The Cost of Instant Gratification
This article originally appeared on Women in Retail Leadership Circle, sister brand of Total Retail.
Is anyone a fan of Gene Wilder’s “Willy Wonka & and the Chocolate Factory“? Who could forget golden ticket winner Veruca Salt’s screeching words, “I want it, and I want it NOW!” as she visibly demonstrates her need for instant gratification, without consideration of the impending result of her demands?
We now live in a commerce environment where we quite literally can have any product whim fulfilled, and in many cases, in our hands the same or next day, at the enticing price of free. And why shouldn’t we? Amazon’s Prime Now, UberRush and Instacart make bold promises of delivery within hours of order placement. Well, possibly, just like Veruca, we might be well advised to consider the longer term implications.
Beating the competition in retail used to be measured in terms of style, product quality and service. But digital has also disrupted this part of the commerce model. Now, many conversions are based exclusively on price comparisons and how fast the retailer can get product into the customer’s hands. Retailers, led by Amazon.com, continue to try to beat each other on how fast they can deliver. So while it is possible to deliver product fast and free to the customer, is it necessarily best if we truly care about sustainability?
In a simple review of how fulfillment actually works, let’s dissect the true costs of delivering three items on one order. We’ll hypothetically place our order from Dallas to Nordstrom.com, a fashion and home goods retailer headquartered in Seattle. Our order will be for a heavy Le Creuset five-quart dutch oven, which will drop-ship from the manufacturer; a private-label BP dress, which will ship from Nordstrom’s closest warehouse in Iowa; and a Lancome eye shadow, which will ship from the nearest Dallas store. Since we’re benefitting from Nordstrom’s “free” shipping, our only additional charges are tax, which we would have also incurred if we went to a physical store.
Our drop-shipped Le Creuset cookware item incurs costs for Nordstrom to electronically transfer the order, product packaging, and warehouse pick and pack labor as well as the FedEx truck, gas and labor expenses. The costs for the BP dress also include Nordstrom warehouse packaging and labor to pick and pack, FedEx delivery truck charges for gas and driver labor. And our third item is on back-order, finally shipping from a store, which also incurs store labor, packaging materials and shipping costs to our home. Our total estimated costs for the “free” shipping for three separate products on one order are likely well over $100. Assuming Nordstrom had an approximate average 25 percent profit margin among the three items, you can see that this is an expensive order to fulfill. In 2016 alone, Amazon lost $7.19 billion in fulfilling “free” shipping.
Let’s also consider one additional aspect — that of the footprint left on the environment. The packaging of our products, which included three separate cardboard boxes and any variety of Styrofoam peanuts and filler packing materials, all become fodder for the landfill, which wouldn’t have been incurred with an in-person pickup. Gas for the three separate FedEx trucks and the resulting CO2 sent into the air are also incurred environmental costs. Consider that parcel delivery trucks produce approximately 9 million tons of CO2 emissions every year.
While we could argue that our spending contributes to our thriving economy, we might conclude that our present desire for instant gratification via numerous individual packages might not be the best for our planet. Could retailers continue to expand their buy online, pick up in-store options to reduce packaging waste and delivery truck impacts? And should consumers consider these choices more at checkout? There are some customers who have voiced their frustrations, according to a New York Times article, which cited 33 million Amazon packaging comments and complaints since 2009. For those of us who are worrying about the footprint we’re leaving on our home, Mother Earth, maybe we should let retailers know and ask ourselves if we’re willing to wait a bit for that new pair of shoes?
Linda Mihalick is the senior director, Global Digital Retailing Research Center at the University of North Texas.
Related story: The Changing Definition of Convenience