The players in the retail value chain are clear, right? Producers, consumers and (web) stores. But what about government, what about new players such as mineral processors – who can turn waste into new raw materials – and familiar faces donning new hats? Consumers can become producers, producers turn into retailers. Let’s find out who’s who and who does what, when, where.

Producers are among the first to anticipate the effects of the circular economy, they need to be open to new and cyclical business models. They will need to have direct relationships with their end user, which is a whole new ballgame. Philips has started offering customers the option of leasing lights, light as a service, including accepting the return of old lamps to give them a second lifecycle. Other manufacturers might buy back used goods at the end of the product lifespan.

The cyclical business models have this in common: producers and manufacturers never relinquish ownership of the goods, consumers pay for using them instead of owning them outright. Here, the circular and sharing economies overlap. In the circular economy, goods are designed in such a way that they can be taken apart, reused yet without loss of quality. Product design needs to incorporate an easy disassembly, so that replacing spare parts can help to improve lifespan.

What will change for consumers

The role of the consumer in the circular economy is going to be transformed, compared to today’s linear thinking. They are no longer the end users, instead they can become part of the recycling-of-raw-materials process thanks to new types of ownership:

  • Pay-per-use. MUD Jeans are a good example, where consumers lease a pair of jeans for € 7.50 a month and the producer takes them back for recycling after the jeans are worn out.
  • Buy-repurchase. Here, the sales agreement includes offering to buy the product back from the consumer after a set period. The (web) store or producer then resells, renews it or uses the spare parts.
  • Buy-sell-on. Goods are repurchased and sold on to waste processors, who ensure parts and materials will get a new use.

New roles and models for stores

Slowly but surely, there is going to be a shift from sales towards use. (Web) stores will become the sellers of service agreements provided for users by producers, and the retailer can add their own services. Recovery, installation, repair and pick-up when goods are at the end of their lifecycle, to name a few. Retailers then can help to nudge the circular economy forward. Buyers at large (web) stores can force producers and suppliers to adopt more sustainable production methods. H&M, the Swedish fashion retailer, aims to make all of its products from recycled or eco-friendly materials by 2030. IKEA has a so-called people-and-planet-positive strategy, whereas Walmart has stated it plans to obtain 50 percent of its energy from renewable sources by 2025. Good to know. Just as interesting is that the buying back of goods at the end of their lifecycle could provide a new influx of working capital. Bottom line: the players in the value chain may need to spend less, in the end.

To summarize, the business models of the circular economy come down to these five, described in Waste to Wealth: circular input models (using renewable or biodegradable raw materials), waste value models, lifespan models, platform models (sharing, renting, re-selling) and goods-as-services models. Retailers can encourage and ensure the success of them all. By adding ‘sustainability’ to online search criteria, for one, or ensuring they recycle responsibly, selling spare parts, using existing platforms for new services.

Next week, I will look at the paradox of circular retail – how can retailers still make money while they move away from the linear model?

This is blog 20, based on my book ‘The end of online shopping. The future of retail in an always connected world’, published by Business Contact (Dutch/Flemish editions), Nubiz (English edition) Post & Telecom Publishers, Beijing (Chinese edition, from May 2018). The book will also be translated into Danish, German, Italian and Portuguese in 2018.