Circularity Doesn’t Need to Be Overwhelming: 3 Ways Retailers Can Close Loops in eCommerce
Circularity at a glance
For retailers, the logistical challenges of returns are overwhelming. Without circularity in operations, returned items often end up in landfills. But retailers can take small, immediate steps to set themselves up for becoming more circular — and more successful.
Every year, 5.8 billion — yes, billion — pounds of retail returns and excess inventory end up in US landfills. If you feel sticker shock looking at that number, you’re not alone. Consumption and capitalism have driven us to this point; and it’s become clear that we need to find a viable, long-term solution for mitigating their impacts on the environment.
Before we dive into solutions, it’s important to diagnose why we’re seeing this level of waste: Consumer behavior has evolved — there is more demand than ever for ecommerce, which has only increased during the pandemic; consumers buy with the intent to return portions of every order (we see this especially within apparel); and the retail industry is still trying to get a handle on the carbon footprint of each item’s journey through supply chains.
For retailers, the logistical challenges of returns are overwhelming. Oftentimes, returned merchandise cannot be resold as new and quickly becomes costly to hold in warehouses. Retailers may sell returned inventory in bulk to liquidators; but much of that inventory doesn’t get resold, or is exported with little visibility into what happens to those products. Without circularity in retail business models, returned and excess items often end up in landfills.
It’s somewhat of a catch-22 and there’s no one party to blame; but in order to carve a path forward, we need to fundamentally rethink the value proposition of retail business models — both in the near and long term.
What retailers can do today
The hard truth is that today, sustainability is seen as more of a marketing play than an operational issue. It’s not surprising — creating sustainable infrastructure often conjures up thoughts of having to fundamentally rebuild businesses from the ground up. And while that may make for the most drastic, long-lasting effects, retailers can take smaller, immediate steps to set themselves up for becoming more circular — and more successful.
For instance, retailers can de-silo their sustainability teams and push forward progress within their supply chains by requiring relevant supply chain and product teams to share sustainability goals. With a bird’s-eye view of the entire business, cross-functional groups can identify opportunities to make procedural changes — whether that’s redesigning packaging, streamlining supply chains, or pinpointing areas of waste in inventory management — all while seeking to maintain profitability and revenue figures. Empowering internal stakeholders whose dedicated focus is to push the business toward more circular practices can make all the difference and set a company on the right path.
Tactically speaking, two areas where most retailers can, and should, find opportunities to cut waste are in packaging and return logistics. The amount of packaging used to ship, transport and sell items is exorbitant today, especially with the acceleration of ecommerce since the onset of COVID. There are strides being made in packaging design, with biodegradable and recycled materials rising in popularity — and when implemented correctly, those switches can provide tangible business benefits, as well.
Finding solutions for return logistics is another way to cut down on supply chain waste. Today, there are a plethora of options available for retailers to leverage returned merchandise. They can either choose to invest in establishing their own product refurbishment program, à la Patagonia‘s Worn Wear program or The North Face Renewed; or work with companies such as thredUp and Renewal Workshop to set up resale programs to ensure that items don’t go to waste.
Outside of environmental impact, there are a number of benefits that come with investing in any kind of resale or recycling program. For one, it provides retailers with another line of inventory, which can unlock access to a new set of customers while deepening relationships with current ones. Retailers and brands can also design their business models — and products — to be more circular by using insights generated from returns and resale data. As these programs grow, that data can offer insight into the reception of different designs and launches, ultimately helping them curtail waste at the ideation stage.
What’s in store for the future
Decades from now, retail will look a lot different than it does today. From logistics to digital optimization, the way that we produce, distribute and consume goods will be centered around sustainability and circularity.
These changes won’t always start with the large, established retailers of today. Rather, disruption — as it tends to — may sprout from smaller, more agile businesses that inspire new ways of embedding circular business models and sustainable practices. This will further shape consumer demand in the mainstream and help push established retailers to redefine their business models, as well. We’re already seeing the beginnings of the consumer shift — according to a study from McKinsey, 63 percent of fashion consumers consider a brand’s promotion of sustainability to be an important purchasing factor.
This is exciting, and something to be hopeful for. For one, we’ll see a lot more standardization in retail circularity — from repair and recycling programs to innovations in packaging and network-based supply chains that help mitigate retail’s carbon footprint.
Digital optimization will also play a critical role in bridging the awareness gap for consumers. For instance, scannable ID tags — such as the ones created by Eon — will arm consumers with information on the supply-chain journey, carbon footprint, care details, and recycling instructions for every item they own. The more we can leverage these burgeoning technologies, the more we can embed intentionality in the way that we produce and consume.
It’s easy to look at the issues plaguing retail and see a monolithic, insurmountable challenge. But there is always hope — innovation and circular business models will carve a path for retail that enables a more sustainable future.
Learn more about Optoro’s mission to make retail more sustainable and our environmental impact.