New business models
Lacy and Rutqvist describe 5 new business models:
- Circular input models. These are focused on producing goods through the use of renewable and/or biodegradable raw materials. Ultimately, this kind of goods will prove less expensive than things made out of traditional materials. Producers will find they are less reliant on the supply of materials from abroad. Online retailers can encourage the sales of these goods by adding “sustainability” to the selection criteria for searching their range.
- Waste value models. This kind of model deals with creating materials out of waste through recycling or upcycling. Recycling is the breaking down of the original material to then produce something new. Upcycling is reusing an object or its material without taking it apart first. Recycling tends to use more energy than upcycling does. Both methods will mainly be done by parties which create and produce large amounts of waste. Retailers can then ensure their old and used goods end up at these waste processors.
- Lifespan models. There are various ways to increase the lifespan of goods, including repair, upgrading or remanufacturing, or even simply re-selling them. Retailers have a part to play as facilitators by selling spare parts and providing extensive product information online about small repairs so that the end users can do those repairs themselves.
- Platform models. Here, there are ways to better utilize goods by sharing them, renting them out or re-selling. This is a particularly interesting means of making money for retailers who have an online platform already.
- Goods-as-services models. This is when the producer retains ownership of the goods and offers them to consumers as a service instead. Retailers facilitate in this model by entering into, or selling on, contracts with consumers, or by providing an environment for consumers to use such services.
Businesses will need to tap into their creativity if they are to develop new business models capable of reducing costs and providing added value to consumers.
The circular economy
McKinsey has estimated that a shift towards the circular economy can add 1 trillion dollars to the global economy in 2025. In Europe, the manufacturing industry can advantage of savings in (raw) materials, which could amount to 630 billion dollars in 2025. According to the action program Circular Economy 2020 Vision, the EU can benefit from an improved trade balance worth 90 million pounds.
New jobs will appear: brokers where consumers can get rid of their used goods, designers of products that are easy to disassemble, technicians who are able to repair durable goods or prepare them for reuse or disassembly, and administrators who can take stock of the raw materials. McKinsey believes there will be 100.000 new jobs in the United States and 160.000 in the EU in the next 5 years. There are serious numbers to take into account, which further emphasize the importance and potential of the circular economy.
Source: The End of Online Shopping: The future of retail in an always connected world