability go hand in hand. According to the latest IDC research, 46% of retailers consider operational efficiency and sustainability a top business priority for their organization. As omni-channel operations become more complex, retailers need to develop an architecture that enables greater visibility across the entire value chain, for example by leveraging data on product life cycles and customer journeys and maximizing efficiencies in distribution and last-mile delivery. 

Returns — a pain point for retailers but an expected part of the shopping journey for consumers — dent omni-channel operations efficiency and profitability and increase carbon emissions. As we transition to a post-pandemic shopping environment where omni-channel customer journeys are the standard, returns continue to be a problem. The National Retail Federation estimates that U.S. consumers returned more than $816 billion of merchandise in 2022, generating a 16.5% average return rate for U.S. retail. Returned items are a cost for retailers, and the impact of sending deliveries back and forth is detrimental to the environment, making it a priority issue for retailers to address. 

Prevent Returns to Minimize Carbon Footprint

Increasing the efficiency of fulfillment operations is one effective way to achieve sustainable retail. According to IDC research, order fulfillment capabilities such as inventory orchestration, fulfillment optimization, and delivery execution are considered essential or a high priority for 19% and 45% of retailers respectively. As more customers buy online, retailers need to optimize fulfillment through capabilities that raise efficiency and visibility, including order management systems and optimized route planning.

There is no point in having efficient fulfillment if what follows is an unhappy customer sending items back to the retailer. Retailers should look at ways to prevent returns from happening in the first place. This issue is particularly thorny for companies selling apparel and footwear, categories in which returns are far more likely. 

Technologies such as virtual fitting — which combines artificial intelligence (AI), machine learning (ML), and computer vision to help consumers identify the right fit and make it easier to shop across different brands and channels — can be instrumental for apparel and footwear retailers to build profiles for each customer with information such as size, preferences, and specific requirements. 

The insight gathered enables the delivery of personalized, engaging, and frictionless customer experience, and is a powerful tool to empower client-facing staff to better engage with customers across the omni-channel shopping journey, simultaneously boosting customer satisfaction and reducing returns. According to industry sources, retailers that implemented virtual fitting technologies have lowered their return rates by 20% or more.


Recommendations for Sustainable Retail Operations

Sustainability is a critical factor in retail, and consumers are increasingly demanding environmentally mindful shopping experiences. Returns are detrimental to operational efficiency and sustainability, and need to be prevented. Retailers should:

  • Emphasize sustainability in communications with customers: As consumers become more environmentally conscious, retailers should effectively communicate their sustainability efforts and focus on measuring and communicating their achievements in reaching their sustainability goals. 
  • Leverage technology to optimize order fulfillment: Retailers need to optimize their order fulfillment capabilities including inventory orchestration, fulfillment optimization, and delivery execution to minimize returns and reduce carbon emissions. 
  • Implement virtual fitting technologies: Apparel and footwear retailers can significantly reduce returns by implementing virtual fitting technologies to reduce return rates and improve customer satisfaction.
  • Develop an architecture for greater visibility across the entire value chain: Retailers should develop an architecture that enables greater visibility across the entire value chain by leveraging data on product life cycles and customer journeys to maximize efficiencies in distribution and last-mile delivery.
  • Prioritize sustainability and operational efficiency: Retailers should prioritize sustainability and operational efficiency as top business priorities to achieve long-term success. By minimizing returns and reducing carbon emissions, retailers can improve their profitability while meeting the demands of their environmentally conscious customers.

By implementing these recommendations, retailers can minimize returns and maximize sustainability in their operations, leading to improved profitability and customer satisfaction.

Consumers are increasingly aware of the impact of their buying decisions on their communities and the world at large. At the same time, they expect a high level of personalization and convenience while shopping. Maintaining a superior buying experience and at the same time helping customers shop responsibly is an ongoing challenge for retailers. Advances in data analytics and AI are helping brands and retailers boost operational efficiencies, enabling them to ensure both convenient and sustainable operations.