Online commerce: cutting energy and resource use - but at what cost?
This is the fifth in a series of posts by SustainAbility about business model innovations that accelerate social and environmental impact. When Warby Parker launched its prescription eyewear brand four years ago, it broke the industry mold by offering a unique business proposition. Whereas most eyeglass shops depend on storefronts to bring in customers, Warby Parker created a business model based on bringing the glasses to the consumers.
Using their “Home Try On” system, the company’s customers can order up to five pairs of glasses to try on in front of their bathroom mirrors – for five days at no charge. Much has been written about Warby Parker’s hipster brand identity as well as its social mission: for every pair of glasses sold, the company donates a pair to a person in need. What I find unique about its model, however, is the potential for sustainability by way of reduced resource usage.
Just like Netflix and other virtual brands that have come before it, Warby Parker is cutting energy and resource use by streamlining operations. Once, the consumer marketplace was almost exclusively comprised of single-purpose brick and mortar stores – the butcher, the baker, the greengrocer and even the optometrist. Later, grocery stores – and, eventually, big box stores, retail outlets and shopping malls – put several of these services under one roof. It isn’t hard to see why the department store model was so profitable: erecting a store on every corner or in every town provides customers with convenience, builds brand recognition, and can even create a sense of community. However, this brick-and-mortar model can also be resource and capital intensive.
As a result, companies like Warby Parker have experimented with virtual business models, a more sustainable model in terms of resource use. I analyzed several of these “physical to virtual” business models in a report I co-wrote and launched earlier this year, Model Behavior: 20 Business Model Innovations for Sustainability. This model eliminates brick and mortar infrastructure in order to reduce the resources needed to supply a product to a consumer. Shipping and its associated emissions – as well as packaging and data centers – remain important considerations, but studies show that online purchases can be less carbon intensive than in-store buys. Advertisement Side-by-side emissions comparisons highlight the efficiency of online retail. A 2010 study found that, at distances of less than 8.6 miles, in-store shoppers expend slightly less carbon per transaction than online shoppers, about 77.9g CO2 versus 73.8g CO2. Beyond that distance, however, online shoppers’ footprints remain relatively constant, whereas in-store shoppers’ footprints can explode exponentially, to as much as 451.4g CO2 per transaction. A separate study looked at “last mile delivery”, or the last trip that a product makes between retailer and home consumer. It found that consumers who drive to the store have to buy 24 items to make the trip equal to the carbon footprint of just one item ordered online. Recently, Warby Parker has started moving back to traditional retail, opening 14 stores and showrooms across the country.
However, many e-commerce brands remain totally virtual, relying on the ubiquity and increasing security of online payment platforms to eliminate the need for brick and mortar infrastructure. Zappos is a good example. Before it was purchased by Amazon in 2009, the online retailer operated out of only two warehouses, which it self-managed. This is especially impressive when one considers that it was managing $1bn in sales at the time. Had Zappos gone the brick-and-mortar route, it would have needed stores across the country to attain those sales figures. This isn’t to say that all “virtual” models are more sustainable than their physical predecessors. For example, FreshDirect, the grocery-delivery company that has operated in New York City for several years, has faced criticism for the emissions created by its idling vehicles and its use of excessive packaging. And Amazon has come under attack for its perceived lack of transparency. Last month, news emerged that the company had hired a chief sustainability officer, which may jumpstart its sustainability strategy. There are other complications that are unique to virtual stores. For example, in augmenting some environmental elements of sustainability, virtual commerce may eliminate jobs, thereby creating questions about social impact. Furthermore, as more and more commerce moves online, we run the risk of losing valuable social capital created through community connections that come from visiting local stores. Virtual retailers, try as they might, still haven’t yet created the same sense of community and connection enjoyed by the corner store. Regardless, e-commerce continues to grow. In the US, it comprises 6.4% of the overall retail market today; meanwhile, China’s online marketplace is exploding through the rapid growth of companies like Alibaba. As consumers become more comfortable with virtual shopping and develop trust with virtual brands, we will likely see more online-only brands. The looming question is whether these models, with their low barriers to purchase (free shipping! One click purchase!), accelerate consumption habits or keep them in check.