The big trick you are missing in your sustainability policy

 

What are you doing to improve the sustainability of your ecommerce operation? Eco friendly last mile delivery? Limiting packaging and plastics? Encouraging customers to use click and collect? Reducing stock destruction?

All of these are positive changes, but chances are you are missing a much bigger win – reducing the volume of stock you need to hold to cater for customer purchase behaviour.  A typical retailer needs to hold significant over stock to allow for customers ordering more than one size of an item, or taking too long to return unwanted goods. Retailers want to provide ‘endless aisles’ so customers can order what they want when they want it. 

Understanding your customers’ needs and intentions and providing a delivery proposition which supports these needs whilst at the same time promoting a sustainable approach can be massively impactful. If you get this right, it can not only cut the carbon footprint of your operation, but it will also be hugely positive on your overall business efficiency and effectiveness.  It may even make your best customers feel more loved.

 

The impact of multiple sizes ordered online.

 

Online retail isn’t like going into a shop and trying on three dresses, buying one and two returning to the shop floor.

Here’s what happens if a hundred consumers each buys a dress in three sizes to try on at home and keeps one (if you are lucky):

 

One dress (Size 8, 10 and 12 ordered in one colour)
number of sizes (3) 3
Number of orders 100
Total items shipped out 300
Return rate (item not liked) 30%
Returned items (size selection) 200
Returned items (not liked) 30
Total returned items 230
Total item journeys (minimum) 200
Sales 70
Journeys per sale 2.857
Operational activities (item level) 530

 

This scenario not only results in fuel waste from the delivery process and running costs for warehouse operations to handle and reroute stock, but it also evaporates precious profit margins as there is significant effort in the sales per operational activity ratio. 

 

So what’s the alternative?

 

What if you could nudge customers to only buy the most likely size to fit? Customers only shop as described above because they are anxious that an item won’t fit, and foresee inconvenient, lengthy to-ing and fro-ing to get an item which is suitable.  The solution is to use predictive analytics, based on the basket contents and purchase history, to offer an alternative solution.  In the example shown below the option is an ‘express exchange’ if the item needs to be returned for a different size or colour.

This needn’t cost the earth – in today’s fast-moving ecommerce world, it’s possible to do next day or even same day delivery relatively cost efficiently. 

The effect of this approach reduces the number of items in transit and total number of journeys to or from the DC (environmentally a big plus).  As a side benefit, it gives retailers the position to present their offer as environmentally conscious, and/or to treat exchanging customers like VIPs, keeping them in the loop re sustainability and maintaining a buying process dialogue akin to an instore helper checking everything is ok. 

Here’s the change on the numbers:

 

Scenario – Expedited exchange single size order
Number of orders 100
Total items shipped out 130
Return rate (item not liked) 30%
Return rate (item doesn’t fit) EXPRESS exchange 30%
Returned items (size selection) 30
Returned items (not liked) 30
Total return items 60
Total item journeys (minimum) 190
Sales 70
Journeys per sale 2.714
Operational activities (item level) 190

 

You’ll see that while the journeys per sale are reduced slightly (2.714 from 2.857), there is the massive reduction in operational processing. These carry huge costs for people and infrastructure, but also a hidden environmental impact of repurposing incoming items ironing, cleaning, re-packaging etc before they can be sold again as new. 

The other benefit (and this really is the big one) is in the reduction of stock which is needed to serve this ‘endless aisle’ process.  If you are sending out three items for everything sold, this means you have three times the stock you actually need for each sale. 

Even with the worst emissions trucks you can source and inefficient routing, plastic packaging etc the impact on the environment is dwarfed compared to the manufacturing impact of creating the goods to be sold in the first place. So, be leaner with the amount of stock you hold, be it at the DC, in store to be fulfilled to customers from the micro-warehouses there. Also factor in the virtual stock retailers hold which is bought already, but will be returned by their customers to be refunded and resold, get this back faster and ideally reduce the virtual stock. 

This is the biggest win for the planet… but don’t stop the other sustainability activities too!