Sustainability of consumer products has been a premium product for decades, one which has been high-priced, serious, and perhaps a little bit apologetic. Sustainability has existed on the bottom shelf of supermarkets, packaged in plain packaging, asking customers to forgo convenience for their conscience. However, this bargain is being destroyed by a new wave of direct-to-consumer brands who consider sustainability an integral part of their product design.
The Structural Advantage of Going Direct
Due to how the D2C model works it lends itself really well to sustainable businesses. As they do not have any distributors/wholesalers/retailers to cut out of their process, they are able to have complete control over the entire value chain which builds credibility.
Brands who own their entire supply chain can guarantee their claims where those who do rely on a 5-step supply chain can only hope. Without the need to cover retailer margins, D2C brands can use higher quality materials, ethical labour and refillable systems whilst keeping prices competitive. The ‘green premium’ is becoming less of an issue and in some categories there is no premium at all.
From Slogan to System
The most interesting brands aren’t focused on being virtuous, but instead are making better products which also happens to be sustainable. These are some examples of what we’re seeing:
Personal Care – Using refillable pouches, solid shampoo bars and plastic free packaging instead of single use bottles.
Fashion – Brands are using organic cotton, recycled fibres and on demand production to cut down on excess stock issues common in fast fashion.
Home & Cleaning – Concentrated tablets and plant based ingredients reduce the amount of plastic and weight going through the post.
Food & Drink – Brands are using upcycled ingredients, millet based snacks and regenerative produce to find passionate customers.
Each of these take a systems approach by thinking about how their packaging, delivery and disposal will work from the start.
India’s Quiet Green Revolution
Nowhere is this seen more clearly than in India. The young, digital-native population has increasing disposable income and increasing smartphone penetration. This is creating new opportunities for local skincare, clothing and home brands that are tapping into an ancient cultural heritage.
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They are using Ayurvedic ingredients, handlooms and a long history of using very little and re-using. Tier 2 and Tier 3 cities such as Indore are also becoming more prominent in this market. As logistics improve and social media becomes more prevalent, niche brands are becoming available to consumers who had previously had no access. This means the demand curve is widening.
The Trust Problem
However, there are dangers. Green-washing is the biggest threat within this sector. With ‘eco-friendly’ being a hot selling point for brands, many are now making broad, vague statements. These include terms such as ‘natural’, ‘conscious’ and ‘planet positive’ without much proof. This has caused consumers to become increasingly sceptical and regulators are starting to pay attention. The Indian Central Consumer Protection Authority have put out guidelines to combat false environmental claims, like this globally.
Overall, transparency is key and the only long term competitive advantage. Brands should be making use of third-party certifications, publishing their sources, including carbon calculations and being open about what they are still struggling with. The brands that will succeed will be ones who can be honest and say ‘this is what we’ve achieved and this is what we haven’t’.
The Economics Still Matter
Scaling pure idealism is impossible. Sustainable D2C brands have increased customer acquisition costs, smaller batch sizes and also a higher carbon footprint due to sending out individual items in parcels. Returns can also be an issue, especially within the fashion industry, and negate any benefits of being more sustainable. The most intelligent ones are looking at combining deliveries together, regional fulfillment centres, subscription top-ups and returns.
Profit is also a challenge as investors who previously rewarded rapid growth are now looking for businesses to have viable unit economics. Interestingly sustainability can actually help improve profitability as customers who are loyal to your brand will purchase subscription top-ups on a regular basis which is a cheaper way to retain them than spending money on paid advertising.
What Comes Next
It’s becoming an expected norm rather than a differentiator, just like quality and convenience. Eco brands are being acquired by traditional conglomerates or they are rushing to copy them. However only brands that will really win are those that actually incorporate and can prove sustainability within their processes and make it easy for the customer.
The consumer of tomorrow will not question if the product is sustainable, they will expect it to be and penalise those that cannot prove it. The green premium may be gone but this creates a much more challenging market which rewards those that do the right thing for our planet.
