Platforms powering the circular economy

Preserving our planet’s resources is vital, and we’re in a race against time. From reducing clothing waste to refurbishing electronic equipment, awareness is rapidly growing of the need for change if we hope to secure a sustainable future – for today, tomorrow and for generations to come. 

Elle Tucker, author and advisor on the sharing economy, is well acquainted with this challenge and with the potential for digital platforms to make a difference. “Since the Industrial Revolution, this ‘Take, Make, Use, Dispose’ model has been the dominating force in our economy,” she says. “But what can platforms do to change that?” 

This question is top of mind for Tom Berry, Senior Director of Sustainable Business at luxury e-commerce marketplace FARFETCH. “The biggest issues that we face as a society are social and environmental,” he says. But with this mounting challenge also comes a whole array of opportunities: “Loads of businesses and the most exciting startups coming through are deliberately orientating themselves around solving some of those problems. So, if you’re not thinking about it, you’re missing out.”

 

From ‘Take, Make, Use, Dispose’ to ‘Donate, Repair, Resell’

The fashion industry is certainly no stranger to environmental problems, producing approximately 10% of global carbon emissions and 7% of global landfill waste. “One of the key challenges on the environmental side in fashion is the fact that production is going up and clothing utilization is going down,” says Tom. “It’s an unsustainable trend in the industry, because effectively the industry is using increasing amounts of new resources to sell increasing amounts of new products which are used less and less.” As the pressures of climate change mount, many fashion brands are facing up to the impact of their business models and searching for alternatives.“The whole idea of a circular economy is using less new resources,” Tom explains.

This is exactly what drives Lucy Peacock, Head of Pre-loved Fashion at eBay. “Our mission at eBay is to really scale and accelerate the circular economy,” she says. With its long, successful history as a secondhand marketplace, this mission is a natural fit for eBay. “Selling what’s in your home or your wardrobe has been around for a long time for eBay,” says Lucy, adding that their secondhand market encompasses more than just fashion. “[It’s] anything from refurb tech to home and garden, even things like used bikes.” Notably, the secondhand category is growing even more quickly than sales of new products at eBay.

Meanwhile, FARFETCH currently connects four million active consumers directly with 1,400 of the world’s best small shops, boutiques, and brands globally in 190 countries. But the platform isn’t content to act solely as a marketplace for luxury fashion items. “The whole exec at FARFETCH didn’t want to just be any platform,” Tom explains. “They wanted to be a platform for good, and for us that was about enabling positive choices [and] positive actions amongst both the businesses and consumers that we serve and enable.”

With this mission in mind, FARFETCH has defined clear targets for their platform. “The goal that we set ourselves is to be more circular than linear by 2030,” says Tom. “[This] means growing the number of units that we service – that we either buy back from consumers or that we enable consumers to donate, repair or recycle.” Not only has FARFETCH set its sights on growing this area of its business, they’re also working towards increasing the proportion of upcycled and pre-owned products in their inventory. Tom acknowledges that they’ve set a steep challenge for themselves: “The new report is about to come out, but last time I reported, it was at about 2%. […] We’ve got to get to 50%, so there’s still a long way to go.”

Aligning priorities and enabling industry-wide change

In order to achieve circularity targets like the ones FARFETCH have set, the entire company needs to align towards these goals, Tom says. And in hindsight, he thinks that the business opportunities were obvious. “We have these four million active consumers who – thanks to the likes of eBay championing this kind of thing for many years – are already starting to think about [reselling their items].” He adds: “In lots of industries, it’s pretty common. Think about the car industry and now even the tech industry. It’s quite common to be able to trade these things in.”

There may be a misconception that preowned is a less lucrative market, but this hasn’t been the case at FARFETCH. “There are a number of different drivers for why people buy pre-owned,” Tom says. “We’ve kept it really high end and elevated deliberately, because we know that that’s what our customers come to us to shop for, and that’s worked really well for us. The pre-owned customer is actually a higher spending customer than our average FARFETCH customer.” This has made it easier to build the business case for initiatives like FARFETCH Second Life and FARFETCH Refresh, although Tom admits there have been obstacles at times. “It’s been tough to grow them and get traction behind them for a whole load of different reasons, but it’s an obvious way to align business priorities with the circular economy.”

The future of platforms is…to be the heartbeat of the circular economy. – Lucy Peacock

At eBay, Pre-loved Fashion is concentrated on three main verticals: brands, charities and small and medium businesses (SMB) – which eBay has nicknamed “bedroom millionaires”. Lucy points to eBay’s longevity as a secondhand marketplace, which makes the firm uniquely positioned to advise and support other brands as they work towards environmental sustainability. In her opinion, the question has become: “How do we use that data and share with brands [how] to work through business models that are effective both from an economic point of view [and] an environmental point of view?” In Lucy’s experience, probing into what actually happens at each stage of a brand’s supply chain or a product’s lifecycle can help businesses understand how much opportunity there is for increased circularity.

Tom takes a similar view. “What are the things which we can do in the industry that we’re in and in the model that we run which will enable better behaviors in the customers that we serve?” he asks. For FARFETCH, this has meant not only launching a consumer resale platform, but providing resale capabilities to their partner brands. Companies like Harrods and Ferragamo already power their e-commerce offerings using FARFETCH, and Tom says it was a natural extension to equip brands with resale solutions as well.

Customer engagement, consumer education and user experience

Platforms and brands can do their part to kick off the circular economy flywheel, but there’s another vital factor: consumer behaviour. Both eBay and FARFETCH are intently focussed on strategies to engage and educate their customer and provide optimal user experience. 

Recently, eBay launched a partnership with the wildly popular reality TV show, Love Island, which is known for its fast fashion aesthetic. Since eBay paired up with the show, however, the contestants have been wearing secondhand clothing. With this high-profile partnership, Lucy and her team aim to change perceptions of secondhand items and what kind of quality and value consumers can expect. “A lot of it is down to education,” she says. “That education is improving but [there’s] still a long way to go.”

For many consumers, there are practical considerations, too. “Value is really important for the eBay customer,” says Lucy. “What we’re doing a lot more of is playing into that sustainability space.” Recently, the Pre-loved Fashion team have been zeroing in on some of the largest barriers to secondhand shopping, such as authentication and hygiene. If they can help customers feel assured that they’re getting good quality secondhand inventory, Lucy believes it increases the likelihood that consumers will choose to purchase previously owned items. “I think the experience is really paramount,” she says, also pointing out that some customers might be content to browse on their own, while others need strong matching mechanisms to find specific items. “We need to make [it] really easy for customers to make sure they get what they want.” This might also involve nudging consumers towards secondhand at the appropriate point in their shopping journey, again with an emphasis on education.

When it came to FARFETCH’s buy-back program, Tom explains that they also focused on user experience: “We deliberately made it a ‘buy-upfront’ model because we know our customers want a really easy, luxury experience. They don’t want to have to list, wait for items to sell, negotiate on price. They just want a really simple service which reflects the investment that they’ve made in that high-value piece, so we’ve deliberately structured the service and the model of resale that we’re offering to meet our customers’ needs.” This, he believes, goes a long way towards encouraging customer adoption on both sides of the resale market.

No “one size fits all” for circularity

As far as platforms are concerned, some circular models are more demanding to manage than others. For example, Tom points to rental platforms, which he says are “high intensity” in terms of shipping and cleaning. Platforms operating in this sector also have a multitude of commercial choices to make, such as whether to charge on a subscription basis or pay-per-use and how to handle fines for damages or late returns. Rental ecosystems can have obvious benefits for consumers, but do present challenges for the platforms themselves. “Often with peer-to-peer, because the renters are not professionals, the experience of the person who’s renting isn’t necessarily great,” Tom says, noting that influencing customer experience in this environment is no small task.

There can also be notable logistical challenges with inventory management. Secondhand fashion items are typically available in a single size, each requiring its own Stock-Keeping Unit (SKU).  FARFETCH has focussed their buy-back program on handbags, which was already their top-selling pre-owned category; dealing with products that retain their value and have less complex sizing helped to mitigate the logistical demands. Ultimately, it’s about finding the right fit to achieve traction and scale: “There’s no one size fits all for circularity,” Lucy observes. 

Supporting circularity with regulation and innovation

While there may not be a singular solution to transitioning to a circular economy, Elle sees a clear theme emerging: “Platform technology is like the motor that’s powering that circular movement of things.”

Lucy agrees that innovative platform features and functionality can encourage circularity. For example, if the resale price of a particular item increases, customers who purchased that item in the past can receive an alert. This creates value for participants on multiple sides: the seller is equipped to list their items under optimal market conditions, buyers are encouraged to purchase secondhand and the platform is able to facilitate a transaction and promote circularity.

Whereas regulation and innovation are sometimes framed in opposition, Tom thinks that the right regulation can actually prompt the development of new products and services. “There are two bits of legislation coming through which I’m really positive about. They’re both EU level. One is a directive for minimum levels of recycled content within products and the declaration of what recycled content is in products,” he says. “The second is the digital product passport legislation.” This product passport would allow consumers to access a digital version of a product, which could then connect them to relevant repair services, information about the resale market, and even product cleaning instructions. Lucy is also optimistic about the proposed legislation. “The digital passports [are] really exciting because we can do a lot more measuring of how many times an item gets resold and [get the] data to really understand that rebound effect,” she says. “I think legislation will help change things for the consumer. However, that could be a long way off. How do brands get going now?”

Regulation may be on the horizon, but Tom agrees that there’s no time to waste. “You’ve got to make a choice as a platform: whether you want to enable more positive choices which actually benefit people and the planet, or whether you don’t care,” he says. And efforts have to be focussed and intentional in order to realise the benefits for businesses, customers and the planet alike. “If you’re a brand or a retailer, I would say: don’t do it for the PR benefit,” Tom advises, but rather: “Think really carefully about how it’s going to be part of your business long term.”

The future of platforms is…about enabling better choices for people and the planet. – Tom Berry

 

To go further

This panel with Elle Tucker, Lucy Peacock from Ebay and Tom Berry from FARFETCH was part of the Platform Leaders event organised by Launchworks & Co on the 7th of June 2023 (full list of speakers and agenda). To watch the full event, play the video below.