In 2021, the linear take, make, waste, one-off selling business model still dominates -- and retail is still ranked as the 2nd most polluting industry, driven by overproduction and overconsumption.
Innovation across the retail value chain is making change possible, and even a necessity, to keep up with the changing consumer.
To power more sustainable consumption, starting in 2012, industry pioneers began deploying re-commerce offerings, mixing rental and resale. Combining growth and sustainability objectives has proven to be a massive opportunity for brands and retailers.
After 10 years of breakthrough innovations, testing and learnings, 2022 will be the year of circular business model adoption.
The re-commerce opportunity
Re-commerce represents an alternative way for consumers to engage with the products they want by re-using already existing resources through rental or resale services.
Re-commerce currently represents a $73 billion market in fashion alone (3.5% of the global fashion market) and is projected to grow to $700 billion by 2030 (23% of the market)*, growing 10 times faster than standard retail.
Over the last decade, starting in Asia and North America, major brands crash-tested re-commerce helping technologies, and infrastructure flourish. 10 years in, the first-movers have cleared the brush and shown the value of these new business models.
Brands who deployed rental and/or resale services the last 10 years
As one of the first innovators in the re-commerce space, at Lizee, we are constantly asked about the real value of these new business models. They are many answers, but we tried to sum them up here:
When going circular, brands will start generating incremental revenue with fewer new products. Thanks to the reuse of the goods, they will also drive higher margin per product compared to the classic linear model (i.e., selling only newly produced goods). Due to the variable costs, premium brands are more likely to generate higher margins, but there are also great opportunities for the value market. It will just require a truly optimized customer and product journey.
Higher CLV and brand equity value
Rental (with subscription or not) and resale of preloved products will significantly help increase the CLV and will also boost big time the brand equity value.
Target new customers
When brands start re-commerce, about 50% of the circular shoppers are engaging with the brand for the first time - mainly Gen Y, Z and A.
Re-commerce improves customer engagement and loyalty. According to KPMG and FEVAD, 70% of shoppers prefer brands that promote an eco-responsible approach**. While completely reinventing its supply chain to be fully circular-ready can take time, re-commerce is an immediate path forward for retail's sustainable future.
Richer in-store experience
Like any retail experience in 2022, rental and resale must be somehow omnichannel. The stores, more than never, are becoming a point of services offering new local values to shoppers. The store should be used as a drop-off point for a take back program, but also as a pick-up point. In some cases, stores could even carry a local inventory for in-store rental or resale. Not only it pleases your clients, but it will also drive new consumers to your stores and boost traffic.
Re-commerce could play a critical role in shifting the industry towards a less resource intensive future. According to the Ellen Macarthur Foundation, re-commerce could provide a third of the emission reductions necessary to put the fashion industry on a 1.5-degree pathway (carbon reduction of 340M tonnes of CO2 per year). While today 70% of the industry emissions are done at manufacturing level, the only way of significantly decreasing the impact is to reduce the volume of production, which can be possible by leveraging the reuse of resources*.
With re-commerce, brands naturally collect valuable new data about customer behaviour, as well as product desirability and durability.
2022 is the year
Momentum has never been so important. Over the last 10 years, first movers tested and learned about the nuanced complexities of re-commerce; particularly the supply chain, as return management and refurbishing of products provide a new logistical challenge that no current WMS (warehouse management system) can handle. Profitability of re-commerce services and efficiency of the circular supply chain (where all the variable costs happen) are intimately connected.
Now that those pioneers crash-tested the models, innovators like Lizee are making it easy for brands to go-live with a powerful re-commerce offering, mixing rental and resale.
This is just the beginning of this retail revolution that consulting firms like BCG, McKinsey or Bain have already proclaimed as the new industry standard.
Lizee, the purpose-driven enabler
Since day 1, Lizee has been on a mission to create the best technologies to transform the retail industry from linear to circular. We work daily to develop the most powerful re-commerce and supply chain software to keep products in-use in the economy, instead of in a landfill. We are experts in developing easy-to-deploy logistics management technology to streamline fulfilment and return processes.
Lizee helps brands test, learn from, scale measure their circular businesses to reach meaningful and sustainable growth in the future.
*Ellen MacArthur Foundation, Circular business models: redefining growth for a thriving fashion industry (2021)
**KPMG & FEVAD, E-commerce et RSE : The Green Deal (2021)