How your business can tap into recommerce and the circular economy

Kirsten Kore is the co-founder and co-CEO of Designerex, the world’s largest peer-to-peer designer dress-sharing platform. She was named on 2022’s Inside Retail Australia #Top50 People in E-commerce List and was a finalist at the 2019 Online Retailer Industry Awards as well as the 2018 Anthill Smart100.

Edwina Morgan is General Manager, Customer & Strategy at Salvos Stores. She drives digital transformation and customer strategy for a business with more than 100 years of history that raises tens of millions of dollars every year to fund The Salvation Army programs that transform lives for the better.

You can subscribe and listen to the full episode on Spotify, Apple Podcasts, Google Podcasts, and elsewhere podcasts are found.

You can also check out this Q&A from the episode (edited for clarity and brevity).

Adrian: How do you both personally define recommerce?

Edwina: In simple terms, recommerce is the passing of ownership of a product from one person to another to keep that product in circulation. I have also heard it termed as giving custodianship of a product to others. So for me, it really is passing on that ownership to keep something in circulation. 

Kirsten: Ultimately, recommerce is taking advantage of a product’s full lifecycle. That’s why I think it’s going to continue growing. Recommerce, and circularity, everyone’s aware of them and technology has fast-tracked our awareness of lots of different things in the world, but especially post-COVID when everyone was at home and reassessing what’s in their lives and what’s in their wardrobes and how much value they’re extracting from the products they purchase and things that they’ve got sitting around their house. 

For businesses, it’s going to look different for everyone. They’ve got to look into what their customers want, and extract the value out of things, but also the whole supply chain comes into play to make sure the products can go through those cycles properly, and eventually maybe get recycled or repurposed. So there are a lot of opportunities and a lot of people that need to come to the table to make sure that end to end is covered.

Adrian: Why do you think that recommerce and the circular economy are seeing so much attention now?

Kirsten: We [Designerex] came from that social point of view. The growth of social media really impacted people wanting to wear these things once, as did the growth of fast fashion. That’s why we came across the problem and then tried to solve it. So for us, it was very technology-enabled; taking advantage of something that people were already doing, as people already shared dresses with each other. We just put that in a scalable model. Also, younger generations’ awareness of global problems has played a role.

Edwina: Technology has been a huge enabler for people to participate within either the circular economy or resale or all the different aspects that make up recommerce and the circular economy. Over the years, we’ve really seen that driven by the likes of Thredup and Rent the Runway. They’ve done amazing things through technology to remove friction points and roadblocks for people to participate. They’ve almost made secondhand or circular mainstream. They have really tapped into those markets and converted consumers that may not have looked at secondhand previously, because they’ve made it convenient, and they’ve made it easy.

On the younger generation, their incredible awareness and activism around social and environmental issues has probably driven a lot of us to reassess the way that we personally and professionally are tackling environmental problems. There’s this real drive to provide solutions to the market and participate within that solution, and have an impact on the planet, and on communities by looking at how we do things and changing up our business models, and really looking at how to be more responsible for generations to come. For Salvos Stores, we’ve seen this shift coming for many years. I’ve been with Salvos Stores for 10 years and in that time we have outperformed traditional retail as more and more people are open to shopping secondhand.

Adrian: There’s an interesting dichotomy here where recommerce is growing, yet also ultra-fast fashion is still a huge industry, with Shein’s US$100 billion valuation one example. Are you foreseeing a future where these two opposites intersect, or will one outstrip the other?

Edwina: I think that we will see resale outgrow fast fashion and Thredup actually points to that in their yearly reports and have done for many years now. They’ve got it pegged at about 2030 for that tipping point to come. Fashion plays a part in people’s individuality. We have to figure out how we can entice consumers to look at different options to evolve their fashion identity over a period of time through different avenues, whether that is purchasing new products or renting secondhand.

We tend to demonize fast fashion quite quickly and I can’t speak to Shein, but if you look at the likes of H&M and what have you, they are investing in circular economies and pulling back value from items that aren’t able to be worn. They’re looking at how they can make things more durable. Although fast fashion is not a great practice, it’s important to note that a lot of these players are doing things to address the issue, which we can all benefit from.

One of the big impacts of fast fashion is the durability of the item. These clothes are not made to last for long. What we’re seeing from the Salvos Stores perspective is that actually floods our supply chain and we’re having to deal with those items and look for alternatives because they’re not sellable.

Kirsten: These shops are selling products to people and pretty much saying it’s so cheap, and it’s cheap because you’re just going to throw it out and buy the next product. That’s what Shein has been really successful at. They iterate really quickly and when they notice something that’s trending, they start building more products around what’s trending. They show that we’ve still got a lot of work to do. They’re also giving the consumer the marketing play that consumers love, discounts, points and loyalty, so they’re doing that marketing really well. But ultimately, it’s not sustainable, financially or environmentally.

I absolutely agree resale and rental and the circular economy are going to overtake fast fashion because governments are getting involved as well. Businesses are going to make the circular economy easier to access and have products circulated easier and quicker. That’s what we focus on every single day. That’s why we launched three-hour delivery and are really trying to feed the customer what they want in terms of a retail and online retail experience, but within the circular economy. So there are challenges for us because we’re coming from a completely different angle, for example, every dress on the platform needs to come back. So there’s a lot of logistical things that we need to address.

Adrian: How important would both of you say it is for businesses to find a niche within the world of recommerce instead of being generalists? 

Kirsten: I really believe with the growth of the circular economy, there will be niche businesses that are going to do one thing really well. That’s why we double down on rental and we try and extract as much value out of an item. When we came into it, it was all about a global mindset, how can we reach as many customers as possible because this is a global problem. So that’s where the peer-to-peer model came for us. Businesses need to look at what products they’re selling, or what services they’re offering and speak to their customers and work out from the beginning of the product to the end what the customer wants to do with it, and for how long. Then you need to then assess what circular economy, product, or service you can tap into, and solve one problem for your consumer.

Edwina: The key players will find their value proposition within that circular economy over time. Everybody has a part to play and that will take shape in different forms, some more general than others, some targeting those niche markets. I know for Salvos Store at the moment, we are looking at what are the unique things we actually bring to the table around recommerce and around circularity and one of the things that is really unique to our business is the social impact. 

That impact that we have by selling secondhand and having that environmental impact also pushes into the social impact, which is pretty humbling when you think about the support that is provided to Australian communities but also looking at ways that we can provide meaningful pathways into meaningful work through volunteering. Digital or eCommerce is quite a new thing for us, we actually had our second birthday this year of re-platforming and launching our eCommerce offering, which has been hugely successful for us and we’ve also got that human side where we’ve had volunteering opportunities and we’ve been able to upskill people with digital skills and they’ve gone on to find meaningful employment. For us it’s really about finding our place as the landscape continues to change and shift and finding where do we add value into that ecosystem. As Kirsten has pointed out, that’s an individual journey for each organisation in terms of how they actually go about addressing the needs of their customers, and even down to the point, do they do it themselves? Do they partner with an organisation that’s got some expertise?

Adrian: What are the benefits for a business to fully go into recommerce?

Kirsten: I love the point that Edwina made around community. The benefit of this whole circular economy and its growth is the growth of communities. So with our 6,000 lenders, they’re offering one-on-one personalised experiences to renters, and that’s a huge community. And we’re giving them the tools and empowering them. They’re all entrepreneurial in their own right, they’ve got their rental profiles on the Designerex platform. So it’s really giving the power back to the consumer as well. For brands yet to get involved, they get to be part of more of the customer’s journey with that product. So it’s not just a sell, see you later, and then try and resell them something new, it’s kind of they can be part of that ongoing experience with that customer and probably build much more loyalty and history with that customer.

Edwina: For brands now, I don’t think it’s even a question of their customers want them to be doing this, they’re expecting them to be doing something better for the community and something better for the planet. The way that brands undertake this journey and how they go about responding to the concerns of their customer base and how they go about creating solutions to overcome those concerns will be key in maintaining and building that loyalty from their customer base.

Adrian: What are some of the technical considerations facing any business looking to go into the recommerce space that might have to taken more seriously than for a traditional eCommerce business?

Edwina: From a technical perspective, there’s a few key things that we keep front and centre. So the first is usability, our offering, or the very essence of our businesses powered by 10,000 volunteers. We need to make sure that whatever we’re asking them to use or interact with is easy. At the moment, we’ve got over 180 stores enlisting into our eCommerce site. That’s been really key for us in terms of making sure that any back end systems are easy things, such as dispatch. We look at how we actually make that ecosystem and make the way that our team interacts with those technologies as easy as possible.

Probably the second thing is identifying the technologies that allow us to scale quickly, and allow us to enhance quickly. Kirsten spoke before about consumer expectations and they shift so quickly. You watch what a customer expected last week and stuff will really shift over a really short period of time in terms of removing friction points and making things easy for them. Customers are expecting items delivered within windows of an hour to three hours. 

Kirsten: Fitting into those expectations is key. That’s why we had to build custom so we could plug into those third party solutions and make sure that this unique marketplace that we built was still serving what the customer expects. Because if it’s not easy, they’re just not going to consume and we’re not going to have the traction that we need to have and the planet needs to have. Looking at what your customer ultimately wants and making it easy for them to consume sustainably will be the big factor in the growth of the circular economy. That’s why fast fashion is still here because they give the customer what they want: affordability, something new, something quick, and any payment solution that customer wants. That’s where we need to come in from a circular economy point of view. We need some real innovation to satisfy those expectations but from a completely different angle. 

Adrian: To wrap up, what would be your top tips for business trying to get involved in recommerce? And for both of you, if you could go back in time before diving into recommerce and give yourself one piece of advice, what would that be?

Kirsten: If I could go back, I would say to back myself a bit earlier, get some confidence and go after this a bit sooner, solve a global problem earlier. If we’re talking to businesses, and they’re looking to get into recommerce, I would definitely speak to your customers and understand the journey of that product that you’re selling to them and understand what they want to do with it. Then figure out how you can make it easy for them to keep it circulating. Then prioritise those options based on impact, cost and ease.

Maybe surround yourself with people that have done it or speak to people that are in recommerce already, and what they’re seeing from their customers. For example, we learn a lot about our customers and why they buy and where they buy, and then how many times they rent.

Edwina: If I had my time again, it would just be get just get started, it doesn’t have to be perfect, just start somewhere. That has probably been the gift of COVID. Prior to COVID we were thinking about doing full architecture, investigations and really looking at how to build our eCommerce and there were so many steps and processes to go through. Luckily, we had started that work, but I think what COVID made us realise we had to accelerate, so we just kind of did it. 

For businesses, Kirsten really nailed it in terms of really developing a solution for your customer. Really find what your customer is looking for. And really think about the solution that will serve them. Once you’ve got that answered, look at how you go about that. So look at how you may partner to go through that, or how you would bring that to life for your customer, that doesn’t necessarily disrupt the other part of your business model. 

It’s important for businesses to keep the DNA of who they are and shift in line with with their customers’ expectations. Remember, customer is king. Customers still expect a great experience and customer service and that human connection. If you’re doing what’s right for your customer, then you’re in a winning situation.