The Possibility of Developing Green Retail Marketing: Study Review

Green marketing has been a topic of research for about last five decades. With a lot of buzz around the carbon foot print of producers, many major organisations have started adapting sustainable ways to give their customers products that are innovative and environment friendly. Some come with higher price tag to either accommodate the cost of going green or to differentiate against the non green options available in the market while others try to fight the battle at the same price as the competitors. Many big global brands across industries have registered themselves in this category by adopting a green supply chain but in India the concept is still fairly new. The green concept has been studied in light of manufacturers in many studies but very limited literature could be found related to retailers in this aspect.

Green Retailing seems to be a new and attractive concept for retailers to gain customer attention but very vague in terms of understanding. Green retailing can be defined as a business selling eco-friendly products, practicing environmental-friendly methods, processes, materials or services in order to prevent environmental degradation and create a sustainable environment. Green retailing includes use of pro environmental methods in goods and services distribution , use of renewable energy, greener outlets, green communication and promotion methods, etc. for customer satisfaction and longterm environmental sustainability. Transportation, storage and outlet store are the three main activities that comprise retailing where as green retailing on the other hand combines these activities with 3R’s (Reduce, Recycle and Re-use) to achieve sustainability. The retailers can be green by employing eco-friendly practices in their regular activities like using standardised vehicles for transportation of goods, usage of solar power, energy efficient equipment, etc. Thus, retailer can be himself green and also influence and promote sustainability by suppliers and consumers through his activities.

We could owe the popularity of green retailing to an informed environmentally conscious customer, producers taking environmental responsibility and governmental policies and regulations. The concept has really picked up pace in the developed countries like US or UK but is fairly new in the developing countries and still requires a lot of work to be done in the domain.The millennial population around the world is much more aware about the heath and environmental benefits of using green products and are willing to pay more to support the cause. Environment-consciousness and eco-friendliness of brands are ranked as the most important parameters influencing shoppers (67%), followed by natural and organic ingredients (66% and 65%, respectively), as per the International Lifestyles Survey 2019 by Euromonitor. According to this report, 62% of the respondents surveyed said recyclability influenced their purchases, while 59% said supporting a charitable cause was a key factor while shopping. Hindustan Unilever declared that in 2018, their sustainable living brands grew 69% faster than the rest of the business which is an up from 46% in 2017. Such trends put more pressure on the retailers to go green. Many studies have focused to understand the factors that impact the purchase decision from the customers point of view. Our study in its first phase aims to interact and understand the green retailers point of view about green retailing, products offered, steps that they take to communicate their efforts to their customers, their efforts towards adopting sustainable ways of production, the impact of these activities over retailer preference and their overall performance. For the present study Green Retailer would be a retailer who either sells green products or engages in business practices that are environment friendly and attempts in its efforts to reduce the negative environmental impact due to its daily activities. In our second phase we wish to investigate the effect of all the above stated factors on Green retailer performance but from the customers perspective. And in the last phase we would compare the derived models from the previous two phases with each other to be able to identify the gaps which could be addressed to improve the popularity of green retailing.

Overview of the Retail Sector and FMCG Industry

The Retail Industry, in 2017, was valued at US $ 23,460 billion. The industry is expected to attain a CAGR of 5.3% during the period (2018-2023), to reach a valuation of US$ 31,880.8 billion by 2023. The retail sector is very competitive and mature in developed economies of North America and Europe.The developing economies, on the other hand, of, Middle East, Asia-Pacific and Latin America have been catalytic in driving the market growth. The entry of many new players in the Indian retail industry has turned it into one of the most dynamic and fast-paced industries. Total consumption expenditure can be expected to reach about US$ 3,600 billion by 2020. This turns out to be over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-largest global destination in the retail space. In FDI Confidence Index, India ranks 16th after U.S., Canada, Germany, United Kingdom, China, Japan, France, Australia, Switzerland and Italy. Retail industry reached to US$ 950 billion in 2018 at CAGR of 13 per cent and is expected to reach US$ 1.1 trillion by 2020. Revenue generated from online retail is projected to grow to US$ 60 billion by 2020. Revenue of India’s offline retailers, also known as brick and mortar (B and M) retailers, is expected to increase by US$ 1.39-2.77 billion in FY20. India is expected to become the world’s fastest growing e-commerce market, driven by robust investment in the sector and rapid increase in the number of internet users.

The global FMCG market is projected to reach US$15,361.8 billion by 2025, registering a CAGR of 5.4% from 2018 to 2025. These products are consumed on a small scale and are generally available in a variety of outlets including grocery store, supermarket, and warehouses. The FMCG market has experienced healthy growth over the last decade because of adoption of experience retailing along with reflecting consumers’ desire to enhance their physical shopping experience with a social or leisure experience. FMCG market is segmented based on product type, distribution channel, and region. Based on product type, it is classified as food and beverages, personal care (skincare, cosmetics, hair care, others), healthcare care (over-the-counter drugs, vitamins and dietary supplements, oral care, feminine care, others), and home care. Asia-Pacific is expected to grow at the highest CAGR of 8.0% due to changes in peoples’ lifestyle, due to increasing working population and globalisation. Rise in the overall populations’ purchasing capability and easy accessibility & penetration of internet and social media has led to an increase in the consumption of food that is processed and packaged, which makes way for the growth of the FMCG market in the region.

In the Indian economy, 4th largest sector is the FMCG sector, with personal care and household adding upto 50 per cent of FMCG sales. Increase in customer awareness, easily available access and progressing lifestyles are drivers that are leading to growth for the sector. The largest contributor, is the urban strata, to the FMCG sectors overall revenue in India, which also accounts for 55 per cent of the revenue share. However, the FMCG market has been observed to be growing at a higher rate in rural India when compared to the urban India, in the last few years. The semi-urban and rural market segments are growing at unusual rate and FMCG products alone account for about half of total rural spending. By 2020, the retail market in India is forecasted to touch a mark of US$ 1.1 trillion compared to US$ 840 billion in 2017, with a growth rate of 20-25 percent for modern trade. FMCG sector is forecasted to reach US$ 103.7 billion by 2020 in terms of revenue compared to US$ 52.75 billion in 2018. The sector has witnessed the surge in growth owing to moderate inflation, increase in rural income and private consumption as reported by Nielsen.

The overview of the FMCG industry indicates that India’s demographic profile acts as a major factor in the growth of the sector. Governments’ urban development initiatives and the expanding middle class of India, has helped in creation of attractive markets in the country. Ernst and Young’s research on the cities of India highlights 42 ‘new wave’ markets including the two new metros—Jaipur and Surat—and 10 high-potential cities including Bhopal, Chandigarh and Patna besides 30 additional emerging markets that include Agra, Amritsar.

Critique on Existing Literature

Rising awareness about the environment and the destruction that human beings are causing to the natural resources due to their activities is leading to a paradigm shift. People have started realising that by using and supporting certain kinds of products, they can do their bit to reduce the negative impact on environment. This category of products are called the green products. A green product can be defined as “a product that was manufactured using toxic-free ingredients and environmentally- friendly procedures, and which is certified as such by a recognised organisation”. According to Diglel and Yazdanifard, a green product is produced in an environmentally conscious manner inflicting lowest possible negative effects on the surroundings, product and packaging made from recycled materials, ensuring preservation of natural resources and locally manufactured. These products that are manufactured through green technology and caused no environmental hazards are called green products. Promotion of green technology and green products are necessary for conservation of natural resources and sustainable development. Green products are products that are originally grown, recyclable, reusable and biodegradable, produced with natural ingredients, recycled contents, non-toxic chemical, or have contents under approved chemical limits. These products do not harm or pollute the environment , which are not tested on animals and have eco-friendly packaging i.e. reusable, refillable containers etc.

Campher, has observed that market research shows that consumers want greener products. Ottoman and Mallen believe that customers are seeking out green products, because green product is perceived to be better quality, organic and healthy and also helps to maintain the environment. Manget, Roche and Münnich, have found that many benefits of green products are valued greatly by consumers. Owing to the ever increasing demand for green products and environmentally conscious customers, many organisations have now started taking conscious steps to reduce their carbon foot print. Many well known organisations that already are in the process to minimise their carbon foot print are world lead retailers such as Tesco, Patogonia, Carrefour, BestBuy, Wal-Mart and Zara to talk about a few.

Green management has been defined by various researchers from many perspectives and the definition has really evolved with time. “Green management is the organisation wide process of applying innovation to achieve sustainability, waste reduction, social responsibility, and a competitive advantage via continuous learning and development and by embracing environmental goals and strategies that are fully integrated with the goals and strategies of the organisation”. Green management means to manage the complete process of production, since pollution doesn’t know distinction between different processes and activities of product development.

According to the American Marketing Association, green marketing can be considered from three varied perspectives. First is the marketing of products that are environmentally safe from the retailers point of view. Second is the social marketing perspective where it’s defined as development and marketing of products that have reduced the negative effect on the environment. Polonsky and Peattie also define green marketing from the environmental perspective. Third is the environmental perspective, where green marketing can be defined as an “ organisation’s efforts to produce, promote, package and reclaim products in a manner that is sensitive or responsive to ecological concerns”. In short, today green marketing basically means integrating concern for the environment in all the business domains like sourcing, product designing, supply chain, manufacturing, delivery, reverse logistic and final disposal. Basic goals of green marketing are to eliminate the concept of waste, reinvent the concept of product, make prices reflect actual and environmental costs, make environmentalism profitable, bringing out product modifications, changing in production processes, packaging changes and modifying advertising.

Retail store is the place that facilitates consumers’ interaction with products. The product responses are then used by the companies to understand the customer needs, requirements and their buying behaviour. Hence, retailing has emerged as an important building block of green marketing program and has raised significance of retail focused sustainability research. “Green retailing incorporates availability, display and promotion of green products, sustainability practices in the retail stores, and ethical business practices'. But, not many studies can be found that illustrates the efforts on the retailer front to achieve environmental promises. Any retailer or business would always like to maximise his profit, market share, customer base and good will amongst its customers.

In short, the performance of a retailer compared to its competitors decides if he sustains in the market or exits. In case of green retailers, its even more critical to be able to sustain and perform better than not only their direct competitors but also compared to their non green counterparts. There are many factors that affect the retailers decision to go green in its operation or offer products that are pro environment apart from the sheer motivation to reduce their environmental footprint. The most important factor would be the performance of the Green retailer compared to its competitors. The study of literature reveals a few factors that impact the performance of a green retailer and we wish to propose a model using three such independent variables that we see, are absolutely critical for the same.