Online vs. In-Store: And the (Sustainability) Winner is…
Accelerated by globalisation and a change in consumer behaviour, e-commerce has continuously grown over the past years. In 2020, e-retail sales accounted for 18 percent of all retail sales worldwide - and this figure is expected to reach 21.8 percent in 2024.
This rise in e-commerce also got accelerated by other factors, such as the Covid-19 crisis, through which consumers have purchased products online at levels that were not expected until 2025.
And while many love the convenience and simplicity of online shopping, others much prefer to be able to touch and try on products directly in a physical shop. But which one of the two actually has a higher impact on our planet: online shopping or in-store? And what can businesses keep in mind to reduce their impact? Let's have a closer look at it.
The impact of Online Shopping vs. In-Store
In 2020, retail e-commerce sales worldwide amounted to 4.28 trillion US dollars, and they are projected to grow up to 5.4 trillion US dollars in 2022. The rising number of sales in e-commerce will consequently also lead to an increase in carbon emissions in the future.
For most companies, the main carbon emissions drivers lie primarily in Scope 3. This also applies to e-commerce companies. With e-commerce companies heavily relying on a complex logistics and delivery network, this naturally gets reflected in the company’s carbon footprint. Zooming closer into the carbon footprint of e-commerce, the three main carbon drivers are delivery, freight, and packaging. Later in this article, we will have a closer look at those elements.
For retailers, a significant share of their carbon footprint originates from the brick and mortar stores - heating, air conditioning, lighting, ventilation and refrigeration are among the main contributors for direct energy consumption, and thus raising carbon emissions.
In order to reduce their impact, retailers with physical stores can focus on the energy efficiency of their stores and shift to green energy providers.
Another major carbon driver for in-store shopping is related to customer transport - but let’s have a closer look at that in the next section.
Where do the emissions come from?
There are four main areas that account for the vast majority of carbon emissions produced by e-commerce and retailers, namely transport, buildings, data, and packaging.
This category includes long distance freight, last-mile delivery (for e-commerce), as well as customers’ trips to Bricks and Mortar stores.
Transportation plays a big role in the carbon footprint of both e-commerce and Bricks and Mortar stores - and it will continue to grow in the future. In fact, freight transportation emissions are expected to grow by 225% by 2050.
Last-mile delivery accounts for the largest share of carbon emissions for e-tailers, but is still below emissions related to customer transportation to Bricks and Mortar stores. However, customer transport emissions can vary significantly depending on the consumer’s chosen method of transportation (car vs. public transport) or when combined with visits to other stores and places. For instance, whereas in the US 95% of shopping trips are made by car, in other places biking might be the preferred mode of transport, and therefore decreasing emissions.
Speedier deliveries, in particular, are typically hauled into an aircraft for next-day shipping and therefore significantly intensify the carbon footprint of your orders. It is estimated that by 2030 the demand for last-mile delivery (the final logistics step in the order process) is actually expected to grow by 78%, increasing competition among online stores, food delivery services and e-grocery stores to offer faster home deliveries.
In the future, deliveries could increase related emissions by almost one third and even potentially result in an addition of 11 minutes to each passenger’s commute - leading to higher emissions, and more pollution and congestion, especially in city centres.
Moreover, the simplified process of online shopping, which is often paired with free delivery and/or free returns, has led to an increased return of products by consumers. Online returns and failed deliveries actually happen in almost one third of online purchases, and thus double the carbon footprint of the e-retailer.
This includes warehouses, which are used for both e-commerce and Brick and Mortar stores. Building emissions hereby include all direct (Scope 1) and indirect emissions (Scope 2) related to energy, heating, and cooling.
In this scenario, the lack of physical stores in e-commerce actually leaves e-commerce businesses with a smaller carbon footprint compared to Bricks and Mortar. Yet, due to the increasing demand for e-commerce, e-tailers are building more energy-guzzling warehouses, which could lead to an emissions increase in the future.
This category includes the electricity use that is associated with the use of data centres and computing and headquarter operations.
Packaging includes all GHG emissions that are associated with the manufacturing process and end-use of the packaging material. According to Supply Chain Dive, the packaging that comes with customers’ orders actually accounts for half of all plastic waste, considerably contributing to carbon emissions.
Which one has a higher footprint?
To be clear upfront, there is no easy answer to this question, since it all depends on a couple of different factors.
Online shopping can, generally speaking, have an overall lower impact if e-commerce businesses take a couple of things into account to reduce their carbon footprint. E-tailers can strongly contribute here, for instance, by working together with carbon neutral logistics providers, setting a minimum order amount, bundling orders together, reducing packaging as much as possible and making unavoidable packaging more sustainable, as well as offsetting residual emissions.
Last-mile delivery currently makes up the largest carbon driver in e-commerce, meaning that there is a potential for improvement in the future. At present, there are already many companies looking into options to make last-mile delivery more sustainable and affordable. Ideas such as Real-Time Tracking to reduce the risk of delivery failure, Dynamic Route Optimisation, and delivery through autonomous vehicles, including electric vehicles, drones, and robots, are already in the running - with certain optimisations those ideas can help to make the last-mile more efficient.
Yet, in the fast changing retail landscape, many businesses these days offer both online and in-store services, blurring the lines more and more. Omnichannel retailers should not be overlooked, as they can offer new options for their customers that can be more environmentally-friendly if paired with conscious consumer behaviour - e.g. order pick-up in store can be more efficient than home delivery, as the impact of the last-mile can be reduced significantly.
On the other hand, consumer behaviour should also not be disregarded, since it can have quite the impact on carbon emissions. A study conducted by Deloitte found that if consumers were to buy a larger number of products without returns, buying it at the mall would actually result in a lower amount of total CO2 emissions compared to an online purchase of several products with a product return.
Are you looking for ways to make your e-commerce business more sustainable? Then check out our article or feel free to contact us, and we can support you in implementing a holistic carbon management strategy.