Have you ever been to a car dealership? The options are endless. From leasing to used and made-to-order vehicles, the automotive industry is an expert in extending the life of their products and finding something for every customer on the lot.
Outside of automotive, this circular model is growing in relevance across industries. The next frontier for this model will be in digital experiences, as it becomes a valuable and necessary strategy to capture new customer data and drive business revenue.
So, what is a circular model?
The circular model keeps materials, products, and services in circulation longer than their expected lifecycle. This model has multiple market benefits, including reducing waste and supporting sustainability efforts, addressing the needs of multiple audiences, and increasing business resilience through supply chain efficiency, which, in turn, create competitive advantage.
By giving consumers access to used or circular products, brands can build relationships with a new audience by offering more approachable prices. This model appeals to consumers’ growing demand to shop by values, like sustainability, while satisfying their desire for new experiences with new-to-me products.
Keeping customers within a brand ecosystem and driving retention creates an essential competitive edge. This model provides an opportunity to capture more customer data for further optimization and drive conversion of new products lines.
The circular model is rapidly gaining popularity for its ability to increase revenue over the lifetime of products while attracting new and retaining current customers.
How are brands bringing the circular model to life?
A huge benefit of this model is its flexibility. For example, while automotive has been utilizing it one way for years with the massive used car market at the dealership level, the apparel space is driving circular innovations that will likely expand to other industries. Though each brand brings this model to life in different ways, they all see similar outcomes.
1. Nuuly Rental Membership
Apparel rental programs have become more mainstream solutions as customers have deprioritized ownership. Nuuly’s membership allows customers to refresh their closet every month with rental pieces. This approach appeals to shoppers who aspire to belong to certain brand communities but may not have the means to do so otherwise. The rental membership keeps consumers within their ecosystem and builds a two-way relationship to grow Nuuly’s digital experiences and learn about new segments. This strategy also increases Nuuly’s ability to gather key customer data to support marketing initiatives and new product lines.
2. Madewell Verified Resale
What started as a resale pop-up grew into a major strategy shift for Madewell. By partnering with ThredUp, a resale-as-a-service platform, they gained a new line of revenue through brand-verified resale and vintage items. This tactic within the circular model has grown across multiple brands and helps reduce post-consumer waste, doubles the average lifetime value of products, and increases digital touchpoints throughout the customer’s journey. Brands that have adopted this strategy can drive more money towards new revenue lines, while consumers earn monetary discounts by selling back old products.
3. Royal Phillips Refurbishment Services
Services play a major role in helping business move to a circular model and process. Royal Phillips, a medical devices company, shifted their business strategy to provide circular services for their clients within the healthcare Industry. Their upgrade and refurbishment program helps prolong the use of their devices and provides predictive maintenance to keep products in use longer. These additional service support sustainability efforts in the supply chain, reduce material costs and increase overall effectiveness of products.
Philips has taken a holistic approach when including circular services and used it to further develop their overall business strategy to create a clear competitive advantage, build stronger customer relationships and reduce their own spend on materials and resources.
4. For Days: A Circular Fashion Brand
For Days is a newer direct-to-consumer brand that labels itself a “circular fashion brand.” Their 100% recyclable fashion allows customers to purchase clothing that can be returned and recycled after use with the goal of zero waste. For Day taps into consumers’ growing desire for sustainable shopping options while still providing new-to-me products and ensures consumers stay within the brand ecosystem.
Why This Matters
While all the brands mentioned above utilize different tactics, they center around the same central idea: a circular model increases digital touchpoints, supports customers’ increasing demand for new options, and drives business revenue. These brands have found ways to connect with new segments of shoppers while building and maintaining relationships with their key audiences. As consumers’ digital experiences evolve, moving to a circular model is an essential digital strategy to drive business growth.
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