Top 5 Strategies for Successful Retail 2024: Part 5, Be the Change You Want to See (and Buy)

In today's constantly shifting retail landscape, navigating immediate challenges while focusing on future expansion for success is essential. Retailers are facing high inflation, ongoing pandemic impacts, and geopolitical unrest, leading to increased costs and financial pressures for consumers.

Despite these challenges, some retailers have thrived, leveraging their adaptability, profound understanding of consumer behavior, and strategic investments. The key question revolves around how these elements have fueled their success and their objectives for 2024. The most recent 2024 Retail Report, featuring perspectives from 44 UK and international retail leaders, highlights how these retailers plan to strategize in the upcoming year.

Characterized by a prevailing sense of optimism, here we share the first part of the last of five critical insights for retailers seeking to refine their strategies for 2024.

#5 It pays to be good (and ethical)

Data indicates that over the last five years, there has been a significant increase in interest in sustainable goods around the world. According to The Economist Intelligence Unit, there has been a 71 percent rise in searches for sustainable products as consumers engage with ethical businesses more than ever before.

Consumers around the world are currently seeking to align themselves with retailers and brands that share the same values and priorities. According to a recent survey from McKinsey & Co., 66 percent of respondents and 75 percent of millennial respondents consider sustainability factors when making a purchase. Moreover, researchers from Accenture found that 72 percent of respondents consciously and actively purchased more environmentally friendly products than they did five years ago, with 81 percent expected to buy even more over the next five years.

The 2022 Retail Week consumer study found that 55 percent of consumers prefer to purchase from retailers recognized for their ethical and sustainable practices, with 48 percent actively checking a retailer's sustainability credentials before engaging with their website or physical store.

As sustainability and transparency promote a strong sense of trust among consumers, many are more likely to spend more with retailers with positive intentions, such as caring about their business's impact on people and the planet. For example, in 2020, UK spending on ethical products exceeded 100 billion pounds for the first time, as reported by Co-op's research, indicating a trend that continues to thrive.

Reflecting this trend, a significant number of leaders interviewed are prioritizing sustainability. Several UK retailers voiced their support for the British Retail Consortium (BRC) Climate Action Roadmap, which has garnered participation from about 90 businesses collaborating to cut carbon emissions and protect the planet's environmental health.

At the same time, many retail leaders interviewed are showing a strong commitment to fostering diverse and inclusive work environments. The McKinsey & Company's 2018 report "Delivering Through Diversity" found that companies in the top quartile for gender diversity on their executive teams were 21 percent more likely to achieve above-average profitability, while those with high ethnic and cultural diversity saw a 33 percent increase.

Further supporting this, ongoing research from Deloitte reveals that businesses with genuinely diverse cultures see an 83 percent rise in innovation revenues, highlighting the practical benefits for retailers in embracing diversity and inclusivity.

Going Green

Many of the retail leaders interviewed for the report are and will continue to invest time and resources in sustainability as they foresee it remaining a key priority over the next coming years. Likely to be driven by legislation as well as social pressure from consumers and other businesses, retail leaders were transparent with plans to become more responsible and outline tangible targets to reduce their business operations' impact on the environment and people.

Sustainability a top priority

Leading retailers, including Osprey London, eBay, and the Fragrance Shop, made sustainability one of their top three priorities for 2024. eBay, for example, is actively focusing on the second-hand market, having repositioned itself as a pioneer in this sector amidst growing interest and enhanced perception of pre-used goods.

Since 2022, its partnership with ITV's Love Island as the main fashion sponsor has elevated eBay's profile in promoting second-hand clothing and its commitment to the circular economy. eBay's spokesperson Williams emphasizes the significance of pre-loved items as eBay's core, offering consumers quality products at desirable prices and reliable methods. In addition to setting the Science Based Targets Initiative to reduce its Scope 1 and 2 carbon emissions by 90 percent by 2030 and 100 percent renewable energy by 2025, the online marketplace is also aiding its sellers to work more sustainably.

Both Osprey London and The Fragrance Shop are intensifying efforts to make their headquarters more eco-friendly in 2024, placing environmental sustainability at the forefront of their agendas. Osprey London recently relocated its headquarters to a new base, The Who, located in the Chiltern Hills, symbolizing the brand's ethos. Sustainable efforts include rewilding a portion of the area, installing numerous solar panels, and implementing independent water systems to enhance sustainability.

The Fragrance Shop has relocated its headquarters to a modern facility in Trafford Park, Manchester. The retailer has made significant investments in environmental, social, and governance (ESG) initiatives, including extensive solar panels, an advanced rainwater system for sanitary purposes, and a heat recovery system for energy efficiency. Further underscoring their commitment, The Fragrance Shop has also appointed a board director specifically responsible for overseeing ESG, highlighting the critical role they and the broader retail sector play in sustainability.

Leading the way for green

In 2023, retailers like The White Company and Decathlon appointed new sustainability leaders, while Asos brought on Anna Maria Rugarli, a sustainability and CSR specialist, as a non-executive member to head its ESG board, focusing on green initiatives. Some retail leaders are focusing on investing in transitioning to greener energy to help reduce overall costs in the long term, although immediate costs can rise due to elements of sustainability strategies.

Performance Roadwear apparel brand Rapha, aiming for carbon neutrality by 2025, faces financial challenges in using environmentally preferred materials, which are often more expensive. However, the retailer anticipates stabilization of costs as these practices become more standard.

Some retailers like fashion brand Rixo are choosing to emphasize efficiency and sustainable practices in line with their vintage-inspired ethos, which involves training by sustainability experts. Other retailers surveyed are contributing to sustainability by offering repair services, switching to LED lighting, using recycled packaging, and moving towards a paperless system. However, not all the retail leaders surveyed seemed to have committed to broader goals like net zero, with some citing practical and financial constraints.

Stay tuned for the second half of part five of Top 5 Retail Strategies for 2024 later this week.