Against the backdrop of growing consumer demand, two logistics leaders discuss their sustainability pursuits.
Known as the Motor City, you might not associate Detroit with sustainability. But in recent weeks, Ed Rogers, Senior Director of Global Sustainability at UPS, and Larisa Summers, Senior Vice President of e-Commerce and Marketing at Optoro, presented at the Sustainable Brands conference, right in the heart of the city synonymous with the automobile.
With the theme Redefining the Good Life, the conference focused on how innovative companies and brands can work to ensure all facets of daily life are good for both the planet and its population. Longitudes recently caught up with the pair of leaders to discuss the future of corporate social responsibility.
Q: Within the logistics landscape, what is UPS seeing in terms of miles driven, emissions and consumer versus business-to-business deliveries?
Rogers: Thanks to the rise of e-commerce, UPS expects that half of its parcels will be consumer packages by 2019. We’re expecting to see lower density deliveries, translating to more miles driven, more fuel burned and thus, more emissions. We are proactively countering this by implementing more efficient systems and technologies, but with the sector growing 20 percent year over year, we have our work cut out for us.
Q: Is the on-demand economy causing the e-commerce boom, or is it the other way around?
Summers: It’s a little bit of both – a cyclical relationship, in a sense. Millennial buying behaviors without a doubt complicate the growing tension between the on-demand economy and sustainability.
This generation has essentially grown up in an e-commerce world where you can buy almost anything with the tap of a finger and see it at your doorstep a day or two later. Millennials are an e-commerce-driven generation, and since retailers have become so good at executing on speedy deliveries, it reinforces the idea that fast is the norm.
But interestingly, millennials are also growing more open to buying used goods or participating in the sharing economy, ultimately enacting a more circular model, which is good news for the planet. I don’t see their perspectives of on-demand purchases changing any time soon, but if they are open to reuse, there is at least less of an environmental consequence from a manufacturing, materials and waste standpoint.
Q: If retailers and their logistics partners like UPS are shipping out more packages than ever, are they also seeing more returns? Is there a direct correlation between e-commerce growth and return rates?
Summers: That’s a great question.
Optoro’s business focuses on retail returns and we know that about 10 percent of all goods purchased in the U.S. are returned. The numbers are lower for brick-and-mortar stores (around 8 percent), but can be much higher (sometimes as high as 30 percent) for e-commerce outlets, especially apparel retailers.
We expect this ratio to hold as e-commerce grows and as we closely track return rates among our retail partners to keep an eye on trends.
“Returns aren’t bad for businesses, as long as retailers are gaining back as much value as possible.”
That 10-percent figure can be scary for retailers – 10 percent is a good chunk of business – but it’s important to understand that returns are not necessarily bad for businesses, as long as retailers are handling them well and gaining back as much value as possible from the returned goods.
Tony Hsieh, CEO of Zappos, has said that returns are simply a price of doing business, but that when retailers make the process as painless and fast as possible for customers, retailers are actually apt to foster more loyalty among those customers. Hsieh even says that Zappos’ most loyal customers, in terms of lifetime value, are actually the ones who return items the most frequently.
Q: Now that we have a better understanding of the tension between the on-demand economy and environmental waste, can you tell us a bit about what your organizations are doing to combat it?
Rogers: At UPS, achieving better sustainability in our business practices means offering customers new products and implementing new partnerships to streamline processes.
- For example, UPS My Choice® and UPS Access Points™ put more control in the consumer’s hands and help us consolidate deliveries on our end.
- Strategic alliances with companies like Optoro and Deliv allow us to orchestrate and evaluate return paths to promote a more circular supply chain. These two partnerships also provide insights into the dynamics and profitability of same-day delivery, respectively.
- Collaborations like ours with the USPS, through UPS SurePost™, allow UPS to cut down on last-mile delivery, eliminating unnecessary inefficiencies in daily routes.
Summers: For Optoro, the opportunity to help ease these tensions lies in implementing our solutions at more retailers and brands across the U.S. and beyond. We’re excited about what lies ahead in our alliance with UPS since together we can offer a one-stop shop solution from forward to reverse.
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