How Businesses are building newly profitable business models, from your old stuff
Walk through any city district, and eventually your eyes will catch it. You’ll look on in awe, as you see racks of refurbished clothing and used shoes packed neatly into Nike’s refurbished stores, available for far cheaper than initially bought, in near the same condition you would find them new. You could cross the street and see Apple’s refurbished outlet, with stacks of like-new computers on sale for hundreds of dollars less than retail, because someone opened them before. This is an irrefutable sign that the times are changing, and businesses are finally opening their horizons to the many financially and environmentally fulfilling opportunities found in the secondary market.
Online marketplaces like Poshmark, a fashion resale site, are booming like never before, seeing an average of 67% growth in orders in 2019 compared to the year before. Reuse and repurposing of materials are not only becoming a hotly demanded value proposition for customers but is increasingly a major way for the top 5% of disruptors and market leaders to turn major cost centers into consistent revenue streams.
Just a few years ago, most consumers had wildly different attitudes about reused goods than today. The like-new Patagonia jacket carried a dirty, unsanitary, and quite different stigma than today. Now, rising environmental concerns have pushed this trend to the front of popular culture, and reusing goods is touted as a popular, more ethical, even luxurious approach to buying. Various big companies, from Nike sportswear to Apple’s phones, are announcing similar public, groundbreaking efforts to capture consumer interest.
For the trendsetters, the circular economy is the best kind of business. Companies like Apple and Patagonia have been able to turn waste into a strength, increasing profit while decreasing inventory management costs and backing their trendy environmental-first marketing. For example, Patagonia’s Worn Wear campaign repurposes returned goods, which were initially a cost center for them, into the raw materials of the next generation of apparel. Established marketplaces such as Ebay who typically captured all of the revenues from secondary markets are still growing rapidly, seeing active user base growth of 97.5 million new users, approximately a 100% increase, since 2010. Larger, more innovative retailers have put their own spin on building markets for used goods, to minimize wastefulness and increase profits.
As brought up earlier, Apple has their own “Refurbished” site, where they capture revenue on warrantied and inspected computers that were originally a cost — like the recent flux of Intel Macbook Pros that were returned after Apple’s launch of their newest versions with their own custom chips. Initially, these computers would have been a hassle to deal with, and difficult to dispose of as everyone wants the newest computer. The computers would otherwise have gone to waste, or auctioned off in other markets to random, inconsistent amounts of buyers. However, now with the refurbished program, Apple is able to repurpose this inventory and capture revenues that would have normally gone to waste.
For major consumers, the impact of this change is big. The average person can expect lower prices for the same quality of goods, longer return policies and more stock so that shortages occur less often. This leads to happier customers, a happier earth with reduced e-waste, and happier businesses with wider profit margins and lower management costs. See a new Apple product that you can’t quite afford? Look into the refurbished inventories, and buy at a reduced cost with a larger exchange frame! Need a new Patagonia, but just don’t want to spend over $200 for a jacket? Check out Patagonia’s Worn Wear site! Buyers previously priced out of the market entirely can now buy manufacturer-approved used inventory! While manufacturers may worry about refurbished goods taking away from new sales, in reality, the costs saved by selling away excess inventory more than make up for this discrepancy, and allow for more consumers to buy in. There’s little to no visible downside to this model, and it looks to be the future for many of the major influencers in the industry.
Being a first-mover in this environmental transition has significant advantages, as it garners extra attention to the business in the press while increasing the amount of trend-setting eco-friendly buyers interested in purchasing a product. Apple has found increased profits and free publicity from its transition, touting itself as the environmental leader in the tech industry. Patagonia has raised profits, selling more than 120,000 repurposed goods that would otherwise have gone to waste. Among tech giants and thrifty teenagers, it seems market sentiment surrounding re-used goods will continue to grow positively into the future.