Consumers Demand Sustainable Products And Shopping Formats

Retail Execs Didn’t Get the Memo

Consumers and retailers are not on the same page when it comes to sustainable shopping. This is the key takeaway from a recent report produced by First Insight and the Baker Retailing Center at the Wharton School of the University of Pennsylvania.

Consumers and senior retail executives were surveyed in tandem to compare perceptions and preferences for sustainable products, shopping formats, and the influences driving sustainable purchase decisions.

The survey found that a significant disconnect between senior retail leaders and consumers exists when it comes to sustainability.

Not surprisingly, the sustainability imperative has been driven primarily by the consumer. A few forward-thinking retailers such as Patagonia and Levi’s have been pioneers in this field and should get the credit they deserve for giving conscious consumerism a bigger platform. Yet it’s the consumer—specifically the Gen Z consumer—that has elevated the sustainability conversation.

The recent study found that the Gen Z consumer has outsized influence on not only their Gen X parents but even their Boomer grandparents when it comes to sustainable shopping.

In the two years since First Insight’s first report on Gen Z and sustainability was published, Gen X consumers’ preference to shop sustainable brands increased by nearly 25% and their willingness to pay more for sustainable products increased by 42%. In fact, consumers across all generations—from Baby Boomers to Gen Z—are now willing to spend more for sustainable products. Just two years ago, only 58% of consumers across all generations were willing to spend more for sustainable options. Today, nearly 90% of Gen X consumers said that they would be willing to spend an extra 10% or more for sustainable products, compared to just over 34% two years ago.

Gen Z’s influence will only increase as the younger members of this cohort grow into adulthood. By 2030, Gen Z will represent 27% of the world’s income, surpassing Millennials by 2031, according to Insider.

Since this generation also supports brands that also support their own values and causes, it’s imperative that brands and retailers become aligned with theses consumers before it’s too late.

Senior retail executives appear to have little understanding of consumers’ preferences around sustainable offerings and shopping.

One of the most significant data points uncovered in the recent report is the fact that consumers across all generations are willing to pay more for sustainable products than retailers expect. Two-thirds of consumers say they will pay more for sustainable products, with equally two-thirds of retailers believing that consumers will not pay more for sustainable products. This conundrum could easily be alleviated if the retailers and brands simply listened to the voice of their customers to gain a greater understanding of how to price sustainable products before they hit the shelves.

Another interesting deviation was discovered around the importance sustainability plays when consumers choose to make purchases.

Almost 100% of the retailers surveyed believe that consumers rank brand name higher than product sustainability, when, in fact, a much lower percentage – 56% – of consumers rank brand name as somewhat or very important.

Likewise, only half of the senior retailer executives believe that sustainability is an important purchase consideration for consumers despite three-quarters of all consumers saying that it is somewhat or very important to them.

A desire to help the environment was found to be the primary reason consumers purchase sustainable products and brands. Almost 30% say they want to improve the environment, with 23% wishing to reduce production waste, 22% wishing to reduce their carbon footprint, and 17% concerned with animal welfare. Only 7% agree that they prefer to shop sustainably due to social signaling; in other words, to be recognized as being a good citizen. Retail executives rank social signaling nearly equal to improving the environment when asked why they believe consumers shop sustainably.

The good news is that almost 100% of the senior retail executives agree that consumers expect them to operate in a more sustainable way. But how?

We know from previous studies that the older generations—Millennials through Boomers—define sustainability primarily by the materials used to create a product. These include organic, naturally harvested fibers or products made from recycled materials. Sustainability to Gen Z, on the other hand, means sustainable manufacturing. Using predictive analytics, testing 3D digital samples prior to production, and refining ESG policies are winning tactics which can improve sustainability targets for many companies.

Consumers are giving retailers and brands the benefit of the doubt, with 60% agreeing that retailers are sufficiently transparent around their efforts to become more sustainable. It’s ironic that 100% of the senior retail executives think consumers assume the retailers are not transparent with their sustainability efforts.

Clearly, retailers must be more in sync with consumers on issues as critical as sustainability.

Listening more closely to the voice of the customer will enable retailers and brands to offer more than just performative measures when it comes to ESG priorities.

Gen Z’s sustainability priorities are expected to increase in importance as more and more members of this generation enter the workforce. Aligning with consumers on sustainability demands is simply better for business. Acting on consumers’ sustainable shopping preferences will guide retailers with better offering selection and more competitive pricing. Transparency around sustainability efforts will help brands and retailers differentiate themselves in the market, while testing consumer-validated merchandise can improve retailers’ sustainable product assortments and bottom lines.