Retail executives across the industry are exploring a variety of circular business models. Each model is unique because each retail business is unique. Retailers of different sizes sell different kinds of products to different kinds of consumers at different price points in different parts of the world. These nuances generate unique circular retail opportunities.
Get an industry-wide perspective on emerging circular business models and explore insights on resale, repair and recycling opportunities.
To better understand industrywide circularity opportunities, the National Retail Federation collaborated with Deloitte to create a retail-focused circularity action guide. “Retail Circularity: An Action Guide for Retailers” explores the Ellen MacArthur Foundation’s circular economy principles through the retail industry’s perspective, identifying activities retailers can directly control and those they can only influence. The action guide also zooms in on retail resale, repair and recycling business models.
“Retail Circularity: An Action Guide for Retailers” highlights crucial factors among retailers that require tailored approaches to circularity. Large retailers that sell multiple kinds of products from multiple brands and manufacturers, for example, face different circularity challenges than smaller retailers focused within a single retail vertical that only sell products they manufacture.
For-profit retailers that primarily sell new products have different opportunities, as do for-profit thrift store retailers that sell primarily used products, or nonprofit retailers like Goodwill or Salvation Army that mostly sell donated products.
As a founding sponsor of the NRF Center for Retail Sustainability, Deloitte worked with NRF to create an invitation-only workshop at NRF 2024: Retail’s Big Show in January to discuss creating a circular economy. The workshop included more than 80 executives from retailers and other industry experts comparing successful strategies and shared challenges.
Sponsored by Deloitte, the NRF Center for Retail Sustainability supports retailers’ commitments to create net positive environmental, social and community benefits while generating economic value. Read more.
Following the workshop, and based on findings compiled by Deloitte, we conducted an industry-wide benchmarking survey completed by 100 executives from 83 retailers. Survey results were used to identify issues that were explored further in interviews with 16 retailers. The meeting participants, survey respondents and interview subjects reflected the wide diversity of retailers across size, type, products sold and consumers served.
“Retail Circularity: An Action Guide for Retailers” provides an overview of circular business models across the retail industry, including examples from participating retail executives. The key findings emphasized in the guide include:
Recognize the business landscape is shifting
Retail executives referenced multiple consumer surveys, including Deloitte’s “The Sustainable Consumer 2023” and other research reports, to highlight growing consumer interest in more sustainable and more circular retail solutions. They also cited growing investor and board member interest along with increasing regulatory pressures encouraging circular solutions.
When implemented successfully, circular models can drive both sustainability and business results.
Focus on the business value proposition
Retailers with the greatest success implementing circularity-focused projects have embedded circularity into core traditional business value drivers — growing revenue, reducing costs and reducing risk. This finding is consistent with earlier findings from the “Pathways to Net Zero: Circular Strategies for Climate Action” report Deloitte developed with environmental nonprofit organization EDF.
Support existing consumer circularity behaviors
For a variety of reasons, many consumers are already participating in parts of the circular economy. They are buying used products at thrift stores, selling products they no longer need to other consumers, repairing products rather than buying new, donating products to nonprofit organizations, and recycling products and packaging when possible.
Retailers have opportunities to facilitate and scale these consumer practices while simultaneously improving existing customer relationships, attracting new customers and generating new revenue streams.
Focus on what your business can control
All retailers control what they offer for sale and how those products and services are delivered. Smaller retailers cannot control much else. A small percentage of retailers control the design and manufacturing of the products they sell. Exceptionally large retailers can sometimes influence product design and manufacturing processes because their large purchasing volumes give them greater influence; however, their suppliers are constantly balancing different requests from their retail and non-retail customers.
Retailers focusing on circular solutions often find more success by focusing on aspects over which they have greater control. These opportunities vary by retailer.
Prioritize circularity business models carefully
Six circular retail opportunities continually emerged in discussions with retail executives: resale, repair, recycling, reuse, donation and re-design. Each can become successful only within specific business contexts. No retailer appears to be implementing all six, although some have deployed a mix-and-match approach.
Instead, retailers are relying on a series of strategic questions, identified in the circularity action guide, to determine when it is appropriate to prioritize each opportunity. The strategic questions address issues associated with things like the product category, price point, residual value, type of retailer, and existing and new capabilities required to implement a circularity solution.
“Retail Circularity: An Action Guide for Retailers” is available online through the NRF Center for Retail Sustainability. For additional information, email Scot Case at NRF or Tal Viskin at Deloitte.