More and more businesses are including a “second-hand” component in their product offering. Some buy back and resell their own products. Others extend the concept and act as a marketplace to orchestrate exchanges within their customer base. But it’s not that simple.
For one thing, it involves the logistical effort of managing additional “user” inventories while ensuring their compliance. Secondly, the “second-hand” option is perceived by many retailers as less profitable than simply “selling new”. Are they right? We put the question to Lucie Bourgeois, founding president of social engagement firm Umalia.
It’s important to look at things systemically,” she begins. If I resell an item a 2nd time, for a lower profit, but my customer remains loyal to me, do I factor that into the equation? We all know that the cost of acquiring a customer is very high.
Next, the social commitment consultant reminds us that the movement towards circular commerce is very recent. And that it’s normal, in this sense, for retailers to be groping their way forward and looking for the best formula.
The more people get involved in second-hand trade, the more the business model will improve. The culture of sustainable development brings with it a culture of innovation. If we ask ourselves: how can we improve our return on investment in this area? It’s going to force people to think differently, and then also to go and see how others in the industry are doing it, here and elsewhere in the world.”
At the moment, several models are coexisting and being fine-tuned. Big banners like Walmart and Amazon offer formal “marketplaces” where you can buy “refurbished” phones and computers, while alongside this, smaller companies are starting to buy back their own products (e.g. Womance, Souris Mini, H&M).
For the proposal to make sense, Lucie Bourgeois explains that we need to change our vision of commerce.
With second-hand, we’re trying to maximize what we call the economy of functionality,” explains Lucie Bourgeois. For example, instead of selling a bike, we sell the use or function of the bike. When we open this door, we discover new possibilities: second-hand, rental, bike-sharing and so on. We’re also going to ask ourselves the following question: how do I ensure that the right components last as long as possible – even if it means offering repair – to avoid someone buying the same product over and over again.”
Far-fetched? Too much to ask of retailers, do you think? Well, you should know that the Quebec government is currently working on a bill on programmed obsolescence, which includes a “right to repair”. So retailers had better start thinking now about how to integrate circular commerce into their business model.
