Circular economy, economy of use: How to decarbonize retail

The explosion of online commerce, in the wake of the health crisis, poses new challenges for retailers. In the retail sector, optimizing operational efficiency should go jointly with implementing the responsible practices expected by a growing number of citizens. Between reducing the carbon footprint of deliveries and the rise of the circular economy, we explore the retail of tomorrow.

In the history of retailing, there has definitely been a before-COVID and an after-COVID. In less than a year, we have made a leap of at least five years in terms of digitization. The increase has been particularly rapid in the food sector, where Christmas’ sales in UK was up 126,4% in 2020, compared to an 14,8% decrease for non-food deliveries. One manifestation has been the sudden emergence of startups specializing in the delivery of groceries in less than fifteen minutes, such as Cajoo and Flink.

Reusable packaging and subscription models: getting rid of the linear economy

An increasingly strong trend in retailing: seeking out good practices in the circular economy. Where packaging is concerned, there is no shortage of solutions for reducing resource consumption through reuse. For example, LivingPackets — a startup specializing in the transport of parcels between individuals — has developed a connected package called THE BOX, which can be reused up to 1,000 times. THE BOX ensures real-time shipment monitoring using sensors, while guaranteeing an even more secure service than traditional deliveries, the startup says. Repack’s less high-tech solution consists of returning the specially designed packaging (made of recycled textile fiber) once it has been received. The bottom line: 83% less carbon impact, according to the company.

Other retail players have applied this philosophy, not only to packaging but, to the products themselves. Whether for rental of clothing (being tested since 2019 by H&M) and, among others, and already offered by FashionPass) or electronic devices (as offered by Grover), subscription offers have emerged in areas where consumers have been accustomed to ownership. What is the advantage of this usage economy or functionality economy? Reduced waste and greater flexibility for the customer, which has particular appeal for Generation Z. In the United States, 90% of young consumers use such subscription services.

Then, there’s the sale of second-hand or reconditioned products, which now goes beyond the sphere of commerce between individuals as popularized by Craiglist and Vinted. Brands such as Ikea now offer second-hand products in their catalog while encouraging customers to resell articles they have purchased from the brand. It’s a virtuous loop that targets a new clientele (by making certain products more accessible) while creating a sustainable growth driver. So, beyond reducing their environmental footprint, retail players have everything to gain from investing in the circular economy, including from an economic point of view.

Beyond reducing their environmental footprint, retail players have everything to gain from investing in the circular economy, including from an economic point of view.

According to the Ellen MacArthur Foundation, making only 20% of single-use plastic packaging reusable would represent a development opportunity of $10 billion.

Last mile delivery and delivery orchestrators: Moving toward decarbonization

Logistics should be fast, safe, and efficient, but also environmentally responsible: expectations regarding delivery are growing. In response, some retail players, such as Tesco, are betting on “dark stores” – supermarkets without customers, entirely dedicated to online sales. The objective is to ultimately locate inventory as close as possible to customers and thus shorten transport time (and reduce the carbon footprint). I believe this avoids the difficulties encountered by traditional stores, specifically the issues surrounding the large surface area, which is expensive in itself, as well as in terms of maintenance as it requires personnel, etc. Bringing merchandise closer to customers, however, does not quite solve the last mile puzzle. Because of the large number of distribution points (customer homes), the logistics of this final link in the chain is complex, costly and is blamed for worsening traffic jams and pollution in cities.

Faced with this observation, softer alternatives are emerging to combine optimization and decarbonization, such as the startup Woop, launched in 2018, which recently joined the Atos Scaler accelerator program. Half of Scaler’s startups offer decarbonization solutions. Woop describes itself as a delivery orchestrator, centralizing more than 150 national, local and ecological carriers on its platform to allow customers to choose the best option according to their personal criteria (cost, deadlines, carbon footprint, etc.). Provided they prove to be feasible, particularly over short journeys, soft mobility offers such as cycle delivery are suggested as a priority.

In the near future, this famous last mile could be covered by drones (as has already been done for food delivery in Reykjavik, Iceland since 2017) or by autonomous vehicles. While they currently tend to be used more in warehouses to optimize and streamline order preparation, tests are underway – especially in the United States, where Walmart is experimenting driverless delivery, in collaboration with an autonomous trucks specialist (Gatik) through Arkansas.

When omnichannel becomes the ally of more responsible consumption

Another way to decarbonize: the rise of omnichannel through the growth of phygital: physical points of sale that include digital technologies. Augmented reality filters, integrated e-shops (for ordering online while in the store) and automated or autonomous stores have made rapid progress since the health crisis. I’m personally convinced by the emergence of virtual supermarkets whose shelves would be organized according to individual preferences. Beyond the constraints caused by the health crisis, these transformations are also an opportunity for retailers to respond to a desire widely shared among citizens: to regain control of their purchases, while promoting responsible consumption. Certain research reveals a strong trend. According to the 14th Responsible Consumption Barometer conducted in March 2021, 72% of French people have changed their daily practices to reduce the impact of their consumption.

As customers change their consumption habits, will retailers find new growth levers by becoming more virtuous? Perhaps the circular economy will succeed in accomplishing the feat of reconciling retailers, consumers and the environment.

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About Terry Lobel
Senior Vice President Retail, Transport and Logistics, Atos
Since February 2020, Terry Lobel is in charge of Strategy, M&A, Portfolio, Pre-Sales, Consulting, Marketing, Alliances and Partnerships, as well as Innovation for Retail, Transport and Logistics at global level in Atos. He joined Atos in 2006 as Head of non-IT consulting in Spain, then took the responsibility of the transaction-based division in Iberia in 2009. Later in 2013, this division was carved out into Worldline Iberia, that he led as CEO for 2 years. Terry has been a Member of Atos Executive Group since July 2014, as Global Head of Sales in Worldline between 2014 and 2017, then in Atos for Retail, CPG and Services. Before Atos, Terry worked in France and Canada, then for Sun Microsystems in the UK and the US between 1994 to 1996, then joined strategy consulting firm McKinsey as a Manager in Paris and New York. He moved to Spain in 1999 and became a senior consultant in Arthur D. Little. In 2001, he joined Hewlett Packard Iberia as account service manager for large accounts, then became Director of Business Development for HP Iberia in 2003. He studied in Cambridge Board of Extra-Mural Studies (UK), is a graduate from EHESS in Paris, holds a B. Sc. in Biochemistry, a Master of General Management from IESE Business School, and a “Value for Executive Leaders” program certificate from INSEAD. He is also a certified - ACTP - coach (ICF) and an associate professor of strategy at Universidad Politécnica de Madrid since 2010.

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