One vision for Amazon's sustainability ambitions
Over last holiday season, the Amazon logo was an ever-present sight on stacks of packages waiting to be delivered, on porches and on the cardboard spilling out of the recycling bin.
A recent study by Macquarie Research states that Amazon accounted for 51 cents of every dollar of growth in U.S. e-commerce during 2015, and captured 24 percent of total retail growth. These numbers are staggering, in addition to the projection that 50 percent of American households will have subscribed to Amazon Prime by 2020. Trends support that Amazon will grow and grow and grow.
Amid this growth and constant chatter of Amazon’s ambitions — global, local, into the cloud (computing), into the clouds (drones) — Amazon has an opportunity to drive sustainability through its marketplace. However, Amazon first must create a marketplace that allows for sustainable growth.
A recent article in the Guardian points to Amazon's having been "mostly absent from the corporate responsibility conversation."
However, for brands concerned about opportunities to support their sustainable product strategies — or that simply want to protect any upstream investment in sustainability — there appear to be a couple of quick win opportunities for the Amazon marketplace focused on leveraging the third-party seller base, and zeroing in on packaging.
A brief orientation
Third-party sellers are why Amazon can offer an unparalleled selection of products and create competition that results in lower prices. The images, descriptions and other content displayed on an Amazon product listing may be created and maintained by Amazon or by a third-party seller. Amazon’s algorithms choose a seller, among possibly many, to win that final sale when the consumer clicks "add to cart."
This is called the “buy box." Winning the buy box is presumably based on many factors, and low price is clearly a major one. Clicking on the list of other offers reveals all of the sellers selling this same product. Amazon claims more than 2 million third-party sellers sell via its marketplace and third-party seller shipments now account for 46 percent of all Amazon shipments, up from 26 percent in 2007.
This mixture of more sellers, greater selection and lower prices is the engine that drives Amazon. This in turn should attract brands seeking to exist in this dynamic market. For those that care about sustainable e-commerce, this should light up the radar on three fronts: supply chain sustainability; environmental sustainability; and business continuity.
Selling with integrity
Brands that enter the Amazon marketplace willingly (as opposed to products just showing up there — which happens) also must understand where and how e-commerce retail selling fits into their value chain and values. In short, brands need to have an e-commerce strategy before understanding how e-commerce can support their sustainability efforts.
There is a parallel to how sustainability is approached in supply chains.
Over the past 20 years companies slowly looked upstream — against the strong current of globalization — to address a wide variety of social and environmental issues hidden in a complex maze of suppliers. Today, leading companies have reined in the fragmentation by driving good practices into the supply chain, and consolidating the supply base by focusing on suppliers who contribute, share the same values and comply with standards.
Fast forward 20 years, and with the explosion of e-commerce, brands must address this same complexity and fragmentation downstream, right to the point where branded products meet the end consumer — on an Amazon listing with yet another complex maze of sellers.
Brands must take that same due diligence approach that created sustainable supply chains to take a hard look downstream — with the same desire for transparency and visibility — to ensure that the 20 years of effort to create a sustainable value chain is not undermined at the point of sale.
Unfortunately, this part of the value chain is not as easy as following goods from east to west or from producing countries to consuming countries.
Complicating matters, e-commerce has made it possible for the seller to be anyone, anywhere. The relatively low barrier to entry for selling on Amazon is what makes the democratizing force of the Internet attractive for economic development and small business growth.
This low barrier plus the anonymity, however, makes it difficult for brands and customers to know who they are selling to or buying from.
This has resulted in the growth of "grey market" selling, by sellers who obtain products from means other than directly from manufacturers and authorized distributors. Brands often have surprisingly little visibility into how their products end up on Amazon. This is partly driven by the arbitrage between wholesale and retail prices — if you can get your hands on a product at a good price, you can make a few bucks on Amazon.
This dynamic always has existed in retail and distribution, and Amazon provides a fast outlet to unload almost any product. However, sustainability hindsight should tell us that the lack of transparency into grey-market selling lends itself to all the risks that come with failing to align all the parts of the value chain.
Assuming that Amazon wants to attract and retain brands that care about their products and customer experience, it can help brands protect that upstream sustainability investment by creating a marketplace where ethics and integrity are important.
Amazon can focus on attracting sellers that promote sustainable growth, and use its open-source marketplace model to lead sellers into a race to the highest standards for customer experience. Brands will want the Amazon marketplace to respect their brands as much as they do. They'll want to ensure that lack of standards for sellers does not attract social, environmental and labor risks, in addition to risk factors from tax compliance, privacy, minimum pricing and counterfeit goods.
Sustainability history shows that standards work best when they promote a race to higher quality and better customer experience.
The frustration with packaging
In addition to creating standards for a marketplace of responsible sellers, packaging is another area where Amazon can lead.
In 2008 Amazon launched its Frustration Free Packaging Program (FFP) to ease customer stress caused by numerous plastic-coated twist ties and other "wrap rage" irritants. FFP's certification standards also call for no styrofoam and for using recyclable packaging material, stipulating that a consumer should be able to free a product from packaging within 120 seconds.
However, an argument can be made that the unsustainability of the packaging and material — including the box within a box problem — still drives some customer frustration.
For the program to drive improvements, sustainability considerations should be at the forefront. Fortunately, good sustainable packaging standards balance materials, damage protection and minimize empty space — and Amazon is well positioned to have a large positive impact by integrating new criteria. Most important, the current Amazon standard already allows third-party sellers as FFP-certified.
If Amazon invests in improved packaging standards, these efforts should be applauded, and they also should be strongly supported by third-party sellers to help provide exponential sustainability impacts — third party sellers ship more than 2 billion packages annually. Like any company, Amazon will have greater sustainability impacts by collaborating in the value chain. With packaging, Amazon should find support from leading third-party sellers with sustainability values.
Creating the conditions for sustainable brands
The anticipated growth of Amazon’s marketplace business provides clear opportunities for driving sustainability improvement and setting the stage for the future of sustainable e-commerce. Its marketplace is poised for success and can enable massive sustainability impacts for sustainable brands by building on existing standards and mobilizing responsible third-party sellers.
Amazon’s more than 2 million third-party sellers help drive the marketplace — these sellers create and deliver digital content, pack and fulfill shipments, and have the last word on delivering customer experience.
Brands can choose how to market, position and grow their e-commerce presence without losing integrity. Adding sustainable e-commerce to the checklist of retail due diligence can ensure that upstream investments in securing supply chains and developing sustainable products are not undermined.
This is not easy, and the typical hands-off approach to e-commerce won’t get there. However, brands can navigate this reality — riding the wave of growth while not being crushed — by being thoughtful with e-commerce strategies, understanding sustainability risks and opportunities, and most important by increasing expectations for what a sustainable marketplace could and should be.