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Navigating the future of retail: A sustainable revolution

A conversation with the leadership at the National Retail Federation (NRF)

The retail landscape is undergoing a transformation, with sustainability emerging as a pivotal force shaping the industry's future. In an exclusive interview with Scot Case, the Vice President for Sustainability at the NRF and the Executive Director of the newly launched NRF Center for Retail Sustainability, we explore some of the profound impacts of sustainability on retail and the strategies retailers are adopting to navigate this topic.

Global Retail Outlook 2024: Industry perspective

 

As a part of our recent report, Global Retail Outlook 2024, we asked 200 retail leaders across the globe to provide their expectations for revenue and operating margin for the industry as a whole. Over the last few months, we have also gathered the industry perspectives by interviewing some of our clients and below is an excerpt of one of such conversations with NRF.

Sustainability beyond regulation

In Scot's extensive retail experience he has seen the economic cycles go up and down. “The retailers that have survived and thrived were the ones that prioritized their investments in times of economic uncertainty,” says Scot. He argues that sustainability is not a pause-button activity. “Rather, it's a continual improvement cycle that yields substantial dividends. Retailers who prioritize sustainability, even in uncertain economic times position themselves for long-term success”. This is why Scot is pleased to note that the NRF, as the world's largest trade association for retailers, is responding to an increasing demand from its members to actively engage in sustainability conversations. “The results of the Deloitte global survey also show that when asked what their top priorities are, retailers list sustainability right after managing costs and inflationary pressures and ensuring supply chain resilience.”

Consumer behavior

This increasing focus on sustainability is contrary to the assumption that economic challenges can lead to reduced consumer and corporate spending on sustainability. In fact, Scot points to a growing consumer interest in buying slightly worn, used, or refurbished products. Retailers seizing this opportunity are not only meeting these evolving consumer preferences but also helping to create new revenue streams and customer generation opportunities. “There are plenty of examples, where we see that the financially smart decision for both retailer and consumer also happens to produce free sustainability benefits.”

Sustainability a question of definition?

But what constitutes a smart decision when it comes to sustainability? Scot underscores some of the challenges of aligning the many perspectives on sustainability within the retail landscape. Each retailer has its own definition of sustainability, and consumers have differing expectations across the different product categories. What they consider sustainable in electronics is likely different than what they consider sustainable in fashion or when purchasing a car or a home. 

Retailers should bridge this gap by understanding specific product attributes, understanding consumer choices and effective communications. The retailer needs to know why a customer picked product X and not product Y. For example, in some cases, consumers may indicate they are prioritizing higher quality because they'll be able to use a more durable product for longer. But some retailers might not consider ‘quality’ as a sustainability attribute. “It’s really a definitional issue,” continues Scot. “Knowing which specific product attributes are involved in a purchase and ensuring retailers and consumers are talking the same language.”

A holistic approach to sustainability

The NRF recently launched the NRF Center for Retail Sustainability, focusing on the circular economy, supply chain sustainability, and consumer insights. Interestingly, when it comes to sustainability, the NRF Center for Retail Sustainability collaborates not only with sustainability executives but engages with various departments. “Because sustainability done properly is embedded throughout every aspect of a retailer’s strategy and the execution of that strategy. This means we actively talk about sustainability with the people in finance, the people in merchandising, the people in our supply network, the people in marketing. Without collaboration we won’t make it happen.”

Is AI the magic wand?

Scot talked about the impact of generative AI and technology in supporting sustainability efforts. From mapping interconnected supply networks to analyzing product attributes and the flow of goods, technology can certainly help retailers to understand and work with the intricacies of sustainability. Moreover, sophisticated AI tools can provide insights into consumer behavior, providing greater granularity about the product attributes of the goods that are being sold and giving an insight into consumer patterns. “Ultimately, data and insights can help to optimize the kinds of sustainable offerings retailers put in front of consumers. But to call it a magic wand…”

Nuances require tailored solutions

“Broadly speaking, all sustainability challenges are similar in nature. We saw this at our recent conference on the future of retail circularity”. The first aim of the NRF Center for Retail Sustainability is developing a roadmap for the future of the circular retail economy. By engaging executives across diverse roles and industries, the project hopes to further foster collaboration, innovation, and systemic solutions that transcend sector boundaries. “So although you're talking to people across all the different roles and sectors within retail, we saw many similarities in how supply chains are organized, how they operate, the kinds of data needs they have, the tools and solutions and the channels they use. There's enough similarity to learn from each other and share innovations for future business models.”

But while acknowledging the uniformity of sustainability strategies at a high level, Scot emphasizes the sector-specific nuances needed for the different retail sectors when it comes to the details. Each retail sector likely faces distinct challenges, and each sustainability strategy looks different from retailer to retailer, because one size doesn't fit all. The sustainability challenges in the electronics sector are inherently different than those seen in the food sector or the fashion sector.

Sustainability in each aspect of the retail landscape

As sustainability permeates each aspect of the retail economy, Scot highlights its increasing prominence in conversations in the retail space. “Even in conversations unrelated to sustainability, we see sustainability weaving itself into the retail narrative. So, whether you're delving into strategies for business growth or talking about data analytics, you can't escape the topic of sustainability in these discussions.” Scot was happy to conclude that “Sustainability has become an integral part of the retail language.”

Read our full report 2024 Global Retail Outlook to deep dive into more such industry perspectives.

Scot Case, Vice President for Sustainability at the NRF and the Executive Director of NRF Center for Retail Sustainability says

“What we do see across all sectors, is that great strides are being made in optimizing the sustainability solutions.”

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