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Retailers “reap rewards” by embracing circular business models

By Danielle Wightman-Stone

17 Mar 2021

Fashion brands and retailers can reap financial, environmental and customer loyalty rewards from embracing circular business models, designed to reduce waste and keep garments and accessories in use for longer, according to a new report from ReLondon and QSA.

The report, ‘Fashion that doesn’t cost the earth’ reveals that embracing environmentally sustainable business models, such as extending the life of products with repair and resale services can “reap rewards” including strengthening customer loyalty.

This is demonstrated through two case studies in the report from luxury fashion platform Farfetch and outerwear brand FW who both worked with ReLondon and QSA Partners over a two-year period to develop, trial and launch their new circular offerings, as part of a project called Circular Fashion Fast Forward.

ReLondon, formerly known as The London Waste and Recycling Board, notes that brands and retailers who implement circular economy business models can outperform traditional linear ‘take, make, use, dispose’ ones. This is demonstrated by Farfetch and FW, who reported that the new sustainable models “positively impact their bottom line and the planet”.

FW reduces costs by 60 percent after launching a gold standard repair guarantee for its outdoor clothing

Outerwear brand FW used the project to create a gold standard repair service offering. This service, FW states has not only helped it build and strengthen customer loyalty, but has also reduced their warranty return costs by 60 percent, and ultimately reduced their environmental impacts as they have not had to make new products to replace warranty claims.

Sara Asmoarp, head of quality and ESG at FW, said in the report: “I’d heard about recommerce, rental and hire, and repair services but I wasn’t sure which options could work for us or what the business case would be. I wanted to make sure that the quality of any service we provided matched the experience that our customers would expect from our outerwear.

“Outerwear experiences very intense use. It’s difficult for any apparel brand to work out what might be excessive damage through adventurous use, and what might be a genuine flaw in a component like a zipper or a panel seam. Having a repair option available helped us to manage these products in a way that delighted our customers. We were amazed when we found out how much money we were saving.”

FW has also added that they have plans to test out more circular options with their customers in the future, after being encouraged by the initial success of its repairs service.

Repair and resale circular business models can strengthen customer loyalty, according to a new report from ReLondon and QSA

Farfetch has also reported positive outcomes from the launch of its two re-commerce models, Farfetch Second Life and Farfetch Donate, which have helped the business to “significant” year-on-year growth in purchases of pre-owned items since 2010. With sales of more conscious products growing by nearly 240 percent between 2017 and 2019.

In addition, research also reveals that purchases of pre-owned products replaced a consumer’s purchase of a new item in around 60 percent of cases as its customers demonstrate a growing appetite for more sustainable products and services.

Tom Berry, global director of sustainable business at Farfetch, said in a statement: “We’re on a mission to become the global platform for good in luxury fashion – empowering everyone to think, act and choose positively, and are committed to long term change that has a positive impact on the future of this industry.

“We will continue to work with our partners to innovate in this space, and offer a range of solutions to customers that will allow them to make thoughtful purchases.”

The report adds that Farfetch is actively seeking to include even more product categories to its re-commerce model and has already rolled it out to 30 countries. Last month, Farfetch also teamed up with The Restory to launch a luxury aftercare service to repair and restore shoes, bags and leather goods, and last year, it unveiled ambitious long-term sustainable goals to see its circular business outgrow traditional sales by 2030.

Andrea Crump, circular economy strategic advisor at ReLondon, said: “Customer demand for sustainability keeps growing; it’s not going anywhere. And what we saw from this project is the need to put customers at the heart of your decisions around circular business models.”

Kristina Bull, partner at QSA, added: “The main benefits retailers get from implementing circular business models is better relationships with their customers and better understanding of what those customers need, beyond just the initial purchase of a product. We’ve seen consumers becoming more aware of sustainability issues so actually implementing circular business models makes brands way more resilient to the interrogation that consumers are now giving the brands that they buy from.”

Alongside the report, QSA has launched a free learning platform with insights from the project for brands interested in embracing both sustainability and profitability. It shares its commercial, financial and sustainability expertise, alongside practical and experienced project management to develop and implement successful circular business models.

Images: courtesy of Farfetch/The Restory