Human consumption has altered the environment and disrupted ecosystems on a global scale. As research indicates, production, logistics, and waste caused by consumerism have, over time, undoubtedly negatively impacted the environment. As e-commerce increasingly becomes the preferred form of commerce, the sector’s impact on the environment must be considered. Particularly the packaging of goods for shipping is of concern. A large portion of shipping materials, mainly corrugated material (cardboard) and plastic, associated with the fulfillment of e-commerce orders, ends up in landfills rather than being properly recycled. Recycling initiatives alone do not have the capacity to address e-commerce’s negative impact on the environment. How environmentally sustainable are current fulfillment operations in e-commerce ventures and what can be done to improve them?

When a customer orders a product online, the item can be manually or automatically packaged for shipping, depending on the product and the scope of a given venture’s operations. Let us consider fashion e-tailers such as Net-A-Porter, Moda Operandi, Zappos, or Barneys New York’s Online, all of which ship an array of fashion and beauty items ranging from shoes and clothing to mascara and jewelry daily. What is the likelihood that these companies ship goods in packaging materials that are adequate for the product, while creating the lowest impact on the environment, i.e. by avoiding disproportionally large packaging materials? Unfortunately, the likelihood is relatively high.

I conducted a test over the past two months to see whether or not excess packaging was a legitimate concern and an area in e-commerce that needs to be addressed. I tested the above-mentioned e-tailers, as well as several others, to see how the packaging of items compares to the products’ actual packaging needs. With the exception of one company, the above mentioned e-tailers sent goods in shipping packaging at an inadequate size, meaning that the boxes were much larger than the goods themselves, thereby creating an exorbitant amount of packaging waste. In one instance, a tube of mascara arrived in a box large enough to fit a pair of shoes. In the case of Net-A-Porter, although their boxes were adorned with the “Sustainable Forestry Initiative” logo, the contents of the package were significantly smaller than the allocated shipping box. Using post-consumer product materials or sustainably sourced packaging materials are only part of the commitment to environmentally friendly packaging. The size of the product and the size of the box matter.

Fulfillment strategies must be created to address the product-to-box ratio problem in order to mitigate the packaging waste created by e-commerce purchases. E-commerce ventures should streamline their packing design to better suit products, while adopting a cradle-to-cradle model, meaning utilizing packaging materials that can be recycled or re-used. Surveys show that the sustainability of a brand’s packaging, both in terms of material and quantity, can influence a customer’s decision to make future purchases. It is in the interest of e-commerce ventures to invest in order fulfillment and packaging strategy, whether automated or manual, in order to limit the negative environmental impact that the distribution of their goods create.


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This has been an exciting time in the e-commerce space with the rise of many new trends and startup ideas that are evolving and shaping the competitive environment.

  • Flash sales: Notable examples: Gilt Groupe, Rue Lala, HauteLook

Despite a number of high profile exits, the successful companies are still doing well, enjoying high margins and have successfully built barriers to entry to prevent new players into the space. Critical to the business are availability and quality of inventories which will become increasingly costly given the cut in post-recession production. Traditionally brands see flash sales sites as alternative distribution channels for off-seasons items and there was little evidence to suggest any significant changes to that position in the near future.

  • Personal subscription: Notable examples: BirchBox, Beachmint

In order to be successful, these players are aiming at specific categories of customers who value convenience and love the discovery excitement (Birchbox) or who do not necessarily have time and need help with styling (Trunkclub). Future growth strategies could include partnership with brands or fashion authorities (editorials, magazines etc.) to push new products to consumers.

  • Social curation / social shopping: Notable examples: Lyst, The Fancy, Pinterest

As the amount of information is becoming increasingly overwhelmed, traditional search tools like Google are less effective at finding answers for topics that involve taste and emotions like fashion. Solutions will likely come from a combination of machine-powered tool and social sourcing – leveraging the power of the crowd.

  • Vertically integrated ecommerce: Notable examples: Bonobos, Warby Parker

These are web-only brands are vertically integrating the retail value chain, bringing products directly to consumers, offering high-quality products at a fraction of the price at department stores and other retailers. By making their own unique products, vertically integrated retailers avoid having to compete head-to-head with Amazon. Furthermore, being an online niche gives retailers the ability to build a distinct, easily recognizable brand that can grow customer loyalty while improvements in online shopping are bridging the experience advantage traditionally provided by physical stores.

Interestingly, recently, after successfully established its online presence, these retailers are moving into brick and mortar stores. However, unlike traditional retailers who rely on big, flagship stores to interact with customers, online retailers established a core website where majority of transactions happen and supplemented it with physical stores to provide customers with additional brand experience. This reflects a trend among retailers who are trying to become more customer-centric, allowing customers to shop the way they want.


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The concept of ready to wear is fundamental to today’s fashion industry. Clothes can be produced half a world away, months in advance of the selling season and then available for a consumer to try on and complete a purchase in as little time as one has in a lunch break. Consumers have long benefited from lower prices and convenience from this system as compared to the time constraints and cost of having clothes made to order or of making clothes themselves.

Looking at the online landscape for fashion today, however, there is emerging demand for the use of technology to get closer to where fashion was a century ago, but better: custom clothes and accessories at (or close to) ready to wear prices. Examples of this trend are popping up in multiple categories: Indochino and Alton Lane for men’s clothing, Shoes of Prey and Milk & Honey for women’s shoes, Bow & Drape for women’s clothing, and others. Additionally, companies like Bonobos (men’s apparel) and ThirdLove (bras and intimate wear) are gaining traction by trying to solve for other fit problems that are remnants of standard sizing practices. These companies are using online channels to gain a following and distribution that would be considerably more expensive, if not impossible, in the offline world. Obviously, going online avoids the extensive costs of real estate and labor, but additionally, the online world represents an opportunity to communicate a unique value proposition to targeted consumers. The ability to reach a dispersed audience online increases the probability that these messages will reach a consumer who is willing to change his or her behavior and gives these companies the chance to develop a sustained customer base.

But does it make sense to use the virtual world to solve for one of the more complex conditions of the physical world: not only varying body shapes and types, but also varying personal preferences for a product category with a wide range of textures, colors and weights? Emerging players are using all types of technology to facilitate the flow of information between the separated parties. To get information about consumers, companies are utilizing everything from simple surveys, to web cams and iPhone apps to sophisticated body scanners. An ecommerce company is more cost effectively able to ship a consumer a free physical measuring kit and have the consumer input his or her information electronically than reach that consumer in person at scale. To provide better information to consumers, companies are employing better photography and rendering techniques as well as video and virtual try-on technology, among other advances.

Rather than seeing these technologies completely replace brick-and-mortar retail, however, some of the most successful of these ecommerce companies are using their scale to do things they never set out to do: build stores. Will the technology ever be enough to have mass market appeal or has the internet simply made bringing these value propositions to scale easier?


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The explosive growth of e-commerce in the last decade has certainly raised questions as to whether there are limits to its take-over of the brick and mortar world. The global consumer’s increasing dependence on online and mobile platforms to communicate and digest information, as well as his/her willingness to partake in technology-enabled experiences, have certainly challenged the need for physical stores to sell physical goods. With this said however, despite the undeniable power of the internet in delivering unprecedented marketing, data collection and monetization capabilities to retailers all over the world, many global luxury brands have, since the very beginning, vowed to never sell their products online. At the same time, even the strongest retailing brands that have relied solely on the e-commerce platform have begun to incorporate physical stores to their overall strategy, recognizing the limits to their ‘curating’ the online experience for customers.

With the online play becoming a critical element of growth and penetration for western brands in emerging markets, several luxury good companies (i.e., Burberry, Hermes, Gucci…etc.) have begun to mobilize global online communities and made efforts to monetize those interactions either through their own sites or third party e-commerce platforms. On the other hand, a strong contingent of brands (i.e., Prada and Chanel) remains beholden to its longstanding conservative stance. For these companies, the thesis, that the in-store world remains the sole venue that can truly carry with it the brand value and identity of a retail company, remains a strong one. For the same reason that many of the most prestigious luxury brands have remarkably been able to shy away from franchise models, in the name of tighter control over brand equity, distribution, customer service and customer experience, they have also steered clear of selling their products on the internet. For the time being, at least, “selling online” continues to carry with it a stigma of reducing brand prestige and value not only by eliminating the exclusivity and luxe experience that is created in multi-million dollar flagship stores, but also by unintentionally generating an aura of product commoditization in the eyes of consumers. For this small group at the upper echelon of the retail market, brick and mortar will likely never die as the effectiveness and profitability of online sales comes at an immeasurable cost to their perceived brand – likely the hardest element of their business to repair.

While the importance of physical stores are clearly critical to those retailers that have only existed and grown offline, even the younger brands (i.e., eBay, Bonobos, Warby Parker, Etsy, Baublebar…etc) that have operated solely online are evolving their models to include a brick and mortar component, coining the ‘click to brick’ retail model. Regardless of the strategic initiatives taken to create operational efficiencies in shipping and return or ‘checkout’ and payment processes to optimize the customer buying experience, even the most pure play e-commerce companies recognize the importance of human contact with sales associates, the product and the brand itself. Each of these elements has played a tremendous role in increasing the basket/order sizes of customers and their willingness to return to these stores for more, and so far, e-commerce platforms have been limited by existing technological capabilities to translate these physical offerings to an online world. Why else would young startups that have witnessed overwhelming success online, bother with the costs, investments and capital intensity of operating stores or ‘showrooms’. Without product demos or consumer interactions with the products themselves (feel, smell, sight…etc.), it is difficult for a broader retail landscape to move online, but even those already online are seeking ways to connect better with consumers offline. Interestingly, retailers have brought technology into their stores because of this – moving more towards optimizing online and/or mobile capabilities to enhance the in-store experience (i.e., leveraging mobile technology platforms for product reviews, price comparisons…etc.), and away from replacing this experience entirely with websites.

On the whole, it is difficult to predict how new technologies and tastes will alter the current pace of e-commerce adoption in what remains of the offline world. While many of the barriers for e-commerce are engrained in technology, some of the larger hurdles are created simply by human buying psychology which simply has not fully caught up, and perhaps never will.

References & Articles

http://www.forbes.com/sites/onmarketing/2013/05/02/making-the-best-of-a-digital-situation-what-luxury-brands-can-do-to-catch-up-online/

http://www.luxist.com/tag/richemont+group/

http://www.businessweek.com/articles/2013-06-05/another-experiment-in-e-commerce-to-brick-and-mortar

http://www.practicalecommerce.com/articles/4114-Ecommerce-and-Brick-and-mortar-Retail-Converge


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Recently, I came across a new trend – social commerce – where more and more businesses are providing discounts and other incentives to its customers in exchange for publicizing their purchases online. Social Commerce is the intersection of social media activity and eCommerce where sharing leads to real dollars. I learned of this phenomenon for the first time through an online shopping website Gilt.com. When I logged in on to the website using my iPad, Gilt offered me a discount to download their app and asked me for permission to make my purchases visible to my friends on facebook (Gilt promised some exceptions, however, gifts and intimates purchased would be excluded). At first, I thought: “What a genius marketing idea!” but then I started to doubt whether this idea was feasible and would get any customer buy-in. On the one hand, people I am friends with probably fit within my age and socio-economic group, thus purchases I make might be items my friends would be interested in buying. Ecommerce businesses by making my purchases public would be getting access to exactly the customers they want. Furthermore, the fact that I actually made the purchase as opposed to just liked the item (Pinterest allows users to simply share items they find appealing) might be a more powerful signal to my friends and might have a meaningful influence in driving transactions for any given ecommerce business. However, at the same time users might not be as excited about making their purchases (sometimes irrational, i.e. items of designer clothing that cost way more than they should) public. I, for one, thinking about that downside refused to become a member of this service despite the whooping 20% discount Gilt offered me). I imagine, there are many users like myself out there who would be worried about giving away the right to make their purchases public to online commerce website.

Social media democratized marketing for small businesses: successful promotion and distribution of products is no longer reserved for larger companies who can afford expensive media expenses such as TV ads, commercials during sporting events, etc. Companies like Facebook and Twitter have leveled the playing field – allowing participants to share events, products, and companies they are excited about with their friends by simply clicking the “like” button. Mass adoption of these platforms made it incredibly cheap for companies to reach a large subset of the population that might have a high likelihood of enjoying and purchasing their product.

EVENTBRITE CASE[1]:

Eventbrite is one of the companies that is very excited about social commerce and uses it extensively. The company allows users to share the event before they’ve purchased a ticket by featuring the Facebook “Like” button. On their order confirmation pages (after the ticket has been purchased), they placed a “Publish to Facebook” tool. They track event-sharing behavior carefully and have made few key discoveries from the data they collected between October 2010 and March 2011:

  • 40% of sharing through Facebook occurred on the event page (via the “Like” button) vs. 60% of sharing which occurred on the order confirmation page. This suggests that the motivation to share is higher once the purchase is made and the guest is confirmed to attend the event.
  • The company’s BSR (browsing share rate) is 1% — only 1% of people who are simply exploring the idea of going to the event share with their friends before purchasing a ticket to the actual event. Eventbrite’s TSR (transcation share rate), on the other hand, is 10%, which means 10 times more people share an event from the order confirmation page.
  • They’ve also found that post-purchase share on facebook drives 20% more sales than a pre-purchase share.

The Eventbrite case shows that social commerce is a very powerful tool that could be used to drive sales for a business. However, are all businesses created equal when it comes to social commerce? Or are some businesses meant to succeed in integrating their tool into their marketing strategy while others are doomed to fail?

I believe it is the latter. Although people feel more and more comfortable sharing many aspects of their lives online – e.g. music they listen to (Spotify), events they go to (Eventbrite), places they’ve attended (FourSquare) – products they buy might not be one of them. Firstly, because frequently purchases we make online (although frequently discounted) might be overpriced – an average price for a shirt on Gilt is around $100, which is significantly higher than the price of an average shirt an average American buys (partly due to the fact that items sold on Gilt are designer). Secondly, frequency of their purchases might be something people are ashamed of. If someone shops online every week feels embarrassed by their shopaholism, they might be uncomfortable by these public posts and thus, it could potentially hurt Gilt by discouraging to customers to make frequent purchases. Thirdly, many of us have facebook friends that we do not know much about, so perhaps I am not comfortable with those individuals finding out more about my spending patterns. For the reasons above, I can see how Gilt could fail at implementing a successful social commerce initiative. I believe to succeed, they should beta test it and incorporate a solution similar to that of Eventbrite, i.e. let customers choose which purchases they want to make public and which they prefer to keep private (as opposed to making every purchase public by default). This approach would allow Gilt to analyze their preliminary data and ensure that their customers are happy with this sharing and then consider making it a default feature.


[1] http://blog.eventbrite.com/social-commerce-2/

 


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