Sustainable Retail: How Gen Z Is Leading The Pack
Contributor: Greg Petro
It’s tough to build a case that making the planet a cleaner place is not in everyone’s best interest. But the question has always remained about whether the cost of implementing models that make products more sustainable was actually, well, sustainable for retailers. I came across an insightful article that ran a couple of years ago about the efforts of Lee Scott, former head of Walmart, in trying to implement sustainable practices as early as 2005.
Under Scott’s direction, Walmart struggled to figure out a cost structure that aligned with consumer expectations for lower prices at the store. Even according to Wikipedia, the company faced growing criticism during his tenure for its environmental footprint, among other things. The piece marks an important moment in time when it states, “The retailer and others who wish to develop such a market will likely continue to struggle with what counts as ‘sustainable enough’ for price-conscious customers. Until that question is answered, sustainable products are likely to remain ’luxury’ goods that fail to penetrate into the mainstream.”
What a difference 15 years make, as younger generations have risen seeking not only sustainable products and brands, but openly stating they are willing to pay more for them. Already in 2015, a Nielsen report found that 73 percent of the Millennial generation was willing to pay more for sustainable goods. Our own 2019 report, “The State of Consumer Spending: Gen Z Shoppers Demand Sustainable Retail,” notes that 62 percent of Generation Z, who will begin entering the workforce this year, prefer to buy from sustainable brands, on par with our findings for Millennials.
Further, the majority of Generation Z (54 percent) state that they are willing to spend an incremental 10 percent or more on sustainable products, with 50 percent of Millennials saying the same. This compares to 34 percent of Generation X and 23 percent of Baby Boomers. It appears that with every generation, the quest for sustainability strengthens.
Research from the New York University Center for Sustainable Business (CSB) reaffirms this shift. According to this November 2019 Fortune story, CSB found 50 percent of sales growth among consumer packaged goods (CPG) between 2013 and 2018 came from sustainability-marketed products, despite the fact such goods account for just under 17 percent of the market. CSB Director Tensie Whelan told Fortune, "Across virtually every category of consumer packaged goods, sustainability is where the growth is, which I think tells you something about where consumers are... if you look at our data there is a massive shift in the last five years."
However, with so many avenues for sustainability resonating with younger generations, ranging from sustainably sourced materials to recycling and re-use initiatives in manufacturing and more, many retailers have been turning to recommerce models which can more quickly align with a consumer’s interest in reducing waste while also cutting down on costs of filling stores with new items. According to our research, this strategy can have real traction in the short-term, particularly with younger generations.
Upcycling: A majority of younger generations (59 percent of Generation Z and 57 percent of Millennials) are buying upcycled products. Upcycled products are made using discarded objects or materials to create a product of higher quality or perceived value than the original. While there are many retail startups embracing this model, traditional retailers like Eileen Fisher have been asking customers to bring back unwanted items for more than 10 years, reselling cleaned clothing under their Renew brand, while lightly damaged pieces are upcycled into new pieces. Patagonia has also been active in upcycling with its brand Recrafted.
Resale and Consignment: Resale/Consignment models are gaining momentum with Millennials (48 percent), Generation Z (46 percent) and even Generation X (46 percent). This includes models like those adopted by The RealReal, ThredUp, Poshmark, and Tradesy, but they’re not just online. ThreadUp, as one example, is now bringing used clothes into department stores and malls via partnerships with Macy’s, JCPenney and Madewell. Worth noting is that Baby Boomers (39 percent) and the Silent Generation (22 percent) are using them less than other generations, but they are still more popular than other recommerce models of targeting this group.
Peer-to-Peer Marketplaces: While still in early days in terms of digital commerce, clothing swaps and peer-to-peer marketplaces are the least popular models with younger generations so far. Only 24 percent of Millennials and 29 percent of Generation Z were engaging in these recommerce models at the time of our survey. However, the model shows potential. Instagram threw its hat in the ring last year when the company enabled p2p transactions. But the CEO of startup Storr, a marketplace that enables individuals to create their own outlet, is betting on friends having more influence than brands and influencers. The company noted in this recent interview that “92 percent of all product recommendations were coming from consumers' friends and family... 21 percent of U.S. shoppers made a purchase as a result of a peer recommendation versus 14 percent because of a celebrity recommendation.”
With Generation Z on track to becoming the largest generation of consumers this year, retailers and brands must start supercharging sustainability practices now if they are to keep pace with expectations around sustainability for these next-generation consumers. However, retailers and brands must ensure they are choosing the right avenues that align with the needs and expectations of their consumers in order to maximize their investment. As new retail models in recommerce gain traction, retailers and brands need to understand these unique needs, and efforts must to go beyond checking a “sustainability” box.