Super interesting article! I do wonder, though, the extent to which a company rooted in wholesale consumable business can really leverage some of these initiatives to drive sales growth. Looking at ecommerce for example, you mention that partnerships in high growth markets are key to increasing sales. How, then, can L’Oreal actively drive growth in this space when the retail partners are responsible for so much of the customer shopping experience?
I also wonder the extent to which the company will be able to measure the ROI of some of these initiatives. Social media and digital magazines are interesting and may well help drive further interest in L’Oreal’s products, but I imagine it will be difficult to tie any increases in sales to these efforts given the fact that L’Oreal often isn’t selling the online goods themselves. It looks like Makyaj is directing sales to a major Turkish ecommerce partner so they may be able to track sales there, but that requires partnership with the retailer to get access to data around impressions and conversion — which retailers are often reluctant to share. It may be difficult to measure which types of social interactions are more impactful without a way to measure resulting sales, so I worry a bit about how they’ll figure out what efficient efforts in this space really look like.
I agree with Vincent that this model brings up questions around scale. In order for the company to grow and for customers to get the products they’re looking for (meaning travelers going to places where goods are available and willing to go source the right items while there), they’ll need to grow their customer base to a critical mass. I imagine, however, that if millions of people start using the service, governments are likely to take note and start to question how much tax/import revenue they’re missing out on here!
I don’t have a lot of details on how the economics here work, but I also have questions around how price competitive this model will turn out to be in the long run. It looks like here that a customer bringing items into Singapore is to be charged a 7% goods and services tax, and through Airfrov they pay a 7% service fee. In the case of items not offered at all in Singapore, that may still be a great deal because you don’t have an alternative source to access the product locally. I do wonder, however, if over time competitors might be able to figure out what sort of items are most in demand and import them in a more systematic (and legal!) way. If these items became locally available at reasonable prices, what sort of incentive would there be to ask a stranger to buy them for you abroad?
In addition to the costs you’ve mentioned this digitization already having incurred, I worry a little about how much ongoing investment keeping up with online orders will entail if you’re looking to keep up with customer expectations. For example, the kiosks installed at the 450 stores were, I’m sure, very high tech when installed, but technology in this space develops so rapidly, I wonder how quickly they will become outdated and therefore need to be replaced. I think there are 21st century tradeoffs between personal customer service and online convenience that customers are ready to make, but the last thing you’d want is to walk into a Panera store, not have a warm personal interaction with the staff, and find the available kiosk ordering system to feel old, slow, and clunky. Keeping up with a digital experience that feels innovative and as good as the current “Panera warmth” experience is likely to continue to be expensive in the long term. Hopefully Panera is considering these future and ongoing costs as they roll out these ecommerce initiatives in the balance of their stores.
It’s super cool to see a fashion brand founded in 1856 not only continuing to stay relevant, but to be an industry leader in technological innovation! At the same time, I definitely have similar questions to the ones Rafi has posed here about online and social media presence for a brand that continues to present itself as very high end and exclusive. I love the idea of the Art of the Trench to get younger customers engaged with the brand and thinking about how they can engage with it, but at the same time it’s strange to think of a luxury brand liking the idea of “digital democracy” — at it’s core, they survive as a company because their brand is perceived as luxe and exclusive, not democratic and easy to access. How many customers will continue to spend $1000+ on a trench coat that they think just anyone can also get? Why spend so much on something that feels ubiquitous and democratically accessible?
I actually push back a bit on the assumption that Nike can force their manufacturing partners to meet high energy efficiency benchmarks. According to Nike’s online manufacturing map (link below), “virtually all” of their products are made in independent factories that also work with other global firms. They currently work with 666 factories in 43 countries, all of which work within highly varying regulatory environments. What’s the right energy efficiency benchmarks they should be using for each factory, especially since many of them are located in less regulated, developing nations? How would increasing costs at the factories impact the other global brands they produce for, who may not want or be able to absorb higher pricing?
Nike works with independent factories rather than investing in their own to reduce their costs and increase flexibility in production. Forcing factories to invest in energy efficient efforts (particularly if trying to meet a standard that exceeds local regulatory requirements) would undoubtedly be expensive. Unless Nike is willing to partner on the investment costs and provide some sort of assurance of partnership longevity, it is unlikely that factories would be able to achieve high energy efficiency. On the other hand, these sorts of financial and relationship commitments undermines the benefits of working with independent factories, so may not be desirable from Nike’s perspective. You make the assumption here that loss of Nike’s business would certainly outweigh the cost to improve energy efficiency, but I’m not sure that’s completely certain especially since so many of these factories are located in far-flung, developing locales. On the other hand, I do agree that it is misleading for Nike to claim their supply chain is energy efficient when so many energy inefficient steps are excluded as independent, so they’ll need to work with their production partners somehow to make improvements.
I think you raise a great point around the timelines for investment and impact in mitigating against climate change risk. It can be difficult to commit to investment today at the levels needed to (hopefully) avoid a negative situation decades from now. It can also be difficult to directly tie some of those expensive present expenditures to concrete future outcomes — especially when, as in this case, that outcome is for things not to look all the different than they do now. While certainly short-sighted, it seems like a pretty human response for the vineyard owners to feel relief at knowing how long the timelines are and assume that somewhere in the time they’ll be able to figure out a solution. It’s easy to discount a future, potentially uncertainly definitely problem when faced with current issues that seem urgent.
Nappa Valley Vinters also struggles in that they can provide information to the local wine making community and hope that they work together to make improvements, but they don’t actually have any leverage to force any sort of action. Unfortunately, it may take things getting worse for things to improve and for wine makers to take what NVV is saying seriously. Luckily for the wine makers, it seems that NVV now has a trove of research compiled to help them navigate the changes they’ll inevitably need to make.
I think one of the biggest challenges here is that, adapt as they can, there’s no way that Vail’s sustainability or diversification efforts can affect how much snow falls from the sky. Reducing energy consumption as a resort is admirable, but has no way to directly impact the climate-related challenges they are facing. Current and future sustainability efforts won’t be able to undo the damage done or reverse the climbing winter temperatures. As you point out, efforts to manufacture higher levels of artificial snow are likely to counter many of the gains made in reducing energy consumption in other areas, resulting in very little net change as a total resort. Even if they were to develop carbon neutral artificial snowmaking technology, it might be a relatively short- to medium-term solution to the lack of snow issue; if temperatures continue to rise, maintaining consistent levels of artificial snow may turn out to be a challenge in and of itself.
Laure, I definitely agree that if a company makes environmental claims about their business, we should hold them accountable to those claims and responsible for fulfilling them. It sounds as though neither they nor outside sources have been able to substantiate the claims they’ve made around reducing car ownership and carbon emissions, which should (but, to your point, has not always publicly) undermine that very premise.
I also agree with Sid that utilization is a key component to achieving the level of scale needed for any of Uber’s environmental claims to ever hold true. I personally have made the decision several times to take an UberPool instead of walking because the super low $2-3 rate was so low, only to find that I was the only person in the Pool. As such, the low price had induced me into driving rather than walking so I contributed to increased emissions, but those emissions were not shared across any other passengers headed in a similar direction. Unless or until Pool reaches a scale where it can truly efficiently match up passengers to reduce emission levels per passenger, it may counteract the very purpose for which it was intended.
Another side effect of these server centers you might be interested in considering is the heat energy produced, which most companies counter with energy-heavy investments in air conditioning. Amazon, rather than just trying to minimizing the energy utilized to keep server rooms cool, is working on harnessing the excess heat to regulate the temperature of the new buildings they’re currently constructing in Seattle — if you’re interested in learning more, check out the article I’ve linked below. The data center across the street from the new complex will naturally produce enough energy to heat the three new buildings and potentially enough additional energy to sell to other local companies. The new heating process, known as hydronic heat, will use water pipes to siphon the heat out of the data center and transfer it into the central heating center so the heat can be dispersed throughout the building complex. The goal is to reduce total company energy consumption by minimizing heat waste. Hopefully they’ll also continue to find ways to make sure they achieve a sustainable power mix so the inputs of the whole process will be as sustainable as possibly. You also make a good point about Amazon needing to step up as a thought leader given their size in the space, which presents them with the opportunity to proliferate the methodology and technology they develop in the hydronic heat process.