The Strategic Advantage Omnichannel Retailers Have Over Amazon

The authors’ research found that by providing consumers with information on the environmental and social impact of home deliveries, omnichannel retailers could capture $100 billion worth of market share from Amazon. It would also allow them to increase margins and make their own businesses more sustainable.

The allure of online shopping is undeniable. As Amazon has shown, consumers can receive delivery of almost any product with the simple click of a mouse or touch of a screen. No wonder e-commerce sales have more than doubled over the past five years and continue to grow.

However, home delivery has hidden sustainability costs that are largely unknown to consumers. If they become aware of these harmful effects, then the broad appeal of this retail channel could diminish. Our research, which is being reviewed for publication by an academic journal, suggests that omnichannel retailers could capitalize on this situation to increase margins, create more sustainable business, and take market share from Amazon.

We found that many consumers are committed to making more sustainable choices, but more than 80% of them do not inherently consider or understand the adverse sustainability implications of having online purchases shipped directly to their homes. While focused on sustainable product characteristics, they are often unaware of the additional packaging wastes, energy usage, traffic congestion, or safety issues that home deliveries create.

Given the growing preference for greener and socially conscious consumption, we wondered what would happen if consumers were explicitly informed or reminded about environmental and social sustainability consequences of their retail channel decisions. Would their shopping behaviors change when home delivery and sustainability tradeoffs were revealed?

To answer these questions, we conducted an experiment that asked online shoppers to choose between free home delivery or free store-pickup channels. Our sample consisted of 200 participants with a range of demographic attributes (age, sex, education, income, and so on) from a variety of location types (urban, suburban, rural) to ensure broad representation across relevant shopper characteristics.

The control group viewed a typical retailer website and was not given any sustainability information. Under these normal conditions, nearly three out of four participants opted for the convenience of home delivery.

In the treatment group, the retailer website included environmental and social sustainability disclosures. Participants were shown that store pickup reduced packaging wastes, emissions, traffic congestion, and vehicle accidents relative to home delivery. When provided with this additional information, store pickup became the more commonly selected channel for 60% of the participants. By simply including online sustainability labels, store pickup more than doubled and home deliveries dropped by 43%. These results were achieved while participants remained satisfied with their shopping experiences.

For omnichannel retailers, these results have immediate competitive and financial implications. We conservatively estimate that omnichannel retailers could capture $100 billion worth of market share from Amazon.

They also could significantly reduce their operating costs. Home delivery is the most expensive channel in retailing. The additional handling and movement requirements for these orders costs $10 to $20 per delivery and can represent nearly 50% of retail logistics costs.

Our research shows that by providing sustainability information and shifting a significant portion of their home-delivery volume to the store-pickup channel, omnichannel retailers could improve their margins on the same sales volume and mix. We calculate that Walmart could recapture $1 billion to $2 billion in annual profits, and Target could recoup $200 million to $400 million. These gains represent a 5% to 14% increase in total corporate profitability. (Our estimates are based on the 43% drop in home deliveries multiplied by the annual number of home deliveries and the average cost range of each shipment.)

Achieving these benefits requires neither major investments in new equipment or technologies nor significant process changes. Rather, omnichannel retailers simply need to provide consumers with the sustainability information.

By persuading consumers to forgo some home deliveries, omnichannel retailers could improve their green performance. Each year, U.S. e-commerce produces an additional 500 million pounds of plastic packaging waste, results in the loss of an extra one billion trees for cardboard production, and accounts for 30% of landfill tonnage. Individual shipments also generate 4.4 million tons of CO2 emissions annually.

If even half of our projected channel-shifting volume is achieved, retailers can reduce that amount of plastic by 100 million pounds, the number of trees used by 200 million, the amount of tonnage that goes into landfills by 6%. While retailers can also realize 880,000 tons of emissions savings, some of these gains may be offset by incremental consumer trips to local stores. However, given NielsenIQ estimates that 99% of consumers already shop in store locations, emissions are still likely to be considerably less.

In addition to environmental concerns, e-commerce also presents social challenges. The stop-and-go nature of home deliveries creates traffic delays, noise pollution, and vehicle-safety issues for local community members. Estimates suggest that delivery trucks increase road congestion by 21% and add 11 minutes to commute times. According to the U.S. Postal Service, 29,000 of its vehicles are involved in accidents each year, and according to a study published in 2022 by the Strategic Organizing Center, a union organization, 20% of Amazon drivers sustain injuries while delivering packages. Reducing home deliveries of items bought online would ameliorate these problems even when accounting for some incremental consumer travel to stores.

With their physical stores and pickup options, omnichannel retailers have an underutilized strategic advantage over Amazon. By educating consumers about the environmental and social costs of home deliveries, their efforts will be rewarded with more profitable sales, higher market shares, and concrete sustainability-performance gains.

Sales and marketing, Environmental sustainability, Customer strategy, Retail and consumer goods, Digital Article

Rodney Thomas,
Rodney Thomas is an associate professor of supply chain management and advisor to the Customer Centric Leadership Initiative at the University of Arkansas’s Sam M. Walton College of Business.

Travis Tokar,
Travis Tokar is a professor of supply chain management at Texas Christian University’s Neeley School of Business.

Remko Van Hoek
Remko Van Hoek is a professor of supply chain management at the University of Arkansas’s Sam M. Walton College of Business and advises companies on procurement transformation. He previously served as a chief procurement officer at a number of companies.

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