066: Profit vs. Planet

Sustainability presents one of the biggest challenges that humans have ever had to face. But, it also presents the retail industry with one of the biggest challenges that we’ve faced too. There are many facets of sustainability – but the ability to protect and save our planet Earth is perhaps the most pressing and critical that we’ve faced. Host of the Retail Transformation Show podcast, Oliver Banks, discovers why the retail industry might end up being only half of what it is today.

Listen to this podcast episode now to discover:

• Why retail might shrink by 50% in the next 20 years
• The 5 elements that could contribute to this.
• The biggest challenge that we face with sustainability

I don’t have the solution. But I do believe that if we work together and we work quickly, then there is an opportunity to make a meaningful, significant and positive impact on the future of our planet.

 

 

What is sustainability?

It’s a world that has been used many more times over the past few years. But, we often miss the real meaning of the word.

Really, it’s about preserving our current way of life for future generations. Our ability to sustain the present.

So, there are often 3 elements that fit within the term sustainability:

• Environmental
• Social
• Economic

These are also sometimes referred to as the 3 Ps: Planet, People, Profit. (And not necessarily prioritised in that order).

However, this podcast and article looks at increasing the opportunity of environmental sustainability.

But when it comes to business, we can usually safely put Profit in first place of the priority list. But then the other two are harder to place and often come at the expense of profit. And it’s safe to say therefore that there will be a conundrum put in place. It won’t be easy and there will be a major tension between delivering profit and saving the planet.

5 big changes that could affect retail

In this episode of the Retail Transformation Show podcast, we will explore 5 reasons for why the retail market could significantly contract over the coming 20 years.

1. Repair

Let’s be honest; at present, all products are designed to break. And usually that gives us, the retail industry a little cheer as it means an impending sale is coming.

I remember learning about planned obsolescence a long time ago when I was at university. This is when a product is only designed to last for a set amount of time but then break shortly after the guarantee expires. In fact, the guarantee period is often carefully selected to tie into the expected life of the product.

So, have you ever had a product break a month or two after the warrantee or guarantee expired? Annoying? Yep, thought so. In fact, that’s probably been designed and optimised to last just enough to see through that warrantee period – and then it will break.

It made sense as a strategy that is designed to get people to buy more from you. But, when you look through a sustainability perspective, it’s not right for the greater good.

At present, it tends to be easier to replace a product rather than repair it. We prefer, as a whole, to throw something away rather that mending or fixing it.

In fact, when did you last try to get a product repaired? Think back for a moment.

We’re just not very good at it as an industry.

Repair case study– a tale of woe for the company and customer (me!)

Take a recent example from me about a broken dishwasher, in warranty.

1. On the first visit, the engineer turned up, drained the system of water and rebooted it. It was frustrating that he turned up to repair a plumbed in device without bowls, towels etc so we provided that. Once he’d finished, it worked. But then after 1 use, it broke again.
2. Second visit, a new service engineer who did what the first one did. Surprise surprice, it worked once and then broke again.
3. Third visit, and back to the original engineer again. He looked, did nothing and quickly concluded that he didn’t have the right part to fix it. This part would need to be ordered in which would take a couple of weeks.
4. Time passes and eventually he returns and fits it on the fourth visit. But it breaks again after another use, so once again he returns.
5. Fifth trip this time, but it’s only quick. He’s clearly running late this day, so he runs to the door to drop off the “we missed you” leaflet and then drives off whilst we watch from the house in astonishment.
6. So, that needs to be rearranged and eventually he comes back and rights it off for a replacement taking only about 5 mins.
7. Next, the replacement comes and is delivered, but it’s the wrong model.
8. So that then needs to be picked up and then eventually…..
9. Eventually, the right model is dropped off.

That’s nine visits, countless phone calls from customer to company and internally too.

It just doesn’t make sense right now. There were multiple failure modes – from poor processes, lack of equipment, lazy engineers, poor parts availability and planning and an appalling customer experience.

Repair isn’t profitable

Ultimately, repair isn’t profitable – and companies don’t really want to get involved.

There are some categories that are good at doing this. For example, mobile phones get reconditioned, checked if they’re roadworthy and then sent on their way. Supply chains are set up accordingly, operating models account for this, service engineers are hired and trained. It’s just a regular part of their ways of working.

Check out this video of how LCD screens are reconditioned. (There is no voiceover so feel free to save time by watching it on 2x speed!).

So, instead, what if our culture grew into a culture where it’s expected to get things repaired. Service engineers and maintenance people are ready to support you to fix gadgets, garments and other goods.

Imagine: when something breaks, we get things fixed.

Imagine a world where when things break, they get fixed. And they get fixed properly.

In fact, imagine in a world where the IOT is in full use and there is preventative maintenance scheduled so it never gets to the point of breaking.

In turn, we would rely on the retail industry contracting and shrinking. Purely because as product lifetime increases and there are fewer repeat purchases in a lifetime.

This would shrink the retail market and would increase the repair and spares market. Certainly, it is a different skillset and operation to stores but it shows a changing world rather than a new retail Armageddon. Some categories would be more impacted of course, but that’s the nature of the beast.

2. Rent

Since Blockbuster declined, rental became less popular. But under new companies, like Rent The Runway, the rental market is increasing.

Essentially, consumers have the ability to try new products without having to buy new. But then they can send them back and get something fresh again.

It’s useful for products that you don’t need all of the time – like a party dress or suit – but then it’s also good if you want to have a new style.

This will reduce the size of the retail market as more consumers look to borrow products rather than purchase.

Whilst this still brings in revenue, it’s very much a different business. Each transaction is smaller and it relies on understanding the lifecycle of the product and how to extend that without the products becoming scrappy.

The operating model needs to shift too. For example, Rent The Runway’s operation has relied on dry cleaning and in turn they have had to develop the largest dry cleaning business in the world.

Now, we have larger retailers, like Ikea, Adidas and H&M are all experimenting or looking to grow their rental business. Could we see Ikea becoming the biggest re-upholstering business, or Adidas evolving into the world’s largest cobbler?

3. Reuse

The next big environmentally focused trend is reuse. This has always existed but it’s ramping up now.

In the UK, charity shops have always traded from 2^nd hand clothing. eBay has of course opened up the second hand market too. Facebook, Preloved, Gumtree and other websites that have promoted trading used products between consumers.

But it’s not just 2^nd hand stuff.

Furniture upcycling has been a big trend over recent years. And with social media sites like Pinterest, we have more opportunities to be inspired than ever before. Fashion hacks help people to customise and personalise their existing clothing into something new and exciting.

And there are elements that just feel wrong. Take babies’ or children’s clothing. They’re worn a handful of times before they’re too small and then they’ve got to be moved on. So I think we’ll see more reuse of these types of products too.

Now, the trade or reuse of second hand products is obviously a detractor from retail selling new products. However, there is a big opportunity for retailers to open up the second hand market. Mostly, it’s done on a consumer to consumer basis at present. But I think there is an opportunity for a retailer to make the most of this theme. What would this look like to be helpful to past and present customers as well as the planet.

4. Reduce

Back in episode 16 and 17, when we welcomed Natalie Berg and Miya Knights to the podcast, we heard that as consumers, we could be reaching “peak stuff.” I think this is likely to be true.

With the global trend of urbanisation, we’re seeing people living in less space. Less space means that they have a need of less stuff. So, will we start to see people becoming more aware of this. Will they look to just buy less?

Prompted by increased environmental visibility, will we see more people start to challenge themselves? Do they really need to buy that extra something?

If the answer is a “no,” then we can safely assume that retail will contract and decline.

5. Reveal the truth

Finally, we can expect to hear more and more about environmental sustainability in the press. Whether it is Greta Thunberg, or Blue Planet or even other new initiatives, I’m sure we can give more visibility of the status quo.

Then, will that visibility actually lead to more awareness of the issues and impacts that we currently face? Probably.

And in turn, will we become increasingly responsible about how we look after out planet? Hopefully.

Will that result in more repairs, more rental, more reuse and more reduction?

So, as we reveal more of the truth and build visibility, we will see the retail market evolve to becoming more sustainable and environmentally friendly.

The 2 biggest challenges to environmentally sustainable retail

It’s anti retail

In many ways, retail is the opposite of environmental living. As an industry, it is our aim to sell more products and in turn deliver profit. So there will be a natural resistance to selling less. And, if you’re not willing to sell a black dress for £4 or a whole chicken for just £2, then there is probably one of your competitors who will be more than happy to pick up the sale.

So it’s tough to be the one who blinks first and whilst being the leader, is also most as risk of others not following.

But, we’re entering into a world where environmental conditions could entice shareholders to take a slightly different view.

There is still pressure to deliver short term financials over “soft benefits” in the long term where there is no financial return.

If you look at discount retailers who, on the whole, are doing well right now. They’re all promoting regular repeat purchases. We’ve also got fast fashion processes who never want to be seen wearing the same outfit twice for fear of being exposed on Instagram as someone with a limited wardrobe. Or maybe it’s those luxury technology brands that are looking for you to buy into new devices each year as they’re launched with a slightly better widget or similar.

These are all going to be barriers to building a sustainable retail market.

Cultural change

As a collective human culture, we’re just not very good at hearing advice and taking action. When change comes around, we can make a lot of noise but it will take a lot more than that to make us do something differently.

Don’t litter – still

For example, the difficulty in not littering. For many years, there have always been numerous adverts for “no littering”. But here we are today… Trash and disposable rubbish litter the hedges next to roads. Rivers are clogged with waste and surely there must be no beach in the world that doesn’t have rubbish and plastic continually washing up on it.

Perhaps, you’re looking at the “Keep Britain Tidy” charity which has been running since the 1950s and 1960s. Yet still, looking ahead to March and April this year, they’re running a big advertising campaign called the “Great British Spring Clean” to stop litter.

Or maybe, you’re thinking of the “Keep America Great” campaign of the 1970’s with the crying Indian.

Or maybe it’s more modern day to Australia’s “Hey Tosser” adverts.

Either way, it’s always been a challenge just to get people to put rubbish into the bin.

So, when faced with the more complex task of becoming more sustainable, you have to wonder how realistic that will be in the short and medium term.

The bottom line

So, with a huge amount of focus right now, it’s easy to think things will be ok. But the honest truth is that we need to do so much more.

I think the retail market probably does need to contract. Significantly. Will it be 50% – I don’t know. But I do know that it’s got to be meaningful and it will be painful!

We’ll see consumers dial down the amount they spend on retail through those 5 buckets that we looked at:

• Repair
• Rentals
• Reuse
• Reduction
• Revealing the truth

Will it be the next retail armageddon? Well, maybe that’s how it will be billed in media. But really it’s an evolution. Instead, in it’s place, will be new business opportunities, such as rentals or repairs. So, the retail industry will once again need to evolve to adjust.

But, to do this, it’ll be essential to transform. Not to hold onto the world of retail as it is today. But instead be ready to change things up and get ready for a very different looking retail market in 20 years’ time.

One thing is for sure. I’m going to be here cheering on retailers and providing the skills, expertise and support to help deliver transformation programmes.

Discover more: Retail Week Live 2020

There will be a big focus on sustainability, with keynotes from Iceland Foods’ MD, Richard Walker, and Tesco’s CEO, Dave Lewis. Both of these keynotes are going to be essential to find out how sustainability will work in retail over the next few years.

If you’ve not yet bought a ticket to Retail Week Live, make sure you take advantage of my special 15% discount on tickets. As a media partner for the event, you can use the code RTS15 when buying your tickets.

Find out more or buy tickets: Retail Week Live.