Consumers are changing how and what they buy. They are reassessing whether they need to own possessions, either by sharing or more consciously deciding which items to purchase based on their environmental credentials. In this thought piece, I will discuss the circular economy and the sharing economy and pose a series of questions for brand managers, innovations and product developers.
The Circular Economy
In the past, most companies worked on a model of design, take, make and dispose. Once the product had left the shop, it was not the concern of the retailer, manufacturer or designer what the consumer did with it. Chances are once the consumer was fed up with the product, it was thrown away. Of course some people have always tried to find a secondary purpose for old things, or donated some items to charity shops, but landfill was the end result for most unwanted items. Increasing numbers of consumers are concerned with lowering their role in this disposable culture. Brands risk consumers buying less, or choosing to buy differently, for example buying veg boxes from local delivery supplies rather than plastic-wrapped supermarket vegetables, or buying fewer but more expensive items of clothing based on their sustainability credentials. There is now a small but significant cultural shift taking place as small start-ups and some global megabrands are considering how to engage with the circular economy. This is driven by consumer demand, concern not to be waster-creators, and economic drivers. Global companies, from Coca Cola to H&M to Heineken, are making plans to close the loop and address their environmental impacts. There are many innovation opportunities for start-ups in this area.
The circular economy goes beyond recycling items at the end of their life. It considers how an item is made, used and recycled during the entire value chain of the product. Engaging in the circular economy may encourage consumers to purchase more new things, rather than abstain from consumption. H&M launched a ‘conscious collection’ in 2013. One of their areas of focus is using new, recycled materials to make new products, for example: waste and cut off wool are used in outdoor garments; recycled glass is used for art deco embroidery; and denimite, a solid, marbled material derived from recycled worn-out denim is used for gemstones in accessories. The denim is shredded, resin is added, heated and then pressed to become hard. They reward consumers with a £5 voucher to use in store in exchange for a bag full of used clothing. At the other end of the spectrum, Northern Monk, a craft microbrewery, made a limited edition beer named ‘Wasted’ using supermarket waste croissants, brioche and pears. In turn, their used hops went to farms and allotments, and the used grain went to a worm farm. The beer was popular; all 1,800 bottles sold in a week.
Embracing the circular economy may encourage consumers to pay more because they know that the product has been made in an ethical way or may last longer. It provides an opportunity for companies to reconnect with previous customers as they ‘return’ broken items and indicate that they’re back in the market for something new or to fix their beloved old item. If you have a broken Maglite, you can post the torch back to the company and as well as disposing it, they will also replace it at a discount. Another sub trend is accepting produce that would have been rejected previously, by either consumers or the retailers. As consumers learn about the huge wastage caused by supermarkets only selecting ‘perfect’ looking vegetables, some are beginning to accept ‘ugly’ vegetables. Morrisons supermarket, for example, now sell a ‘wonky’ vegetable range.
I think the circular economy provides enormous opportunities for innovators, as even the humble beer bottle or the pair of jeans is re-examined. Is your brand thinking about and addressing, the following questions?
- What is your product and its packaging made from and from where you select materials?
- Is your packaging necessary? Of course some packaging is useful for aesthetics and protection, but do you provide superfluous packaging to demonstrate the premium-qualities of your product or brand?
- Are you planning which suppliers to work with based on their own environmental credentials? Do you know what they do with their waste?
- Can your product or its materials be reused for another product?
- Are you demonstrating (on your website, or on social media channels or via influencers and bloggers) how your product or its packaging can be reused for another purpose?
- Is your product made using the resources of a previous product? Should you be promoting this?
- Is your product designed to last? Could it ‘go off’ before the consumer has had chance to use it? Do you design planned obsolescence?
- Are you showing the consumer how they can use up leftovers or waste from their product?
- Could you be communicating about ways to recycle waste you have created?
The Sharing Economy
Concern for the environment, micro-living (see my last blog) and online platforms have paved the way for the sharing economy also.
The Sharing Economy is based on the idea of access rather than ownership. Many consumers have items in our lives that we only need occasionally. Extra glasses for the once-a year Christmas party? A car with a boot large enough to take garden waste to the tip that you struggle to park on your street? A drill stored away for the rare time you need to break out your DIY skills? Rather than finding room for all of these items, which many people no longer have (see my recent blog on decluttering), having shared access allows consumers to use items only when they are needed. The sharing economy is particularly relevant in a society where some people (often older) have a lot of resources, and others have far fewer. Online platforms, notably sites such as Airbnb, but also Library of Things, or pley.com (kids toys) facilitate such sharing for profit. Truly successful sharing platforms adopt brand narratives and communications campaigns that resonate deeply with the target consumer group. Airbnb does not simply suggest people should share their empty bedrooms because it’s unselfish or because you can earn a little extra. Their narrative invokes ideas of authentic exploration of locations and unique experiences.
Innovation of this kind is not just relevant to tech entrepreneurs; established brands have a role to play too. Uber and Didi Chuxing have been challenging the traditional taxi market for some time, but now automotive car companies are increasingly concerned about whether consumers will need to continue to own cars. In the past, owning a car was a rite of passage for a young adult. In recent years, car ownership amongst 18-34 has declined. BMW and Nissan are investing in car share schemes. Volvo are also investing in peer-to-peer car sharing and last week Volvo CEO Håken Samuelsson said that in the future, the most popular form of car usage is likely to be short-term rental. Such an insight into future car driving might radically change how cars are designed and sold. For example, such a scenario has a role for the digital car key which is location and time-specific, so that the car can be locked by one user, and doesn’t have to be collected by the second user. Instead each user is sent access to the vehicle via their smartphone for the duration of their car driving experience.
The sharing economy presents a real risk for existing brand categories as fewer items need to be purchased. Does your product risk being wiped out by a new sharing opportunity? Are you innovating to keep category challengers at bay? For the long-term success of your product, service or brand, you need to be considering the following questions:
- What type of service are you offering? Is this service adaptable to the sharing economy?
- Are you offering an experience around your product or service that is specific to your consumers’ location?
- Does your brand resonate deeply with your consumers?
- Does your product sit idly (and therefore could have more than one user)?
- Does your product have a waste element that can be eliminated by sharing – for example do you need all the seats in your car?
- Could you become a conduit to sharing, rather than allowing a secondary market to develop and challenge your established market?
- How can you generate excitement around sharing through a fun narrative that doesn’t just assert that sharing is unselfish or the right thing to do?
Of course, I believe that to address the issues that the circular economy and the sharing economy raises – changing consumption and attitudes towards ‘stuff’ – it is essential that we as brand managers, innovation experts and insight specialists, better understand people, and find ways to connect deeply with them – not only as consumers interested in purchasing, but also as community members and world citizens with plural concerns and identities. This can lead to radical new innovations and new ways to engage with our existing, everyday products.
If you want to think more about this, we have a think piece coming out as part of our series Peak Stuff: Pragmatism or Puritanism?