Conveniently for us, this was right around the time Rakshnna Pattabiraman wrote her piece for Inside Retail about Big W’s new Toys for Joy toy-recycling program in partnership with TerraCycle. This was a timely reminder of similar programs in which various retailers across categories participate. Suddenly our ‘not good enough to donate, but not bad enough to bin’ items had a purpose; through a trip to our local shopping centre, we were able to recycle them and help turn them back into usable products.
These types of programs are a great example of the increasing focus on sustainability among retailers, and of the idea behind the circular economy more specifically.
Encouraging consumers to bring old products into stores so they can be turned into new or different products is a nice application of the reduce, reuse, recycle idea within the circular economy. Consumer sentiment towards these kinds of programs is improving, and the swing towards the Greens and climate-focused independents in the recent federal elections foreshadows greater political focus as well.
Yet, questions remain for retailers about how best to be involved in the circular economy. There are obvious elements, such as using more sustainable materials, sourcing them ethically, and optimising supply chains. In many ways, these are now basic expectations for retailers. Still, there are other ways that retailers can participate in the circular economy that will not only benefit sustainability goals but also could even create competitive advantages. Below I’ve reviewed a few research-backed ways retailers could – and perhaps should – become more involved in the circular economy.
Sharing responsibilities – and incentives
A recent paper1 in the Journal of Retailing summarised the state of academic research on sustainability in retail generally, and the circular economy specifically. As part of their review, the authors explored the role retailers should play in facilitating, and even leading, the adoption of sustainable practices. One of the key points this summary raised is that the responsibility for sustainability in retail must be shared. That is, it is not enough to focus on consumers in isolation and why they do, or do not, buy more sustainable products. Likewise, we can’t just say retailers need to reduce waste without considering the systems that created the waste to begin with.
These different parties (suppliers, retailers, and consumers) need to act together if the ideals of the circular economy are to be achieved. The authors further argue that retailers have a unique opportunity (perhaps even responsibility) to lead these activities, as they can jointly influence both manufacturers and consumers.
The authors also identified mechanisms retailers could use to better participate in the circular economy, ranging from developing shared incentive systems, to educating consumers, and even creating new social norms. A key point there was that as the responsibilities for participating in the circular economy should be shared, so too should the incentives.
What incentives are retailers providing to consumers to return products to be recycled? Similarly, how do manufacturers benefit from these schemes or others meant to reduce the number of items they produce? The answers to these questions are complex, but also represent a key opportunity.
Making reusable, and rentable, products
One of the more specific issues the paper I referenced above discusses is that for the circular economy to work, products need to be designed and made so that they can be reused or recycled. That is, they can’t just fall apart and become waste.
This point seems somewhat obvious on the surface, but it goes against the broader fast-fashion trends across the industry. Affordable alternatives to on-trend items certainly have their place in the market. Yet, we’ve seen how this trend has contributed to growing waste as the low price and (at least perceived) lower quality leads some consumers to discard products quickly, and simply buy new ones.
For the circular economy to work, retailers and suppliers need to work together to produce products that can last and, therefore, be reused multiple times before being recycled. Yet for retailers, this raises an interesting challenge of balancing the changing tastes of consumers while creating products that can be re-used and then recycled when needed.
There is also more to this idea than just making high-quality durable products, although that would go a long way to reducing waste. Making products reusable can also mean making them in a way that consumers will want to, and are able to, pass them on to others once they are done.
This trend is becoming common in fashion, with consumer-to-consumer rental platforms like DesignerEx emerging, in addition to established players like Rent the Runway. These platforms facilitate users temporarily renting high-fashion items, either from other consumers or the platform itself, to use and then return for others to use later.
In other words, rather than 10 different people buying the same dress 10 separate times, they could all rent it once, cutting down on production costs and wastage. This is an interesting model for retailers to consider, particularly regarding whether and how to get involved. Similarly, given the success of these models in fashion, could they work in other product categories?
This link between the circular economy and fashion-focused consumers is also well backed by research. A recent study2 by academics from the University of Tasmania explored the types of consumers who are attracted to second-hand shopping behaviours, such as visiting op shops or using rental platforms. While we might assume that a desire for a bargain plays a big role, which it does, the study also showed that these consumers tend to be more fashion and style focused than average. For retailers, this means the circular economy doesn’t have to just be about sustainability and reducing costs, it can also be a way to allow consumers to experiment with different fashion styles.
Reducing, not just optimising, returns
The final point I’ll make is about the importance and challenges of product returns. Free product returns now seem to be an almost universal offer across retailers. The need for this makes sense, both from a competitive standpoint and as a part of the overall customer experience.
Yet, I was reminded of the sustainability challenges this strategy creates at the recent Retail Leaders forum. I was part of a panel discussion on the supply-chain issues the industry has faced in recent years. The other speakers3 spoke in detail about how the delays were exacerbated by the increased volume in product returns as consumers were forced to shop online during lockdowns or other restrictions.
The discussion then turned to how freight companies and retailer warehouses could optimise the returns process, which would solve some of this problem. To me though, the bigger questions to consider are what is causing consumers to return products so frequently, and whether some of those issues can be solved? Of course, in some cases retailers encourage returns with ‘keep only what you like’ models. Yet there are still many cases where consumers return products because they don’t fit their expectations or needs. What can retailers do about reducing these situations?
This is where I see technology, such as augmented reality (AR), playing a key role in the circular economy. The better retailers get at providing consumers with a true experience of a product before they purchase, the better off everyone will be.
In our research, we’ve already seen the ways that AR can provide consumers with a better sense of products and increase their decision confidence. Yet there may be other technologies, or even non-technological ways, to achieve the same goals. So the question for retailers dealing with lots of returns is why is this happening? Are your products not accurately described, or don’t do what they promise? Or have you inadvertently trained customers to order multiple products and then return some for free?
Answering these questions would not only reduce product returns and waste but also potentially lead to better customer experiences overall.
The push for sustainability in retail, through the circular economy or otherwise, doesn’t look like it will diminish any time soon. In fact, it seems that many elements are now becoming essential and a potential source of competitive advantage. At the same time, new opportunities are emerging for retailers to differentiate themselves with how they facilitate sustainability for their consumers and suppliers; these should be strategies that all retailers now consider. In other words, as the circular economy becomes more popular, being in the circle seems like a much better position than being excluded from it.
1 ‘Sustainable Retailing’ in the Journal of Retailing, led by Gautham G Vadakkepatt
2 “Consumer orientations of secondhand fashion shoppers: The role of shopping frequency and store type” in the Journal of Retailing and Consumer Services and authored by Freya Evans, Louise Grimmer, and Martin Grimmer 3 Amira Amin from Mondiale AGL, and Raghav Sibal from Manhattan Associates