Wednesday 14 October 2020

Nicolas Ragaigne's article: e-Commerce: the growing
role of ethics

Nicolas Ragaigne's article: e-Commerce: the growing  role of ethics

Times are changing, and the time when companies did business only for business' sake will soon be far behind us. In the 2010s, the idea that a company's ethical values should play a greater role in choices started to take root in the minds of consumers. And e-Commerce is no exception; quite the contrary. 

How do we define an ethical value?  

In order to be ethical, a product must meet a set of environmental and social criteria that are inherent in sustainable development and corporate social responsibility. Ethical business therefore involves a production chain that uses responsible work and production methods, including respect for employees and both the socio-economic and natural environment. 

It is not just one more marketing value, like the wave of greenwash in the 2000s. Different time, different morals: consumers have matured and are no longer taken in by this kind of approach.  If a company's words do not match its actions, the sentence will be swift and its reputation will suffer. Social media has put the focus back on consumers and their influence on products and companies. Bear in mind that consumers are far more volatile when they make their purchases online. Ethical values therefore play a decisive role in acquiring e-consumers and building their loyalty.  

Are consumers really sensitive to ethical values? 

Yes, because the trend is no longer to consume more in order to own more, but to consume less in order to own better things. A report entitled 'The Future Shopper 20191' revealed that the US pure player Amazon remains the most commonly used tool to compare prices and reviews, but it is no longer such a clear choice. Firstly, from an ethical point of view, but also because lots of products come from far away, which means long delivery times and occasionally questionable quality, which can cause problems when a product has to be returned. So, online buyers tend to be more drawn to local and domestic products, in particular generation Z (16-24 year-olds). This consumer category is also far more concerned by ethical and environmental issues, which is reflected by the movement of Greta Thunberg. 

The study draws our attention to the fact that "consumers' values will greatly influence both purchasing behaviour and that of sellers." 55% of respondents stated that brands' ethical and moral values influence their purchasing decisions, and the proportion increased to 58% among 35-44 year-olds. 45% of respondents choose brands that care for the environment, which means that environmental responsibility is at the heart of concerns in the purchasing decision. Companies' ethical transitions will clearly be determined by the growing number of consumers who care about ethical values.  

Which websites cultivate ethical values and how do they do it? 

 
The emergence of e-Commerce websites selling organic or ethical clothing, focussed on quality and proximity 

Organic, because the materials used to make fabrics, such as cotton and wool, are sourced from organic or responsible farming. Quality, as the fabrics are selected for their durability and the expertise of artisans, which is handed down from generation to generation. Proximity, because the workshops are located in the same country or a country nearby (such as a European country for a product purchased in France). Such e-commerce websites often only sell a limited range or a single product (e.g. LePantalon, which sells only trousers). They are also very often combined with small shops located in city centres, for further proximity.  

Another ethical approach: reusability  

Major ready-to-wear chains, often considered to be running against the environmentally responsible trend, are moving into upcycling, either by encouraging their customers to bring back old clothes in exchange for vouchers (such as H&M), or by offering clothing ranges made with recyclable material (such as Uniqlo). Websites that connect users to buy and sell second-hand clothing, such as Vinted, are also growing in popularity, particularly among generation Z. In the space of a decade, these platforms have surpassed fast fashion in terms of market share.  

Websites selling reconditioned products are operating in a fast-growing market (e.g. Backmarket). This global market is estimated to be worth more than 50 bn euros, almost half of which is related to smartphones. In 2017, approximately 140 million smartphones were reconditioned, tested and sold globally. In France, in the same year, reconditioned products represented 10% of mobile phone sales. This popularity is related to the fact that these devices are increasingly sophisticated and, therefore, increasingly expensive, but without there being any revolutionary changes with each new release. Consumers therefore prefer to pay less and also reduce the environmental footprint involved in producing a new smartphone. Reconditioning also involves IT products, such as laptops and household appliances. It is also generating new forms of employment and relocating industry in deserted areas.   

How about ethical values in food e-Commerce? 

According to French sociologist Éric Birlouez, ethical values related to food are based on five pillars2: 

  • Body ethics, or how to choose food that does not alter our health and contributes to our well-being;  
  • Animal ethics, or how to treat livestock humanely and limit their environmental footprint with responsible farming practices; 
  • Nature ethics, or how to eat more organic and local food with a view to sustainable development and reducing packaging; 
  • Solidarity ethics, or how to make sure that farmers earn a decent living for their labour; 
  • Transparency ethics, or how to closely track the origins, ingredients and production methods of our food. 

These values do not all resonate equally and depend on consumers' lifestyles, however they are progressing as more and more consumers are choosing to do their food shopping online. 

Organic food is accounting for a growing proportion of shopping baskets (with sales in France reaching almost 10 bn euros in 2018). Internet has become the fifth largest distribution channel for organic food, following mass retail, specialised shops, direct sales and artisanal sellers. Major retail players are also getting in on the action: Amazon acquired the organic chain store Whole Food in 2017, and Greenwez, France's number one organic food website, was acquired by the supermarket Carrefour in 2016. 
It is not only the big players, however: the number of organic and fair-trade food websites has grown rapidly in recent years. With producers selling online, either via their own websites or specialised marketplaces (such as Pourdebon.com), consumers are able to access products that meet the criteria of the above-mentioned five pillars.   

But packaging and delivery have a huge carbon footprint, don't they? 

After consuming online in accordance with their ethical values, consumers often risk compromising their efforts due to packaging and delivery. The e-Commerce boom has generated a delivery boom and, as a result, fast growth of the carbon footprint related to packaging and transport: 

  • According to Fevad (Federation of e-commerce and Distance Selling), 505 million packages were sent in France in 20173, and 32% of plastic packaging waste ends up in natural environments. 
  • It is estimated that in Paris, one out of five vehicles is transporting packages to be delivered. Goods transport could represent as much as 25% of urban CO2 emissions. 

55% of people in France say that they are concerned about plastic packaging4, and some of them are even prepared to pay a bit more in order to use environmentally responsible packaging. In order to stand out from the competition, e-Commerce websites are moving towards environmentally responsible packaging. For example, Zalando has recently committed itself to completely replacing its packaging materials with environmentally friendly and 100 % recycled materials between now and the end of 2020.  

 
There are many solutions available: packaging made with paper or cardboard (85% of these are recycled in Europe5), or even with recycled packaging; packaging optimised to match the product's dimensions as closely as possible; intelligent and reusable packaging. The Nantes-based startup Living Packets has developed such a type of packaging called "The box". Cdiscount has tested the packaging with a panel of customers in Bordeaux, in real conditions, as have Orange and Chronopost. 

Similarly, the Finnish company Repack is offering packaging that can be reused 20 times, by returning packages empty to a postbox, in exchange for which customers receive a voucher that can be used at a partner. Between 2017 and 2018, 50,000 of these packages were used by online shops in more than 10 European countries. 

Very aggressive marketing concerning rapid home deliveries in less than 24 hours gives the impression that buyers want their products as fast as possible, regardless of the methods used. However, 73% of people in France say they would be prepared to wait longer for their order if it is delivered using an environmentally responsible delivery method6. In order to attenuate their carbon footprint, websites are increasingly promoting environmentally responsible delivery methods, or delivery to a pick-up point, which reduces unnecessary trips if the recipient is not at home at the time of delivery. Startups are emerging in the area of clean deliveries over the last mile using 100% electric vehicles, including bikes, cargo bikes and vans. 

Websites are also appearing that enable consumers to compensate greenhouse gases generated by the delivery of their orders by paying a sum to projects certified as environmentally responsible. One of these is Etsy, an American marketplace, which in 2019 decided to purchase carbon compensation credit in order to manage the environmental footprint of sellers who deliver articles presented on its website. This type of indicator, which presents the carbon footprints of different delivery methods, can have a real influence on e-consumers, who may be more inclined to wait or pay a little bit more in order to increase their "ethical credit". 

 Ethics are clearly a significant factor to be taken into account and will be influencing our consumption modes over the coming years. We are only at the beginning, but consumers' collective consciousness in relation to the social and environmental impacts of their purchases via e-commerce is constantly growing. Companies are beginning to realise that they must base their businesses on these values, at the risk of losing the trust of a section of their consumers, and this trend will grow as the younger generation produces tomorrow's business leaders. 

Nicolas Ragaigne,  e-Commerce Business Analyst

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