You just shipped a great product to a customer. They received it, but it’s not quite what they needed after all; it doesn’t fit their space, it’s not quite the right color or they decided that late-night online shopping spree wasn’t going to fit their budget after all. So they need to send it back, and you accept it, of course, because that is what customers have come to expect.
Now you have this product back in your warehouse or store that’s in great condition, but the box has been opened and the product isn’t perfectly pristine anymore. What do you do? You have a couple of great avenues to make sure it doesn’t go to waste: resale and rental.
Even during the pandemic, customers have gotten increasingly comfortable with buying second-hand across categories. IKEA recently launched a store exclusively dedicated to cleaning, repairing and re-selling its products. Trove is working with brands from Lululemon to REI to enable their online second-hand stores. Increasingly, consumers see second-hand options as a great deal and appreciate the environmental advantage of re-using a good instead of buying brand new. Many brands and retailers that sell durable goods have come to realize that one of their top competitors is themselves in the second-hand market — search for nearly anything on Facebook Marketplace and you’ll find it. Brands and retailers need to compete in this space; it’s the future.
From the consumer perspective, it’s a great win to be able to subscribe to an item for as long as they need it and then return it when they’re done. Plus, they don’t have the hassle of either buying or selling on a second-hand market.
From a business perspective, why would you sell something once or even twice when you can essentially re-sell it 10 times over? The profitability per item increases, and the environmental impact is improved by cleaning, repairing and maintaining each product to maximize its useful life. It also adds the opportunity to build a relationship with your customer through the subscription model. A subscription allows you to really understand your customer and what they might need later. Did your customer just rent a bassinet for the last three months? A real value-add email might cross-sell that customer on a high chair at the end of the bassinet’s rental term.
My team and I started with the belief that humanity cannot continue to manufacture and consume stuff at the rate we’re going; we have to find a way to make our stuff last longer, so we can make less. That’s the philosophy behind many companies in the circular economy. Now it’s up to the leaders behind the brands and retailers to take up this challenge. New technologies are constantly emerging that enable entirely new business models, and true leaders are already embracing them, reducing their environmental impact and enhancing their bottom line.