Article

Consumer desire driving green retail IT

Shoppers increasingly value transparency, sustainability when making buying decisions.

December 3, 2008

Forward-thinking retail IT leaders know that sustainable businesses in this millennium must effectively connect with a discerning and informed consumer base to differentiate their brands and create more consumer loyalty.

Consumers want more and more information and they want to access it everywhere. They want healthier foods and they want to support stores and merchants that genuinely care about them today and for generations to come. Shoppers want full transparency in their relationships with retailers, including specific interest in knowing a product's availability, origination and detailed labeling.

One thing is clear — the consumer is in the driver's seat — and some retailers will not survive. Truly sustainable retail businesses will make green IT investments for the consumer first and for their internal business second.

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Consumer-facing green technology

Leading food retailers are fortunately in tune with changing consumer needs toward sustainability and are developing programs to help inform and empower them. U.K.-based Tesco's carbon labeling program is one example. Many don't know that food production and packaging actually have a much higher impact on the global carbon footprint than the transportation costs of manufacturers, retailers and consumers combined.

Instead of limiting its green initiatives to those it can directly control, Tesco is providing information about the specific carbon footprint of each product right on the label. Consumers will be able to assess this information as part of their product selection. It will be intriguing to see if consumers adjust their purchasing habits based on carbon data and whether manufacturers will adjust their product strategies.

Maine-based Hannaford's Guiding Stars nutritional program directs consumers toward making healthier food choices through the use of a specific number of stars on a product's label. Hannaford reports that sales in healthier foods (e.g. foods with more stars) are increasing at a higher rate than products without a good star rating. Hannaford is now licensing the program to other retailers.

Expect variations on these programs to become available on a more self-service basis through in-store kiosks and retailer Web sites. Expect consumer-centric applications like Stop&Shop's EasyShop (self-scanning) to become more informational in its product content. Digital signage and electronic shelf labels will also be used to recommend products that are the most sustainable.

Consumers also appreciate product labeling that reflects sustainability certifications from seafood, produce, meat and forestry NGOs (Non-Government Organizations, in this case, environmental). Unfortunately there is no single certification standard, so to make product selection easier for consumers, New York-based Wegman's aggregates these certifications and provides its own seafood labeling that calls out sustainable seafood choices. The use of RFID technology may play a role in making identification (for both shoppers and employees) of sustainable products easier in the future.

In anticipation of green-driven consumer shopping and to support their own sustainability initiatives, manufacturers are developing green product innovations — everything from new formulations with lower carbon or water impact to products with lower impact packaging. Retailers are pressing this as well, with Wal-Mart asking its 70,000 suppliers to reduce packaging requirements and developing specific scorecard metrics to track progress.

Recycling is becoming an integral part of the shopping experience as retailers encourage in-store returns of electronic waste (e-waste). Best Buy recycled 30,000 tons of e-waste in 2007 and is expanding this year. Office Depot has been recycling consumer e-waste since 2006. The next e-waste recycling evolution will be for gift card or loyalty program credits — Tesco already awards Green Club Card points.

Retail sustainability behind the scenes

Innovation is also occurring in store building construction, lighting and refrigeration. Subdued lighting is already being applied in produce departments — reducing energy consumption and extending the life of perishable products. In new store construction, retailers are getting Energy Star or LEED (the U.S. Green Building Council's Leadership in Energy and Environmental Design) certified — many retailers have a single LEED-certified store, others like Tesco's U.S.-based Fresh and Easy, Target, Wal-Mart and Best Buy have entered into LEED's volume certification program with defined prototypes designed for quick replication.

Lighting is increasingly optimized for consumer and product needs — LED and CFL lights are now more commonly used as is natural light is in new stores. Retailers are working harder at keeping chilling products without cooling the store unintentionally — Food Lion has received numerous awards for its use of innovative refrigeration technology.

Retail sustainability is not tactical, it's foundational

Listening and responding to consumer needs is the most important thing a retailer can do — preferably before the customer even asks. This is one of those cases — sustainability and more specifically, the adoption of green technology demands industry leadership. If you think the technology landscape changed a lot in the last 10 years, just wait. The pace has quickened with sustainability becoming a new measurement standard for retailers and their trading partners alike.

Leslie Hand is a research director at Global Retail Insights and oversees research and business development for the supply chain and demand planning elements of the Global Retail Insights (GRI) product offerings.