By Anastasia Lloyd-Wallis
Chief Operating Officer and Head of Consumer Insights, Retail Doctor Group
Consumers want to be sustainable and ethical about what they’re buying, it’s a hygiene factor now when they interact with brands and retailers. However their needs and wants in regards to sustainability and ethics are wide ranging and often not followed through by purchase.
So, as a retailer, how can you understand what is a deal breaker and what are customers willing to pay for in terms of sustainability?
Attention and Demand for Sustainability
In the recent RDG Consumer and Retailer sentiment research more than half of Australian retailers (52%) believe that they don’t pay enough attention to making their offers and processes more sustainable. This number is significantly higher than for retailers worldwide (37%).
One possible reason for this lack of attention to sustainability is that consumers have mixed messages about their needs when it comes to purposeful retail. This not only differs significantly by age group but also by personalities.
Those personalities driven by the balance system have stronger opinions, needs, and responsive actions when it comes to sustainability, ethics, and values. This is why mixed messages can be received even across age brackets.
The other possible reason is confusion about how to decide if a product or brand is sustainable enough to meet the consumers’ growing awareness of what they need to do to save the planet.
Current Brand Approaches to Sustainability Messaging
Companies use two main approaches to communicate about sustainability to consumers:
- The first one involves using third-party verified sustainability labels on their products. These labels are like stamps of approval that show a product is environmentally friendly. For example, you might see labels on organic food or cotton clothes. These labels help consumers trust that the product is genuinely sustainable, but there are so many different labels that it can be confusing.
- The second approach is when companies create their own messages about sustainability. They might talk about not using unethical materials or ingredients, like some fashion companies banning fur. They could also mention their commitment to making sustainable products or being part of global sustainability initiatives.
However, it’s a bit tricky because the idea of “sustainability” can be confusing, and this confusion can make it hard for consumers to make informed choices. Even though companies use labels and their own messages, it doesn’t always lead consumers to buy more sustainable products. Many consumers struggle to understand what the labels mean, and sometimes the claims companies make about sustainability aren’t very reliable.
Another issue is that getting and using these verified labels can be a complex process that involves a lot of paperwork and resources, which often only big companies can manage. This means smaller businesses with eco-friendly products might find it tough to reach consumers who care about sustainability.
For 45% of Australians, sustainability is a factor in their shopping decisions either always or frequently, however this varies by category from 30% in beauty to 47% in cleaning. And as environmental awareness grows, consumers’ involvement in circularity is increasing.
The global resale market is growing at a rate 11 times faster than traditional retail and should be worth $84 billion by 2030. (Source: Threadup)
Retailers’ Alignment with Purposeful Retail Practices
In a circular economy, the aim is to decrease how much ‘stuff’ is used. Materials, products, and services are created and used in a way that doesn’t use up too many resources. Also, there are smarter ways to take what would usually be called “waste” and turn it into new materials or products.
This is how almost 50% of Australian retailers are leveraging opportunities in circularity and recycling. Retailers worldwide are reviewing their partner networks to ensure they only work with ESG-compliant businesses.
64% of Gen Z and Millennial customers are willing to pay more for brands that have a good social impact. This presents a good opportunity for Australian retailers to deploy new business models with a greater focus on sustainability.
On the topic of sustainability, trust and diversity, Australian sustainability initiatives fall far short of global sustainability initiatives. When retailers were asked about sustainability actions they are currently taking or plan to take in 2023, only ‘offering and stimulating second-hand use of products’ exceeded global responses.
Next Steps for Retailers
Australian retailers readily acknowledge that more needs to be done in the area of purposeful retail. Identifying areas such as circularity, diversity, and transparency as a key focus for improvement is an ongoing exercise.
Additionally, retailers will have to be more purposeful in their sustainability messaging, as will the brands they represent. Now more than ever before, customers are treating sustainability and ethics as a “must have” before engaging with a brand, however their needs in this area differ significantly. It is vital for retailers and brands to know their customers in detail to understand where they can put their investment and focus.
RDG Recommendations
- Review your current operations for areas of improvement that are within your control. What can you do differently?
- Talk to your customers to understand the difference between what they want (nice to have) and what they need (are willing to pay for).
- As purposeful retail is becoming a hygiene factor for consumers it is vital that retailers make changes where they can and are able.
To download the RDG Retailer and Consumer Sentiment 2023 – Click here.
Want to know more about what’s on your consumer’s minds? Schedule an appointment with our Insights division by e-mailing us at businessfitness@retaildoctor.com.au or calling 02 9460 2882.