In this latest in our series on marketplaces, we’re looking at the catalyst that marketplaces have been in the circular economy up until now. In this blog we’ll also look at their recent embrace by mainstream consumer brands, as they use the marketplace model to generate additional revenues and increase their sustainability footprint.
Let’s start with some large numbers and a little context. Consumers around the world are beginning to realize that the linear model of take-make-waste (that most businesses are built on) simply isn’t sustainable.
Take fashion. It’s one of the biggest offenders, whether because of overproduction, excessive consumption, work ethics and more. According to World Clean Up Day, the fashion industry produces 92 million tons of waste yearly, including unsold clothing and leftover materials.
Perhaps because of these kinds of numbers, the global economy is actually becoming less circular. In 2018, 9.1% of the materials produced by the global economy were reused or remade (rather than wasted), but that ‘circularity’ metric has actually reduced gradually over the last five years and now stands at 7.2%.
Despite this, all the evidence is that consumers actively want brands to be more environmentally responsible. A study by Nielsen showed that 73% of millennials are willing to pay more for sustainable products. But it’s not just millennials who are willing to pay more for sustainable products.
A report by McKinsey & Company estimates that 66% of consumers worldwide are willing to pay more for sustainable products. It’s no wonder that a 2020 report by Global Data showed that the sustainable fashion market is projected to grow by 9.81% globally between 2020 and 2025.
It’s worth noting at this point that, alongside consumers’ professed desire for sustainable goods, brands behind trends like so-called fast fashion have also seen huge growth. As we saw in our recent webinar on retail trends, the ‘polarized consumer’ can have conflicting views (if you missed the webinar you can read about the key takeaways here).
A Brief History of Marketplaces
Marketplaces began as sector-specific aggregators, with companies like eBay pioneering the model followed by Amazon that built on existing e-commerce experience. This generalist platform approach was then challenged by smaller, more focused specialist and niche marketplaces, completed by marketplaces which specialized in handling time-sensitive products and services, like Uber and Just Eat.
Up until recently the role that the circular economy has played in marketplaces has been mainly in that sector-specific area: a B2B marketplace such as Dipli (one of our clients), that connects telcos selling their old devices with refurbishers, who will then refurbish and repair and sell onto B2C resellers , for example.
Obviously too, platforms like Amazon and Ebay have been offering consumers the chance to become buyers and sellers for a long time, including second-hand items. Their marketplace positioning as key players in the circular economy was, however, less obvious.
By 2025 however, according to an OC&C report, online marketplaces will account for around 50% of overall online spend, in what it terms “the largest fundamental shift in consumer spending since the emergence of ecommerce in the 1990s”.
So given the scale of the opportunity, perhaps it’s no surprise that mainstream brands are now looking at bringing circular economy offers into their commercial mix in order to increase their sales and stay in line with their consumers’ preferences
The Next Stage in Marketplace Evolution
We’re now seeing a move by large consumer brands to incorporate marketplaces into their offer. This paradigmatic shift is evidenced by brands such as Zalando, About You, IKEA, Nike, Zara and more, all developing the relatively environmentally-friendly dimension of their marketplaces.
There are also customer-to-customer marketplaces like Vinted experiencing phenomenal growth. Vinted, a Lithuanian C2C e-commerce platform, earned over 371m euros in 2022, up by 51% on the previous year.
Marketplaces like Backmarket (our client) are a good example of the next generation of B2C marketplaces now playing an important role in the circular economy.
Backmarket is a global B2C marketplace for refurbished tech devices that includes some of the biggest brands in the world, linking up refurbishers and customers looking to buy leading global consumer brands like Sony Playstation or Apple iPhones.
Case Study: Nike Refurbished
Let’s take a look at the trainer giant’s new initiative to see how one of the largest brands in the world is handling its own marketplace with a focus on the circular economy.
Now rolling out in Europe, Nike Refurbished was originally introduced back in 2021 as part of Nike’s Move to Zero environmental program. It sees the brand selling exchanged, returned and imperfect pairs for up to 50% off, depending on the condition of the trainers.
The brand itself acts as the intermediary trusted party, consumers return their worn Nike shoes via the ‘Nike Refurbished’ platform, thanks to that, the company’s in-house team then refurbishes the shoes. With a careful quality management system in place, only slightly -worn shoes and shoes that cannot be sold as new are accepted. Nike has a three-level grading system, which ranges from ‘Like New’ to ‘Gently Worn’ to ‘Slightly Imperfect’.
It’s a smart way to introduce a more sustainable approach into how Nike operates, combining sustainability concerns with business oriented expectations and it’s obviously proving a commercial success since it was first piloted in Beta in the US. Crucially it also rewards fans of the brand by giving them the option to get shoes they love at a reduced price they can afford, having therefore a positive impact during the cost-of-living crisis.
Why Circular Economy Marketplaces Are Good for Brands
Embracing the circular economy by allowing customers to reuse, repair and recycle their clothing is obviously better for the environment. In addition to creating new customer journey touchpoints, it’s also good for the companies getting involved. It helps them get closer to climate-neutral commitments already made, but it also makes them more visible to investors looking to put money into innovative net-zero investments.
At Concentrix + Webhelp we are working with our clients to ensure that their marketplaces are safe, secure and optimized for customer experience. From robust KYC procedures to seller onboarding, customer care to catalogue content moderation and more, we work with our clients to improve their marketplace operations.
If you’d like to discuss any of the issues in this article, from the circular economy to your own marketplace, please get in touch and let’s talk.
