In recent years we have seen a massive growth in online retail sales – last year sales grew 18% and total global online sales are now nearing $3 trillion. In particular, sales of Fast Moving Consumer Goods (FMCG) are increasing and expected to grow over 54% in the next 5 years.
FMCG companies are increasingly realising the opportunities within this channel. Proctor & Gamble for example reported online growth of 30% annually in 2018, accounting for 7% of their total sales. Similarly, Unilever reported online sales being up 47% in their latest annual report.
These figures clearly show the massive opportunity for FMCG companies with unprecedented access to consumers and the ability to fulfil consumer desires almost immediately with services like next day delivery. However, this comes at a cost: increasing waste and plastic pollution and a higher carbon footprint.
Making e-commerce net zero
Many online retailers and distribution companies are already looking at how to reduce their carbon footprint as well as their impact from packaging. Amazon for example has set a goal of making 50% of all shipments net zero carbon and Etsy has committed to offsetting their carbon emissions generated by shipping.
Considering the massive growth of e-commerce, meeting such goals and maintaining the ambition of net zero will be a large challenge. Having said this, FMCG companies have the potential to contribute by helping individuals reduce their impacts and at the same time reducing their own downstream emissions.
Below are five ways FMCG companies can support the net zero target and become leaders in the field of e-commerce.
Rethink e-commerce products
Many FMCG companies will sell the same product online as they do in physical stores on a shelf which means increased packaging to ensure these do not break or leak in transit. E-commerce therefore often leads to higher emissions and increased waste. This does not have to be the case.
Amazon’s Frustration Free Packaging (FFP) and Ship in own Container (SIOC) encourage FMCG companies to design for e-commerce, eliminating unnecessary packaging and thereby reducing waste and their carbon footprint. Tide redesigned their detergent bottles and created the Tide Eco Box using 60% less plastic and 30% less water, specifically for online shopping.
Some companies are going further and utilising e-commerce as a means of taking the necessary steps of moving away from the current linear “take, make, dispose” economy to a circular one. Small business, Loop, is providing large FMCG companies with durable and reusable packaging for their delivered products. Their partners currently include companies like Procter & Gamble, Nestlé, PepsiCo and Unilever.
Make products concentrated, refillable and circular
Increasingly environmentally conscious consumers are willing to accept a product that looks different than in store. This also creates opportunities to rethink product concepts. One way of doing so is super concentrated formats. In-store products are typically diluted with water or specific filler ingredients – oftentimes simply to ensure the products look and feel like value for money. Several smaller companies are already changing this. Splosh for example is selling concentrated refills in a pouch, Puracy produces very concentrated laundry liquids and Lush makes tooth tablets that eliminate the need for non-recyclable toothpaste tubes.
Refillable products are helping to close the loop on product packaging. Refills for sprays such as Replenish and Cif mean the consumer can use the valuable and often difficult to recycle trigger bottle multiple times paving the way to a more circular economy.
Capitalise on digital platforms to communicate your sustainability credentials
The online marketplace provides new ways of communicating value. Online products stand out by using hero images and these can be used to engage with a wide audience of online consumers. They can also be used to effectively and quickly communicate sustainability credentials. Online platforms open the door to a growing population of environmentally conscious consumers seeking out alternative products.
Demonstrating the potential of this market, entirely new brands are emerging which are building their very identity around sustainability and the growth in e-commerce. Aequem for example focuses on sustainable fashion and Who Gives a Crap has arrived to the market to deliver sustainable toilet paper.
Incentivise bulk and bundle purchases
The value of the online shopping basket is already double an average offline one in countries such as South Korea, Taiwan and France and over 4 times in the UK. This indicates consumers are more inclined to purchase more valuable or larger items online. Selling bulkier items can reduce the impact of the last mile as less delivery trips are needed to deliver the same amount of product. Making sure large pack sizes are in your online offering will ensure this lower impact option is available to consumers, which when combined with a small discount is often the preferred option.
Increasing the number of delivered items can similarly reduce the impact of the last mile; products can be bundled together, or discounts provided for buying multiple items from the same supplier. Dollar Shave Club for example is providing discounts the more items are bought.
Make your products net zero
Tools such as Life Cycle Assessment can be deployed to comprehensively compare produce and packaging options and create strategies for impact reduction. This way FMCG companies can optimise their products and reduce the impact of their online sales. It also could also provide them with a marketable low carbon product.
Reducing emissions through innovation and product redesign should always come first, but it might not yet be possible to eliminate all carbon emissions. Therefore, if residual emissions exist, companies can follow the example of Etsy who offset their transport emissions or Sukin skin care products who offsets production emissions. Purchasing carbon credits to offset remaining emissions will make products and services carbon neutral – meeting the growing demand for such products.
Vast innovation and growth opportunities exist for FMCG companies within e-commerce. As the world faces a huge challenge to reconcile growing consumer demand with plastic pollution and the climate crisis, FMCG companies are in a powerful position to take advantage of the developing e-commerce marketplace whilst ensuring growth is sustainable. With the urgency of the global challenges, it is imperative that they do so.