Waste not want not: 4 signs the circular economy is going strong

Consumerism is deeply ingrained in our society, and at no other time of the year is it more evident than the holiday shopping season. Holiday retail sales in the United States soared from $400 billion in 2000 to $730 billion in 2019. While this year may look different — consumer spending dropped by 10.1% between Q1 and Q2 of 2020 due to the COVID-19 pandemic and impacts on holiday spending are not yet clear — global consumption trends have been rising since the 1970s over the long term.

The world would need a total of 1.5 Earths to sustainably support our current resource use, and this consumption rate is projected to double by 2050 if we fail to change our trajectory.

Four years ago, we wrote about how companies must de-link business growth from materials use, warning that society was consuming resources at an unsustainable rate and exceeding planetary boundaries. Reuse and repair business models at that time were little known apart from a few pioneering companies like Patagonia and Eileen Fisher, which encourage customers to consume less by making long-lasting goods and incorporating used garments into new products.

At that time, business leaders might have argued that Patagonia and Eileen Fisher were able to profit from reuse given their niche markets and appeal for environmentally conscious consumers. These same skeptics may have thought this approach was neither feasible nor realistic for them given the parameters of their business models.

Today we are seeing a shift as more companies work toward a “circular economy,” which represents a $4.5 trillion business opportunity. Indeed, consumerism seems to be making a critical shift from rapidly buying more new stuff to supporting reuse, repair and resale.

Four indicators that persuade us we’re at a turning point when it comes to retail:

1. Brick-and-mortar companies embrace resale.

Turning a profit from repair, refurbishment and resale is no longer a stigma, but rather a lucrative, trending market.

Over the past four years, we’ve seen more brick-and-mortar companies enter the space — such as Ikea, which recently launched a global buyback program and opened a store dedicated to selling pre-owned furniture.

Retailers ranging from Walmart to JC Penny to Nordstrom have also partnered with the world’s largest online thrift store, thredUP, to resell secondhand clothing. Fast-fashion company H&M is piloting a repair program and a store selling only used goods.

We’re also seeing a shift in the overall market. The retail sector for apparel is expected to shrink 15% between 2019 and 2021 (reaching a market value of $334 billion), whereas the online secondhand component is expected to expand by 69% during the same period (reaching a market value of $12 billion).

2. Online platforms push resale.

Online resale has also become a common method for purchasing used products.

Online secondhand companies, such as TheRealReal, thredUp and Poshmark, can leverage their digital marketplaces to sell thousands of items in real-time. Customers have a wider selection of products to choose from and can sell their own goods through the platforms — all without leaving home.

These companies aren’t unique to the United States. Chinese e-commerce giant Alibaba Group launched a resale consumer marketplace called Xianyu, where users can buy and sell secondhand products and use the parent company's logistics system if they choose. Depop, a company based in London offering what it calls “peer-to-peer social shopping,” has curated a global fan base, a large part of whom are Gen Z.

3. Business-to-business services emerge to help companies sell used goods.

The existence of a business-to-business (B2B) market for used goods is another validator that we’re at a turning point. There is now a broad range of well-funded B2B businesses that provide services at each step in the value chain to help brick-and-mortar retailers resell, including:

4. Maintenance, repair and refurbishment services become core offerings.

From home appliance repair to cell phone refurbishment, companies are deriving profit from providing a service rather than selling a new product. The global maintenance and repair market was valued at $1.3 trillion in 2019.

Best Buy is one of the oldest competitors in the space after buying Geek Squad in 2002. With more than 20,000 agents across the United States, Geek Squad serves millions of customers and repairs nearly 5 million devices annually, keeping electronics in use. According to the company, Best Buy’s services segment makes up 5% of its total net sales per year, or approximately $2 billion in 2019. Other competitors in the space include Staples, Apple’s Genius Bar and uBreakiFix, a service that offers same-day phone repair in almost 600 locations across the United States.

It requires more labor — and more complex labor — to repair and refurbish one million different products than it does to make one million units of the same item. This has the potential to create more jobs.

Conversely, some geographic dislocation of labor is to be expected as repair and refurbishment work is likely to happen nearer to the consumer, possibly moving jobs from poorer economies to wealthier ones. Companies can identify the social justice components of alternative business models and ensure they enhance rather than undermine equity (check out WRI’s guidebook for the apparel sector).

The circular economy is a business opportunity

If businesses are not exploring the secondhand market for their products, a savvier competitor will capture the value of their used goods. It will be hard to wrestle it back. For example, Winmark Corporation is a publicly traded franchising business offering a buyback and resale service to potential franchisees across five different categories: sports equipment, music equipment and three kinds of apparel. The company has grown steadily over the past decade and currently has more than 1,250 franchise stores.

The transition to a circular economy is a systemic change. We’re going to see more collaboration between public, private and civil society through initiatives such as the Platform for Accelerating the Circular Economy (PACE). We are also likely to see policy shifts and an increase in voluntary agreements that further incentivize the move toward circularity — and reward those already leading the way. Companies must set new aspirations among their customers in wealthy economies while simultaneously helping emerging economies leapfrog the mistakes made by Western society. This will allow us all to thrive without exceeding planetary boundaries.

Our message to CEOs is that the tide is turning. As car manufacturers well know, a high value on a used product doesn’t undermine the value of a new one; it increases it. In the next four years, this is the sort of transformation we need to see: a landscape where people, planet and profit can coexist sustainably.

Best Buy, Walmart, and IKEA are WRI donors. This blog post solely reflects the views of the authors.