Moving from a linear business model to a circular takes time, effort and trial and error. But it also has its hidden benefits.
"It can help you with some operational efficiencies. It can also position you to be sort of a company of the future, and also, frankly, tackle the environmental challenges that we have of our consumption model," said Tensie Whelan, director at New York University’s Stern Center for Sustainable Business, at the end of a conversation that she moderated about circular business models at GreenBiz 21.
Whelan led a conversation with leaders at REI, IKEA and Eileen Fisher, each of which are embracing circular practices in some parts of their businesses. For REI, transitioning to a circular model seems inevitable so it’s doing the work now.
"REI, as a company, we believe that this broader kind of shift to a more circular economy is something that the world is really going to have to do over the next 10 years," said Ken Voeller, director of circular commerce and new business development at REI. "And it's also a shift that's going to take many forms. There's resale, there's rental, there's designing products with circularity in mind. It's not really like there's a silver bullet."
I think resale is still quite innovative and continues to morph and change and [there’s] still quite a limited number of brands that are doing it.
Here are four lessons about implementing and iterating circular business models from these retailers.
1. The nuts and bolts of resell sound simple on paper
But they’re more complicated in action.
"There's a lot to think about, as it relates to how do you want to build the infrastructure to support a more circular economy. And then how do you want to build the capability to support it," Voeller said, noting that the effort aligns with the company’s broader business aspirations, including halving its carbon footprint by 2030. REI has been partnering with Trove (formerly Yerdle) to work out the kinks and operate its resell program in an effort to become more circular.
"As we think about the things that we can do as a company to continue to grow revenue, without necessarily growing environmental impact, our circular businesses really hit that sweet spot of being able to do both of those things," Voeller added.
In order to make a circular economy work, a company needs a lot of partners. For REI, while Trove is one of those partners, in a sense, so are the customers that return items for the recommerce program.
2. Engaging customers before they step foot into a store
IKEA, known for its flat-packed furniture, has launched buyback programs in select markets. Debuting on Black Friday 2020, the program was temporarily launched in some countries where IKEA operates, including Australia, Canada, France, Germany, Italy, Japan and Russia.
And IKEA U.S. is looking forward to launching such a program in the future, after it’s able to wade through state regulations. The program is part of the company’s journey to become more circular.
Here’s what the process looks like for a customer interested in selling furniture back to IKEA:
- Complete an online form about the piece of furniture
- Receive an payment offer from IKEA
- Drop off furniture at the store
- Receive payment from IKEA in the form of a voucher
- IKEA will sell item in its bargain section
"We wouldn't be asking a customer to lug in a big bookcase that maybe they have sitting in their basement that they haven't used, just to see if we'll buy it back from them," said Jenn Keesson, sustainability manager at IKEA U.S., during the GreenBiz 21 discussion.
At the time of the Black Friday announcement, the company noted that any items it is unable to resell will be recycled.
"It's really an end of life solution. ... I'm sure that all of us can think of an item in our house that we haven't gotten rid of, but we're still not using. So we were excited to be able to offer this solution to our customers in the U.S.," Keesson said.
3. Presenting customers with all their options
Since clothing company Eileen Fisher launched its takeback and resale program Renew in 2009, it has collected 1.5 million returned garments, according to Cynthia Power, director of Eileen Fisher Renew.
"I think resale is still quite innovative and continues to morph and change and [there’s] still quite a limited number of brands that are doing it," Power said. "It's exciting to keep trying to figure out how to make it better and how to keep the most garments in use for as long as possible."
Eileen Fisher Renew has been experimenting with the larger main brand in some of its retail stores to display new products alongside used products, design samples and remanufactured products.
"We’re really trying to give the customer a view into all the different life cycles of our clothes," Power said.
4. A gateway for customers — new and old
For both Eileen Fisher and REI, the recommerce work each company is doing seems to be getting the attention of people who’ve never shopped with them before.
"We really see the renew program and resell in general as an opportunity to bring in a new customer who, whether it's price point or environmental values, or whatever the customer likes, offers them a new way into the brand," Power said. "We've definitely seen a significant percentage of new customers purchasing from Renew who haven't necessarily purchased from the main line before."
A circular economy will not just be resale, and it will not just be rental. It will be resale, and rental and circular products designed from the ground up.
Voeller of REI noted a similar trend at the outdoor recreation company and added that its resell program also offers an opportunity to develop a different type of relationship with existing customers.
"We really view the supply side of our recommerce business as a really interesting retention tool to keep customers engaged with REI and continuing to turn to us for their outdoor purchases," he said. "They're able to say, ‘I've got this backpack that's been in my closet for three years. I've used it twice. I really don't need that. Why don't I trade that into REI, and I'll get credit to apply towards the thing that I really do want?’"
And while most of the conversations and strategies between these business leaders focused on resale, they know it’s not the only circular business model. Companies that want to be more circular likely will need and want to take multiple approaches to get there.
"A circular economy will not just be resale, and it will not just be rental. It will be resale, and rental and circular products designed from the ground up," Voeller said.