Laying the Foundation, Part 3: Consumer Engagement and The Circular Win
about 1 year ago
This is the third in a three-part series on Laying the Foundation for circular fashion.
In this final instalment of my three-part series, we’ll explore how to get consumers to engage with circularity, and how circular fashion presents a massive win for both consumers and brands.
One of the great misperceptions around consumer engagement is that it can be achieved incrementally. Nothing could be farther from the truth. A 50% solution does not generate 50% adoption – it generates only a fraction of that, often 5% or less. A 100% solution, however, can ultimately generate 100% adoption. We call this The Law of Consumer Adoption, and it’s been proven across many industries over a long period of time.
Take as an example the consumer adoption of digital music. The first Digital Audio Player (DAP) was introduced in 1997 (the SaeHan MPMan F10). Over the next five years, a plethora of DAPs appeared on the market, including the Apple iPod, which was introduced in 2001. These devices were small, lightweight, inexpensive, and capable of carrying a seemingly endless supply of digital songs. But they all (including the original iPod) required consumers to create the digital files required, usually by placing a music CD in a computer and “ripping” the songs onto a hard drive before manually transferring them to the DAP. As a result, only an estimated 1-3% of consumers actually listened to music through DAPs. That all changed in 2003 when Apple introduced the iTunes Store. Suddenly, consumers could shop online for the songs they wanted, pay a nominal fee per song and have the songs seamlessly transferred to their DAP. In other words, consumers were finally presented with a 100% solution. The market exploded, and within just a few years sales of CDs and other physical media had all but disappeared.
Resale, rental and other circular services today are like the earliest Digital Audio Players. They provide consumers with at best a 50% solution, and sit apart and aside from the standard fashion shopping experience. If I want to sell something I own, I either have to create my own listing on sites such as eBay or Vestiaire Collective, or hope my garment will be accepted by concierge or brand take-back services such as ThredUP or Levi’s Secondhand. If I want to buy a used garment, I have to go someplace other than where I normally shop, such as Worn Wear (for Patagonia) or Rewear (for H&M). And if I want any help repairing a garment I’ve purchased, I’m usually just plain out of luck.
At our previous company, Stuffstr, we spent several years asking consumers what would get them to either donate or resell their used garments, then implementing their requests one by one. Invariably, people would praise us for giving them just what they’d asked for, then not use it at all. We finally realised that providing piecemeal solutions was not going to get people to change their behaviour. So we stopped what we were doing and redesigned our service from the bottom up, focussing on what we believed – based on our research and experience – would provide a complete solution, whether people had asked for it or not. Our redesigned service, which was first piloted through the UK retailer John Lewis, provided people with images and descriptions of everything they had previously purchased, offered them an instant sell-back price on every item regardless of condition, and promised to have a courier pick the items up for free (unboxed) within 1-3 hours. Due to the price and complexity of the courier pick-up, we could only initially offer the service to people living in densely-populated London, but we were successful in finally breaking through the adoption barrier. In our initial six-week pilot, we were able to reclaim roughly 20% of items sold, mostly from people who had never resold a used item before in their lives.
What we found over time, though, was that it was difficult even to maintain a 20% rate of reclamation. While the sell-back service itself was providing a near 100% solution, we were operating outside customers’ core shopping experience. In many cases, the items we were trying to reclaim had already been thrown away. Moreover, no one was buying their clothes with any thought of potential resale, no one was being kept aware of the current resale value of their clothes, and no one was receiving any post-sale assistance or services. It became clear that to achieve 100% reclamation, we would need to redefine the fashion shopping experience and engage consumers in a circular journey from the moment they begin shopping until their used clothes have been reclaimed.
What does such a shopping experience look like? It means bringing new and used versions of the same item together side-by-side, inviting customers to buy or rent any item, treating previous purchases as real-time currency for new purchases, engaging customers in a host of post-sale services that significantly enhance their engagement with and value from each item, and making reclamation at end of use as easy and natural as wearing the clothes in the first place. We call this experience Circular Way.
Part of the reason such an experience hasn’t existed before is that some of the final pieces necessary to make it possible have only recently fallen into place. Technologies such as inexpensive and washable NFC chips (pictured above), industry standards such as the Circular Product Data Protocol, and favourable legislation such as the UK VAT Margin Scheme represent critical enablers. But perhaps the primary reason such an experience hasn’t existed before is that it requires an entirely new business model – one in which the majority of revenue comes from sources other than selling new things. To date, the fashion industry has pursued a business model built around one singular objective: Sell more stuff. A fully integrated circular business model shifts the focus to powering more use, and then monetises that use. This is a profound shift, and presents enormous challenges to the management, systems and practices of existing brands. For this reason, it almost by necessity has to be initiated by a new enterprise that’s free to build the required management, systems and practices from the ground up. Once the consumer adoption, operating dynamics and business economics of this new model have been tested and proven, it will become far easier for existing brands to justify and execute the shift.
What we know from our experiences in interacting with consumers and circularity is that consumers are absolutely ready for this shift. If you can bring consumers greater value, deeper engagement and a sense of doing good for the world, they will jump at the opportunity and thoroughly embrace it. Meanwhile, from a brand perspective, providing customers with an end-to-end circular experience is the greatest opportunity that’s ever existed for building enduring customer loyalty. It binds customers to the brand by extending engagement across the entire product lifecycle, and directly ties every transaction to a future transaction. At the same time, it imbues brands with purpose. It’s also a fundamentally better business model. Customer acquisition costs decline as customer retention increases, while customer lifetime value grows. Resiliency increases as the countercyclical nature of used clothing sales protects revenues during economic downturns. And supply chains become more controllable and predictable, because the feedstock for future products sits in the hands of existing customers and can be ramped up or down through sell-back pricing and other touchpoints.
In short, circular fashion represents a huge win for both consumers and brands. But the full magnitude of the win can only be achieved if brands engage with consumers in a wholly new way. Just as full circularity cannot be achieved without 100% reclamation at end of use, 100% reclamation at end of use cannot be achieved without engaging consumers through an end-to-end circular shopping experience. And that requires brands to shift their focus from selling more stuff to powering more use.
We’re building Circular Way as a model for how this is done. Our hope is that, by proving the consumer adoption, operating dynamics and business economics of powering more use, we can lead the way for both existing and future brands to make the necessary shift. Only then can the full opportunity of circularity be realised.
Co-Founder/CEO at Circular Way | Circular Economy Strategist