Creating a circular retail economy

Select retailers attending NRF 2024: Retail’s Big Show this January in New York City will participate in an invitation-only sustainability workshop to imagine the future of retail. The workshop will explore how consumers and retailers can thrive in a more sustainable, circular retail economy. Popularized by the Ellen MacArthur Foundation, a circular system mimics nature where there is no waste because all waste becomes essential for other valuable purposes.

Retailers are already exploring circular retail models that keep products in use as long as possible before they are ultimately recycled when they are no longer useful. Circular retail practices include, for example, resale retail models in which retailers sell or facilitate the sale of “gently worn” or “previously loved” products. It also includes selling products in reusable or refillable packaging to reduce packaging waste.

The NRF circularity workshop will include retailers focused on fashion, electronics, grocery, personal care, furniture, luxury, home, hardware, general merchandise, thrift, chain restaurants and more. Retail executives with roles in legal, finance, marketing, merchandising, forward and reverse logistics, store operations and sustainability are attending. Each type of retailer and each retail role will bring unique perspectives to the industry-wide conversation.

The discussion will address industry needs and concerns, including the following:

Improving the consumer experience

Consumers are demanding more sustainable products and services and retailers are making it easier for consumers to find them on store shelves and websites. Retailers are also exploring consumer preferences in a circular economy: How do different types of consumers want to return, repair, resell or recycle different types of products? Which types of products are they most interested in repairing or reselling? Do consumers want to see new products and used products side-by-side on store shelves and websites, or do they prefer buying new and used as separate experiences? What can retailers do to help consumers consider used, repaired or refurbished products before buying new?

Scaling needed infrastructure

Retailers cannot make the transition to circular retail models on their own because they are only one part of an evolving system of interconnected networks full of independent actors. The system involves, among many others, consumers, manufacturers, suppliers, recyclers and logistics providers. Successful circular systems need the participation of:

• Product designers and manufacturers to create affordable products made from recycled or other environmentally preferable materials, that are easy to repair, refurbish and upgrade for reuse or resale, and that can be easily recycled into their component parts and materials when they are no longer useful.
• Businesses that can affordably repair, refurbish and upgrade products despite the cost of highly skilled local labor markets and the costs of maintaining needed inventories of spare parts and materials.
• Recycling centers to collect and sort larger volumes of increasing varieties of materials. Most recycling centers can only handle limited types of materials, including paper, cardboard, metals and specific beverage containers. Recycling infrastructure will need to be scaled to collect larger volumes of electronics, fashion, furniture, small and large appliances and packaging, and the ability to separate those products into useful materials. Manufacturer demand for the collected materials to make new products must scale simultaneously to ensure the collected materials are put to good use.
• Local and regional distribution centers to handle both new products that are shipped on pallets of uniformly packaged units clearly labeled with size, color and style and returned or used products that arrive unpackaged and in random assortments. Unlike distribution centers for new products, return centers require additional dedicated space for sorting and evaluating products to determine which can be resold, which need to be repaired, refurbished or repackaged, and which must be recycled.

Providing needed marketing support

With everyone defining sustainability differently, retailers are careful how they talk about their sustainability efforts, including their efforts to support emerging circular solutions. Retailers must communicate accurate, meaningful and relevant sustainability information without overstating the impact of their efforts, avoiding both greenwashing and greenmuting.

Moving toward circular business models creates unique challenges for retail and brand marketing teams because only 11% of consumers are familiar with the term “circularity.” A recent survey discovered that, among fashion-focused consumers who claim to know what circularity means, 19% mistakenly think it refers to cyclical fashion trends and 13% believe it references blood or air flow. Retailers need to be talking with consumers about circular solutions in ways that drive interest and demand, but they must do it while the needed infrastructure to support those solutions is still being built by other industries.

Mapping additional retail industry needs

Retailers will also use time at the sustainability workshop to continue developing relevant retail-focused metrics for the circular economy, creating retail industry benchmarks, and providing clarity around definitions and the roles/activities that exist within the circular economy (e.g., reverse logistics, repair/refurbish, marketing, resale, forward logistics, etc.).

They will also continue exploring how and why circular retail operates differently within different retail verticals and what lessons can be drawn from ongoing pilot projects in different verticals, identifying the most significant revenue and cost-reduction opportunities within the circular economy for different types of retailers, and reviewing lessons learned from Europe.

Retail executives who have not yet registered for the Circularity Workshop are encouraged to apply online. They can include the event as part of their full NRF 2024: Retail’s Big Show experience or register for the workshop as a separate stand-alone event. Both options provide retailers with a free Expo Pass to visit more than 1,000 exhibitors.