The worldwide growth of the retail sector makes it one of the most important and relevant economic activities of today, regardless of its physical or online format. Retail is responsible for a high number of jobs and contributes significantly and increasingly to GDP, with a greater incidence in the most developed countries.
There are many challenges facing retail activity, from the need to redefine the business model due to digital transformation processes, to the adaptation to new consumer behaviors, to the need to move towards a hyper-personalization of communication and service, as well as adequate management of an increasingly complex supply chain.
In addition to all this, retail has a major and greater challenge ahead: sustainability.
The reason is simple: it is one of the sectors that most contributes to the carbon footprint, far above most business areas. In fact, it is an activity that needs to put into practice all the logistics and transport of products, from the factory to the distributor, from the distributor to the store, to guarantee proximity to the customer. But that's not all: it must be ensured that the assortment is also made up of articles that provide sustainability since generations Y and Z prefer "bio," "natural," and "organic" products.
In this direction, significant steps are being taken around the world. Among the main responsible for the largest retail chains in the United Kingdom (British Retail Consortium), namely Waitrose, Co-Op, Marks & Spencer, Sainsbury, and Tesco, the objective is to reach level 0 in the emission of carbon gases in 2040.
This challenge is divided into 3 phases:
- The stores will be renovated to meet desirable sustainability indices as early as 2030;
- The entire transport and delivery system will follow the same path by 2035.
- The products sold in the stores will have to adjust to new market conditions by 2040.
So what are some of the initiatives that retail chains can immediately start putting in place?
- Develop a dynamic of customer orientation towards sustainable products, whether through signs in store, campaign promotion, and the dedication of more significant linear exhibition space for the assortment;
- Use recyclable materials;
- Use minimal plastic in packaging;
- Prioritize locally sourced products, as they doubly contribute to increasing sustainability: either by promoting the local economy or reducing the carbon footprint, resulting from the reduction in transport distances;
- Transition to issuing receipts digitally.
Ultimately, the objective results in putting into practice a process that implements a circular economy by developing products that respond positively to the degree of sustainability requirement. And may they last!
From another perspective, this whole environment also stems from consumers' perspectives and what they value. Thus, a recent market study carried out in the United Kingdom indicates the consumer main preferences in their choices:
- 56% are price-oriented
- 54% focus on savings and promotions
- 51% are "digital"
- 50% say they are "environmentally friendly."
- 49% call themselves "healthy."
- 46% report being environmentally aware
- 43% prefer local products
Crossing all these trends with the customers' perspectives, we will see the achievement of many of these new challenges through the impact on product portfolio, store, and online environment, as well as greater proximity to the customer.
Therefore, it seems that in the near future, we'll assist a market clearance due to price reduction tactics and, consequently, their effect on margins, which are estimated to decrease by 2% per year. If, on the one hand, retailers need to guarantee competitiveness by offering customer-preferred solutions as well as excellent service, on the other hand, we face the challenge of profitability, not only due to the crushing of margins but also due to the constant need for significant investments in technology and in the digital customer support operation.
Have a great and impactful week!
Pedro Celeste
Director of Executive Master in Strategic Marketing
CATÓLICA-LISBON
This article refers to edition #141 of the "Have a Great and Impactful Week" Newsletter and covers SDGs 9 and 12.
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