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Green Commerce

Why eco-friendly e-commerce makes good business sense.

E-commerce has changed the relationship between sellers and buyers. The Internet allows efficient price shopping. In the future, e-commerce will make it far easier for consumers-- from individuals to government purchasing agents-- to shop for green products. Innovations in Web classification and extensible markup language will allow websites to have more detailed product descriptions such as "organic cotton" or "sustainable wood."

Consumers are environmentally concerned

Most American adults (87 percent) say they are concerned about the condition of the environment, and 44 percent of those say they are "very concerned." Environmental concerns are likely to become stronger in the next five years, as the 60 million "Generation Y" consumers (born between 1979 and 1994) grow up. Surveys have shown that such young people are significantly more concerned about the environment than their parents. This general concern for the environment is often reflected in consumer purchasing behavior.

Half of American consumers pay close attention to the health and environmental benefits of the products they buy. According to the most recent tracking poll by Integrated Marketing Services, nearly 50 percent of US consumers scan products for environmental labeling before they reach the checkout counter. And, half of consumers surveyed say they switch the product brands they purchase (from household cleansers and paper products to cars and computers) based on environmental criteria. Over 40 percent of all consumers are willing to pay something extra for products with green characteristics, according to recent surveys. Of these, 33 percent would pay an extra 4 percent for environmentally sound products, 10 percent would pay a premium of 7 percent, and a 5 percent core of die-hard environmentalists would pay 20 percent more for green goods.

Half of consumers say they switch the product brands they purchase based on environmental criteria.

Those unwilling to pay more for environmentally friendly products tend to be poorer and less-educated consumers.

Despite consumer interest in the environment, environmental products remain a small fraction of the retail market. A large reason is that shopping for green products is not easy. Savvy green consumers can read Consumer Reports and other literature to find the most energy-efficient appliance or the safest microwave, but this is laborious and impractical for day-to-day shopping. Moreover, studies have found that consumers are skeptical of claims made on the labels of green products. With the growth of e-commerce, however, all this will change. Online shops will be able to empower consumers by providing them with fast and easy information and access to green goods.

First-generation: green sites

A number of Internet sites have tried to capture consumer interest in environmental and health concerns of consumers by selling products that have been screened for various environmental criteria. These include items such as cleaning supplies that do not contain toxic chemicals; toys without carcinogens; appliances with superior energy efficiency that conserve water; recycled and recyclable products; and home improvement items from sustainable forests.

Another approach to helping consumers shop for green products has been to provide access to reports and data that can help consumers make environmentally sound choices. Shopforchange.com-- a website that gives 5 percent of the amount purchased through the site to nonprofit organizations involved in social change-- has traditional vendors on its site but provides a page with links to a wide range of consumer and environmental organizations that give advice on green shopping, including organizations that give advice on reducing consumption.

Second-generation: green bots

These e-commerce models will still only attract a small customer base-- consumers who are willing to buy from a limited catalog of green products or who will take the time to do their own research. A second generation of sites will rely on sophisticated search engines-- or "green bots"-- to scan and screen for environmental features of products. Green bots may not catch on with individual consumers right away, but intermediaries such as brokers, agents, and buyers' clubs could use these search engines to ferret out the best products for their clients and members. Among the many possible search criteria:

Published energy and water efficiency ratings of appliances
Toxic chemicals used as product ingredients
Publicly available information on chemical releases or accidents at manufacturing facilities
Products that use tropical hardwoods or other scarce resources

With B2B representing the lion's share (87 percent) of total e-commerce revenue by 2003, the market for a green search engine will be potentially huge.