Now further on as the Covid-19 impacts transitions us to the new reality, it has provided a momentous catalyst for consumers to embrace social and environmental causes, seeking products and brands that align with their values. Sustainability is coming back strong and it’s vital for a successful business model.
According to a global research report from the National Retail Federation, 57 per cent of consumers are willing to change their shopping habits to reduce negative environmental impact; 81 per cent indicated sustainability is important to them and 71 per cent of consumers claimed traceability is important to them and that they would even be willing to pay a premium for brands to provide it.
Here are five big major changes currently underway, all powered by consumers’ changing expectations and preferences.
1. Businesses are moving towards net zero carbon
The number of Australian retailers that made pledges in 2020 to reduce carbon emissions has been substantial, and many align with the action required for Australia to achieve the net zero emissions by 2050, compatible with the Paris Climate Agreement. These include major retailers such as Bunnings and Officeworks.
A report by Climate Works in April 2020 analysed 23 Australian retailers – and reported that 80 per cent had started undertaking activities to reduce emissions or had a public stated commitment.
2. Consumers know plastics are bad
Customers know that single-use plastic has a detrimental environmental impact and are keen to reduce packaging and support recycling. We have seen brands and retailers set bold targets to meet or exceed the Australian Packaging Covenant Organisation’s target of 100 per cent of Australian packaging to be recyclable, compostable and reusable by 2025.
Even retailers synonymous with low prices and margins are changing their approach. Kmart has committed to phasing out 10 priority own-brand single-use plastic products by July 2021. Meanwhile, Aldi plans to phase out single-use plastic in its store by the end of this year and reduce plastic in its packaging by 25 per cent by 2025.
Retailers are also actively looking to participate in the new circular economy to find innovations to reduce waste and develop new products. This type of innovation brings endless life to products and services through regeneration, sharing, optimisation, virtualisation and exchange, limiting waste going into landfill while stimulating the economy.
3. Radical radical traceability and transparency product information
Long gone are the days when customers are willing to buy something without wanting to know the ethics behind it. Customers are demanding details such as sustainable product choices, responsible sourcing certification, source of origin and supply chain cost breakdown.
In response to this, Country Road Group has introduced an interactive global supplier map which allows customers to select a specific factory, and gain details of the goods produced and supplier credentials. Patagonia and Marks & Spencer offer similar information.
In addition, we have seen new blockchain platforms such as KPMG Origins, that connects growers, suppliers, sellers and consumers. In one of its features, the platform tracks each step of a product’s journey to better understand the impacts on quality while empowering consumers to interactively see the production journey.
4. Greater exposure of supply chain mistreatment
Specific to the fashion industry, the not-for-profit group Pay UP Fashion has emerged to expose retailers whose practices contribute to human rights abuses. They are tracking 40 global fashion brands and assessing them against 7 supply chain actions. They argue that Covid-19 has brought a crisis to factory and garment workers and their findings have proven to be damaging to brands in the past.
5. Shop local
Covid-19 has facilitated shorter supply chains in part due to consumers wanting to know where their food comes from and supporting local businesses. A Roy Morgan poll (July 2020) showed “more than half of Australians have shown a higher preference for Australian made products” since the start of the pandemic. Tellingly, both Woolworths and Coles supermarkets now have adopted branding slogans that highlight Australian sourcing.
Sustainability has become a key part of the consumer decisionmaking process, and it’s imperative that brands and retailers increase their focus and improve their ability to meet these preferences. This allows competitors of all sizes to build trust and demonstrate they truly understand their customers current and future needs.
This article was originally published in the 2021 Australian Retail Outlook report. You can download it here.