The circular supply chains of the future

Why brands should rethink their supply chain and own their resale markets

Three sustainability pioneers took the attendees at NRF 2020 Vision: Retail’s Big Show on a journey through some impressive closed-loop supply chain business models on Monday.

“This session is probably the one I am most excited about. In every conversation, the word sustainability comes up,” said PSFK Founder Piers Fawkes. “We hear it on the stages, we hear it in the corridors, we hear it on the floor. But I don’t think many of us really know how to leverage it, how to really use it. What do we do with all these products? How do we return these products? What happens then?”

Everything can be recycled, it’s just a question of whether it’s profitable to do so.

Tom Szaky, TerraCycle

TerraCycle CEO Tom Szaky has the answers. TerraCycle’s new Loop initiative is a circular shopping platform that lets consumers shop online for household goods in durable, reusable packaging that can later be picked up, refilled and redelivered.

Loop has allowed leading CPG brands including Tide, Häagen-Dazs and Clorox to eliminate single-use packaging, replacing it with reusable, recycled materials such as stainless steel and reengineered plastic. In addition, stores such as Carrefour in France and Kroger and Walgreens in the United States are stocking Loop packaged items.

“Everything can be recycled, it’s just a question of whether it’s profitable to do so,” Szaky said. “An infinitely durable item is infinitely profitable.”

Accommodating the desires of eco-minded consumers has also presented exciting new business opportunities for brands like Patagonia. “Historically these circular supply chains and business models used to be a competitive edge for brands like Patagonia, but going forward, I firmly believe that they are going to be a means for companies, brands and retailers to survive,” said Patagonia’s Head of Corporate Development Phil Graves.

Repairing, reselling, upcycling and recycling has been part of the outdoor retailer’s business model since the 1970s; Patagonia has 70 global repair centers that fix more than 100,000 items every year.

In 2017, Patagonia went all in on re-commerce and launched the Worn Wear resell business unit. Customers can take Patagonia items to a store or mail it in and receive a gift card for the item. The item is then handed off to logistics and technology startup Yerdle, where it is inspected, cleaned, photographed, stocked in inventory and posted for sale online. “Since 2017, we have kept more than 130,000 used items in play and given them a second life,” Graves said. “As a brand, we love that we get to control the entire customer experience and ensure that it is top notch.”

That brand control is an important component in re-commerce, noted Yerdle CEO Andy Ruben. “Because third-party marketplaces buy these products back from all of us, we’re in a moment where there is no longer brand control of how the products are showing up in the world,” Ruben said. “It’s why I’m increasingly convinced that brands and retailers must own their re-commerce. They must have control of their experience.”

Branded re-commerce is certainly working for Patagonia: The Worn Wear business unit has had 40 percent growth in revenue and profitability since it launched, Graves said, and has attracted customers that are on average 10 years younger than the typical Patagonia customer. To build on that momentum, Patagonia launched its first Worn Wear pop-up store in Boulder, Colo., in November and created a new line of products made from clothing that was beyond repair, the ReCrafted Collection. “Buying used is in,” Graves concluded.

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