How Recommerce is Driving the Growth of Circular Economy
In a world where the rising costs of goods and sustainability rule the day, more customers and businesses are turning to recommerce, also known as reverse commerce, to extend the life cycle of their products. Leveraging various business models, such as resales and rentals, more customers and retailers can buy and sell their products while promoting sustainable business practices and reducing environmental impact. Typically, the driving force behind the circular market is to ensure less waste, especially for fabrics, electronics, and plastics, and to enhance sustainability.
In recommerce, items might be resold in their original form, rented out, or refurbished, depending on their condition and the business model used. Key characteristics include a focus on product longevity, consumer access to quality goods at lower prices, and an emphasis on sustainability.
Types of Products Typically Sold Through Recommerce
Recommerce platforms cater to a diverse range of products, each with its unique market dynamics. Some of the most popular categories include:
- Second-hand fashion: This includes gently used clothing, shoes, and accessories. The fashion industry has seen a significant shift towards sustainability, with many consumers opting for pre-owned items to reduce waste.
- Electronics: Refurbished laptops, smartphones, and tablets are in high demand. These products are often restored to like-new condition, offering consumers high-quality tech at a fraction of the cost.
- Home goods: Used furniture, appliances, and household items are also popular in the recommerce market. These items provide a cost-effective way for consumers to furnish their homes sustainably.
- Luxury items: Pre-owned designer handbags, watches, and jewelry are sought after by consumers looking for luxury at a lower price point. These items often retain their value well, making them a smart investment.
Demographics Purchasing Recommerce Products
Younger generations, particularly Gen Z and millennials, are at the forefront of the recommerce movement. According to a recent survey from eBay, 80% of Gen Z respondents and 78% of millennials reported purchasing pre-owned goods in the past year. These demographics are not only more environmentally conscious but also more tech-savvy, making them ideal consumers for online recommerce platforms. Their preference for sustainable and cost-effective shopping options is driving the growth of the recommerce industry, which is projected to reach $200 billion in sales globally by 2026.
What are The Different Types of Recommerce Models
The recommerce economy or business thrives on three primary models. Each provides a unique system for manufacturers or retailers to leverage the concept successfully.
1. Resale Model
Product resale happens when a retailer leverages reverse logistics process to collect used items from individuals or other businesses and sell them to the public as long as they are in good condition. The used phone industry is a typical example. This model is popular because it allows customers to access and use high-quality products for less than the original price, while also maintaining a good resale value.
2. Rental Model
Under this model, the retailer allows the customer to temporarily use the product for a fee. Customers can use the products without having to pay more for them, which is a significant advantage in the rental market. A typical example of a market that thrives on this model is the car rental industry. Others include electronics and high-end tools. The model works best for products that customers use infrequently.
3. Refurbishment
For this model, the retailer or manufacturer is selling refurbished products, but before that, they must be repaired, cleaned, and tested to give the feeling of new, even if the products are not in themselves new. For instance, by repairing and cleaning up used car parts, manufacturers can leverage the refurbishment model to give customers quality products as an alternative to new items.
Factors Driving the Growth of the Recommerce Market
The recommerce market in the U.S. is valued at $188 billion, and by 2032, it is poised to reach $632 globally. Although the practice of selling used products can be traced as far back as the 14th century, it wasn’t until recently it began to dominate the trends across major markets. This rise in recommerce is fueled by customers looking for innovative ways to maximize their purchasing power and support sustainable practices. Understanding consumer behavior and its impact on market growth is crucial for businesses aiming to thrive in this sector.
Additionally, there have been many advancements in digital platforms, making it easier for customers to access more of these products. At the same time, more businesses, especially e-commerce platforms, are discovering that they can tap into the recommerce wave to provide a steady revenue stream with lower production costs through the raw materials available in these products.
Finally, the growing availability of data analytics has allowed more companies to understand better market demand and how to leverage it successfully. This ensures a consistent supply of goods, enhancing the overall buying experience.
How Recommerce is Driving The Growth of The Circular Economy
The economic impact and sustainability efforts of the circular economic growth are expected to reach $1.3 trillion by 2030. This growth is spurred by the recommerce infrastructure that allows more retailers and manufacturers to provide refurbished products to customers at an affordable price.
1. Increased Revenue Streams for Businesses
Instead of acquiring new products that may not move as fast and lead to poor sales, under the circular economy, more businesses can leverage the recommerce infrastructure to acquire or collect raw materials from customers, offering significant business benefits.
A typical example is acquiring products to strip for parts or for retailers to clean up and sell, while promising customers a quality experience. Manufacturers facing recalls can fix the issues and sell the product at a reduced price instead of allowing it to sit idle or, worse, dispose of perfectly fine products that may just need a little tweak. Reintroducing these goods to the market allows for income-generating opportunities that can supplement the overall revenue.
2. Improving Affordability for Consumers
A consumer may want to buy a luxury product, but those are usually more expensive than others and might be beyond their budget. That said, if they go to a reseller offering the same product for significantly less and the product is of good quality, it presents them an opportunity to own the product at a bargain. In a way, this recommerce approach makes certain product lines more affordable for customers who might otherwise find them to be out of reach.
3. Extending Product Life Cycle
When manufactured according to regulatory standards, many products can achieve significant product longevity. But take the average phone, for example. It can last years and, in many cases, can be remotely updated with the latest software, making the phone relevant for a long time. However, because there are new versions every year, many customers change theirs after a year or two, even when the phone still works perfectly. By leveraging the recommerce market, more retailers and manufacturers can extend the life span of this particular product along with many others. This way, all parties involved can reduce waste, conserve resources, and create new jobs in the circular economy.
4. Lower Operational Costs for Companies
When businesses participate in recommerce, they often achieve cost reduction by reducing waste disposal costs and inventory storage fees through reselling items instead of scrapping them. Many retailers, especially those in apparel and technology, are integrating recommerce to maximize inventory use, lowering operational costs.
5. Increased Consumer Loyalty
Brands that adopt recommerce can strengthen relationships with customers who value sustainable and affordable options. By offering recommerce options, companies can build trust and encourage repeat purchases, often finding a new customer base interested in cost-effective, eco-friendly alternatives. This can improve customer retention, helping secure the brand’s longer-term economic stability.
Leveraging ReverseLogix To Enhance Recommerce Operations
The ReverseLogix’ Returns Management System (RMS) has the visibility and power to enhance operational efficiency and be the technology foundation for your recommerce program. Our Recommerce Module lowers your return management costs, drives new revenue streams, and enhances sustainability efforts. Whether you have a B2C, B2B, or hybrid operation, ReverseLogix supports recommerce programs for smarter returns, a better planet, and improved customer loyalty.
Get a free demo today.
Frequently Asked Questions
The recommerce industry faces several challenges, including concerns about product quality, customer delivery refusal, poorly run reverse logistics processes and reverse supply chain management operations, and potential loss of revenue for new product sales.
Some companies worry that recommerce may cannibalize new product sales, though research often shows it attracts new customer segments rather than displacing existing ones. There is also the issue of poor inventory management, and packaging management might impact the entire recommence operation. Finally, there is the problem of poor reverse logistics, but Harvard Business Review believes that a solid reverse logistics plan allows the company to retain contact with customers and derive valuable feedback from them.
The future of recommerce looks promising, with increasing consumer interest in sustainable shopping options and governmental support for circular economy initiatives. Demand for pre-owned goods is expected to rise as more people become environmentally conscious. Technological advancements will continue streamlining the recommerce process, enhancing reverse distribution, and making the entire process much more efficient and scalable.
The fashion and electronics industries are most impacted by recommerce. Fast fashion has historically created significant waste, but recommerce offers an alternative by promoting secondhand clothing and accessories. In electronics, the resale of refurbished gadgets like smartphones, laptops, and tablets reduces e-waste and the need for rare earth minerals.
