The circular economy is becoming a priority for retailers because it’s a priority for the consumer. Consumers are starting to not only question a retailer’s impact on the environment but they have more options than ever.
“Consumers are also more cautious with their spending and intentionally choosing brands that align with their own values around sustainability. The retail industry needs to work harder in giving consumers what they want. They want more responsible retailers and circularity falls into this bucket,” said Liza Amlani, Principal/Founder, Retail Strategy Group, and Co-Founder, The Merchant Life.
“The retailer has more of a chance to save the sale if the return happens in the store. They also have a chance to demonstrate a delightful experience and increase brand loyalty. This can only happen if the customer is engaged and the physical store gives the retailer more of a chance to drive brand loyalty if they can interact with the customer. Saving the sale is only one part of the equation. Getting the customer to continue to shop the brand is another battle that every retailer is trying to win.
“It’s important for brands to be transparent about their process, what they do with returns and the data behind the circular strategy. Responsible retailing is about tracking progress so we do better. Transparency must be part of the circular strategy. With more and more brands being called out for greenwashing and not being completely truthful, retailers need to make sure they are covering all their bases.”
She said depending on how space is being allocated today, returning product that can be repurposed and sold again requires a process that includes sorting, cleaning and repairs – and additional space.
Heléne Loberg, Head of Sustainability, IKEA Canada, said the circular economy is very important these days for retailers such as the international giant.
“It’s the only way to make sure that we still have a healthy planet and still have a business in the future. We think that is so important,” she said.
IKEA has a number of initiatives in place. It offers a no-nonsense policy that allows customers to take up to 365 days to change their mind on a product.
Given how it continues revitalizing its omni-channel services in response to the evolving needs and expectations of customers, customers can now arrange for online order returns to be picked up as well.
It also integrates its returns into its sustainability ambition with updates and expansion of its As-is circular hubs where customers can find solutions in its parts library or save on deals in its As-is sections. These are popular sections at IKEA in-store and online. It also supports waste diversion and social impact through its partnership with Furniture Bank.
”We’re working to become a circular business and are finding new ways to make circularity more relevant and convenient for our customers. We’re developing new products and services that enable customers to maintain, repair and pass on their belongings when they no longer need them,” said the IKEA Canada 2022 Summary Report. “Through the IKEA Sell-back program, customers can give their gently used IKEA furniture another life and get in-store credit to refresh their homes. This year, customers returned almost 3,000 of their pre-loved IKEA items through this program.
“In the Greater Toronto Area, we continued to partner with Furniture Bank to offer customers an easy, affordable, and socially responsible mattress removal service. The program collected 5,876 mattresses, with 75 percent being donated to individuals and families overcoming furniture poverty, including community groups supporting marginalized communities. We offer a Spare parts program to support customers in maintaining and repairing their IKEA furniture. Customers can easily order replacement parts for free and have them delivered within 7-10 business days. Throughout the year, we shipped 178,000 orders with a total of 2,760,000 pieces to customers in Canada and the U.S.
“For the second year, IKEA Canada launched a month-long Green Friday campaign shifting the conversation to show how sustainable living can be easy and affordable for everyone. By closing the loop on circularity, IKEA encouraged customers to sell back their gently used products, offered special offers on pre-loved products, hosted virtual workshops to support customers in extending the life of their IKEA products, as well as furniture donation and electronic recycling drives for local community partners.”
Loberg said part of the retailer’s mission is to help consumers live a more circular life.
Gary Newbury, Founder of RetailAID Inc. and an Award Winning Strategic Advisor and Delivery Executive across the end to end consumer driven supply chain, said the circular economy continues to rise in prominence across Canadian retailing for many reasons. The key reasons are:
- Finding new ways to be more efficient with resources. Within logistics, finding better ways of last mile delivery routing, deferring deliveries, with consumers support, to allow assets to be utilized better and reducing carbon footprint;
- Consumers are increasinging becoming more concerned with sustainability of products they buy and demanding more transparency in the end-to-end journey from, say farm to folk;
- To meet regulatory requirements developed by various levels of government including areas such as packaging and taking back of products at end of life;
- Beneficial cost savings can arise when systems, infrastructure and ways of working are seen through a sustainability lens. A simple example will be to replace light bulbs with low energy consumption LED lights and installing motion detection systems to reduce power consumption further and, importantly;
- Supply Chain Resiliency. We have learned supply chains became very easily disrupted in the early stage of restrictions. There is much conversation around regionalization, local supply for local markets. Typically what we are seeing is a switch from China to other Far Eastern (Vietnam seems to be a popular origin for manufacturing), low wage economies. However, there is also strength of feeling that nearshoring (to say Mexico and Latin America) reduces the very real risks of modern day slavery, reduces product carbon footprint and reduces geo-political risk. It also makes reverse logistics of returning product to supplier less wasteful and expensive
There are several reasons to integrate stores and returns processing, and remove friction from the process, he said:
- Primarily, this should be convenient for customers to go about their day-to-day business, popping returns to stores, rather than having to repackage the product for sending through the mail, printing off labels and arranging drop off or pick up. Target has reduced this to “drive through returns” at some of its stores;
- A hassle-free store-based returns process should be the goal of retailers looking to minimize the burden on consumers and accelerating the path of the return back into inventory as quickly as possible, rather than routing through the warehouse and back out to stores days later, allowing resale as quickly as possible;
- A friction free store-based returns process helps to build loyalty and more future sales. It may assist with upselling and providing the consumer with an opportunity to buy other products or services while they are visiting the store; and
- Data insights – the returns process should allow returns to be analyzed on the basis of product performance and consumer, to drive supplier performance, returns policy or action with specific consumers
“Most stores have customer service desks that have developed over time. To handle more traffic from, say, online orders which have been previously sent back to the warehouse, they are likely to have to review their procedures (so returns are not held up from being actioned), potentially look at headcount and set KPIs for churning product to monitor performance. Square footage might be a consideration in terms of the extra volume of returns, however the area might need to be redesigned to ensure the consumer experience is friction free, convenient and allows the opportunity to “go and shop”,” said Newbury.
“There are several reverse logistics startups developing solutions to meet the transition of product being tested in store (such as apparel) to the consumer’s bedroom as it transforms into a convenient changing room. The general concept is for the pooling of returns to better utilize the capacity that they have available to move, often, single units, across a country the size of Canada.
“Bringing items back to store can help reduce the costs of reverse logistics, however, for those retailers still working with labels and return warehouses, they should contact reverse logistics businesses to see what services they can offer and their pricings.”
George Minakakis, CEO, Inception Retail Group, and author of The New Bricks & Mortar: Future Proofing Retail, said the goal of a circular economy is to keep resources and products in use for as long as possible, getting absolute value while it is owned. After that products are reclaimed and recycled at the end of life.
“The majority of consumers 70-79 per cent are sensitive to the environment and are listening to their children and the news. As such they are increasingly expecting the goods they buy to be sustainably made, healthy for them and the environment. A circular economy means greater wellness for society, the environment, the economy, and retailers. The demand for sustainably made products will only increase over the next decade. In fact, as more consumers switch to electric cars they will want more actions taken to protect the environment. And therefore a circular economy where we rescue, recycle and reuse will be the measure of a retailer’s commitment to social and environmental responsibility,” he said.
“One presentation that I conduct with groups is called “From Scorched Earth to Blue Earth Leadership.” It’s about developing sustainable products and creating a circular economy through “progressive incremental innovation”. We would be much further ahead in protecting consumers and the environment if we practiced the right principles years ago.”
He said returns are a painful experience for customers and retailers.
“First I want to point out that returns to a store may lower costs for a retailer, but they don’t necessarily lower the percentage of returns or a customer’s costs and patience – unless returns to a store are a means to engage with customers to better understand why products did not meet their expectations. Unless an internal process is designed to understand what the causes were and how they can improve buying and selling of these same products, a return to stores policy will not be successful,” added Minakakis.
“To be more effective the process of returns needs to be simplified because mismanaging this will only create greater negative sentiments. While there is an opportunity to also create another sale, I would strongly suggest that retailers provide their staff with adequate training to ensure that customers don’t feel pressure to buy.”
Minakakis said he’s not in favour of a designated customer returns department in a store. This would only create the perception that retailers have a problem and create unproductive real estate.
“I would do all of this online and have a return slip attached to the product so that store staff can process refunds. If anything I would eliminate the drudgery and perhaps embarrassment for customers returning products. With all customers, even loyal ones, it only takes one bad experience to turn them off a brand,” he said.
“Retailers will need an internal corporate statement on developing a sustainable brand and how that will contribute to a circular economy. For example, stopping the use of plastic bags is old news. So what is new? What percentage of the fabric that their apparel is made of is from recycled garments? Even with appliances, if these products had more IOT connectivity built-in to catch potential failures and notify a customer before they happen, we would have less obsolescence and therefore greater sustainability. Sustainability and a circular economy need technology through many stages of production and use to protect society and the environment. This is a holistic approach that is needed to be successful as both a manufacturer and retailer.”
