Market News

 February 11, 2009
The Greening of Retail

 strong>David Ian Gray

The Canadian retail sector has been slow in responding to the pressures of environmental responsibility, notwithstanding long-time leadership from the likes of Mountain Equipment Co-op or The Hudson Bay Company.  Retail executives polled in our surveys on social and environmental responsibility acknowledge this, ranking themselves no better than at par with, if not lagging, other sectors on sustainability. 

There are a few reasons for this:

  • 1. Retail is a lower-risk sector and relatively benign when compared with petroleum, mining, forestry and manufacturing.
  • 2. It is fragmented with a few large players, a number of smaller chains and many mom-and-pops. Two-thirds of stores in Canada are considered independent, or non-chain. It is harder to rally the sector and easier for outsiders to spot what is not being done.
  • 3. Retailers filter and manage the intersection between people and "things". They are strong on tactics and execution, great at micro-adaptation and adoption, but not so lauded for innovation and long-term strategic change.

However, change has come.  Movement towards sustainable business has had a long, slow burn, but seems to have passed its tipping point. Canadian businesses are acknowledging a revised social contract.  It is time for our retailers to define their place in this new world.

And they are doing just that.  Since 2007, more and more retailer action is reported, from the largest chains down to innovative start-ups.  Those surveyed executives agree sustainability is a growing priority for their business.  A recent DIG360/Retail BC dialogue on sustainable retail drew the cream of retail leaders in British Columbia. A great energy was maintained throughout the discourse.  Occupying a unique position of influence (with customers, staff, and suppliers), retail is rife with possibilities.  The store is the face of business the public sees every day. 

Wal-mart’s initiatives are surely striking in their scale.  However, this is not just about big retail. Independent stores are a fertile ground for innovation - once you get past the numerous operations that simply make-work for owners. A green retailer is not sustainable if it is not fiscally viable. Many will sink. Their legacies will be the creative Darwinian evolutions that engage shoppers to rethink their actions, and that inspire the major players in the sector to adopt new practices.

Retail is tremendously dependent on others. Silos must be broken inside retail organizations, between competitors, and with landlords, vendors and other stakeholders.  Retailers can control their own operational impacts, and this is where most are working today.  However, in terms of shaping the product life cycle or creating better global social conditions, the breakthrough solutions will occur when retail co-creates with others.  Canadian retail leaders must become more comfortable sharing ideas with their peers.  The progress made by Mountain Equipment Co-op working with direct competitors Nike and Patagonia on ethical sourcing is a great example.

Intense competition, low profit margins (in good years), deflationary products and consumers persistently expecting ’sales’ (which drive the need for volumetric growth): retailers face fundamental challenges. Facing exponential growth of "green" recommendations and contradictions, environmental departments nor internal think-tanks are not feasible.  Independent advice is needed from those who understand retail operations and work with retailers to adapt and adopt.  Green advocates should ask how they can help, not just tell retailers what to do.  Retailers should recall lessons from technology adoption: pain can be sidestepped with a clear vision from the top and articulation of needs.

Ultimately, recognition is needed that this is not really about "green" but about change.  While retail can adjust prices and re-stock stores quickly, it is much less comfortable with business transformation.  Yet technology businesses, for example, seem to embrace change.  Perhaps there is opportunity for retailers to use sustainability as the latest catalyst to rethink the business.  Can retail can become more strategic while retaining the executional edge that makes it so successful?  Those reluctant to open that box should look no further than the parallels of the 1990’s with the internet and the rise of e-commerce.  Many viewed websites as funny yellow pages ads, others ignored the internet as a fad, and many crazy ideas arrived fast and disappeared as quickly. The reported death of retail proved false.  But a decade later the web has transformed how we do and view business.  "Green" will do the same.

Canadian retail survived even thrived through disruptive forces.  It should confidently tackle the tough questions and develop its own approach to sustainability.  It does not need to do this alone, but it has plenty of room to show leadership and rally others to create the future.  A green dollar store will confirm the retail landscape forever changed. With creative brilliance and adequate financing, this will happen - well, maybe a green two-dollar store. 

David Ian Gray is a recognized expert on retail and shopper trends and conducts strategic studies through his firm DIG360 Consulting.  He has followed the retail response to sustainability since 1990.  He can be reached at .

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