Growth of recommerce – Circular business opportunities in retail and consumer goods

Recommerce – or selling previously owned goods - is one of the segments within circularity that has significant business potential. Especially products within fashion, consumer electronics and home appliances, sports goods typically present interesting recommerce opportunities. The second-hand market has also grown significantly. In Finland it has nearly doubled from 2015 to be worth of 895 million euros in 2023. Despite this, retail and consumer goods companies haven’t been active in this space as 61% of second-hand sales happen in consumer-to-consumer channels.

Entering the recommerce market presents a compelling business opportunity for retailers and consumer goods manufacturers. By developing their own recommerce programs, organizations can access a share of the existing recommerce market, which could bolster their bottom line. Furthermore, embracing recommerce allows companies to tap into new customer segments, fostering organic growth and expanding their market reach. Crucially, recommerce enables firms to maintain direct customer contact, serve growing expectations for sustainable consumption, preserve brand experience and foster deeper connections with their audience.

Retailers and consumer goods manufacturers have several strategic assets that provide a competitive edge

Retailers and consumer goods manufacturers are uniquely positioned to capitalize on the recommerce boom, leveraging their existing assets as presented in Exhibit 1 below. With established physical and digital storefronts, they possess the infrastructure to seamlessly integrate recommerce operations into existing processes. Especially the physical storefronts are an asset that newer consumer-to-consumer recommerce platforms typically lack. When done right, this is something where retailers and consumer goods manufacturers can set them selves apart.

The existing brand awareness of retailers and consumer goods manufacturers instill consumer trust, mitigating concerns such as fraud and unmet expectations. Other recommerce players, such as pure play second hand platforms and consumer-to-consumer platforms, typically don’t have this type of strategic assets to leverage when starting.

By leveraging their capabilities in inventory management, logistics, and building customer communities, retailers and consumer goods manufacturers can streamline recommerce processes and deliver superior customer experiences in a way that also makes business sense. This further highlights the unique position of retailers and consumer goods manufacturers when it comes to entering the world of recommerce.

Existing Channels

1. Established physical and digital presence.

2. Seamless omnichannel integration.

3. Extensive distribution network.

Brand Trust and Awareness

1. Leverage brand equity.

2. Transparent communication and quality.

3. Robust loyalty programs.

Inventory Management

1. Advanced data analytics.

2. Accurate demand forecasting.

3. Optimal stock levels.

Product Sourcing

1. Existing customer communities

2. Superior understanding of own products

3. Rigorous quality control.

Logistics and Fulfillment

1. Efficient warehouse operations.

2. Reliable last-mile delivery.

3. Flexible shipping options.

Exhibit 1: Strategic assets of retailers and consumer goods manufacturers to leverage in recommerce

Business and customer experience implications need to be considered when starting the recommerce journey

Embarking on a recommerce journey requires careful strategic planning. Organizations must first identify their target segments and product categories, meticulously sizing the opportunity and aligning it with their business objectives. When defining the optimal recommerce business model, companies need to comprehensively evaluate the business potential and consider what it would take the operate a profitable recommerce program.

To succeed in attracting and maintaining customers, a recommerce program must be designed with a high-quality customer experience in mind. Brands need to be able to grow and maintain the amount of quality items, but also to find suitable models to incentivise customers to trade with them. Curated content, experience design that provokes trust, and ease of purchasing are all critical building blocks of the customer experience that need to be designed.

Decisions regarding the business model, including monetization strategies and operating frameworks, are also paramount to incentivizing customer participation. A small-scale pilot program can serve as a litmus test, allowing companies to validate hypotheses and refine their approach before moving to full-scale implementation.

A systematic approach to scaling improves the odds to succeed at scale

Scaling a recommerce business demands a well-defined roadmap and organizational alignment. Clear targets and incentives ensure buy-in from all stakeholders, driving collective efforts towards success. Whether expanding geographically, targeting new customer segments, or diversifying product categories, a systematic approach is essential. Securing necessary investments through a robust business case underscores the strategic significance of recommerce initiatives. Additionally, effective change management, marked by transparent communication and comprehensive training, is imperative for ensuring that the entire organization is onboard the change journey.

In conclusion, recommerce represents more than just a trend; it's a strategic imperative for companies seeking sustainable growth and competitive advantage. It embodies a paradigm shift towards a more circular economy, emphasizing sustainability and resource efficiency. By embracing recommerce, organizations can not only drive profitability but also contribute to a more equitable and environmentally conscious future and retailers and consumer goods manufacturers have strong assets to leverage when driving this change.

Do you have further questions about about the business opportunity of recommerce in you organization or do you want to know how to start developing a recommerce business? Please get in touch, we’d love to support you on your journey.

Impaktly is a consultancy that helps clients shape and accelerate sustainability transformations. Our advisors are experts in their field of environmental and social sustainability, business strategy and transformation, service design and data & technology. We leverage our expertise to support our clients embed sustainability at scale across the organization to increase business resilience and unlock new business opportunities.

Sources: Kaupan liitto 2023