The need for sustainable practices in retail has never been more urgent. And shoppers agree. In fact, 63% of consumers actively seek out brands that have sustainability efforts putting increasing pressure on retailers to adopt a “circular” mindset. 

This article delves into the key aspects of circularity and sustainability including:

What is circularity in retail?

Circularity in retail signifies a shift away from the traditional linear “take-make-dispose” model towards a closed-loop system that prioritizes resource conservation, waste reduction, and environmental sustainability. This approach encompasses a range of strategies that aim to:

Reduce: Minimize the use of resources and materials in production, packaging, and operations
Reuse: Encourage the reuse of products, packaging, and materials through various channels
Resale / Recommerce: Resale of like-new, pre-owned, and gently-loved items
Recycle: Implement efficient and responsible recycling practices for end-of-life products and materials

Key Aspects of Circularity in Retail

Reducing Waste

Minimizing waste is a key focus for many retailers, brands and 3PLs—whether optimizing packaging, reducing single-use plastics, focusing on logistics processes, or leveraging best practices like “ships in own container” (SIOC).

Brands can also prioritize reusable and recyclable materials in product development. For example, On Running rolled out their Cyclon™ program where they develop products meant to be recycled. Similarly, renowned toymaker, LEGO, is also on a mission to use more sustainable materials for their bricks to reduce waste and environmental impact. 

Additionally, 3PLs and warehouse operators can extend the life of products through offering value-added services (VAS) like repair, refurbishment, and resale— giving longer lives to usable products and reducing waste.

Expanding Recommerce 

Recommerce, also known as resale or second-hand retail, is the practice of buying and selling gently-loved goods (whether like-new or pre-owned). Recommerce has grown significantly within the fashion retail sector, driven by a growing consumer interest in sustainability, affordability / price sensitivity, and unique finds. In fact, OfferUp found that the top three reasons consumers shop secondhand are to secure a good deal (78%), avoid higher prices due to inflation (58%), and maintain their desired lifestyle within budgetary constraints (34%).

Additionally, recommerce adds value to the circular economy, in that it keeps non-defective items from landfills which leads to higher greenhouse gas emissions, habitat destruction, and ineffective use of resources.

Recycling and Upcycling

Recycling and upcycling are essential to “closing the loop” on resources in retail, and in many cases, consumers are leading the charge. Nearly 40% of Gen Z & Millennials say they would spend more if the brand offered sustainable goods or services, meaning an investment in circularity can drive larger cart sizes and customer lifetime value (CLV).

And brands are actively investing in recycling programs. For example, Nike has a program called Reuse-A-Shoe, which collects old sneakers (any brand) and grinds them up to create new athletic surfaces. Adidas’ launched their Made-to-Be-Remade program which allows customers to return their old Adidas shoes to be recycled into new products.

Legislation Encouraging Circularity: Introducing ACT

While fast fashion is a popular trend in the United States, it also comes with a cost. “The Fashion industry is responsible for up to 10% of global carbon emissions¹, consumes 1.35% of global oil production³⁰, and results in the excess of billions of garments that end up in landfills or incinerators.”  The only way to move the industry towards sustainable circular business models is by introducing intentional policy, like the recent American Circular Textiles Act.

What is the American Circular Textiles (ACT) Legislation?

The American Circular Textiles (ACT) Act is a circular fashion initiative and a proposed bill in the United States that aims to incentivize the recycling and upcycling of textile waste. Introduced in June 2023 by Senator Tammy Duckworth, the ACT aims to lessen the textile industry’s environmental impact. Its goals include:

  • Reduce textile waste by 25% by 2027 and 60% by 2032.
  • Invest in domestic textile recycling and production
  • Create jobs
  • Achieve a “circular economy” for textiles

What does ACT mean for retailers and brands?

Overall, the ACT is a significant step toward a more sustainable and circular economy for fashion and apparel in the United States. It has the potential to decrease the environmental impact of the textile industry, create jobs, and improve the overall health of the economy. While the bill is still in its early stages, it has garnered support from a variety of brands and organizations and is expected to receive further consideration in the coming months.

Brands with Inspiring Circularity Initiatives

As awareness of our footprint on the world continues to expand, more retailers, brands, and recommerce vendors are investing in programs that promote circularity. A few noteworthy examples include:

  • Nike’s “Move to Zero” refurbished program where shoppers can find stores that sell refurbished shoes, preventing non-defective shoes from ending up in landfills.
  • Steve Madden’s “Re-booted” program where shoppers can buy and sell pre-loved Steve Madden shoes, accessories, & apparel.
  • On Running’s Onward initiative where runners can trade in and shop gently used premium gear, and their Cyclon™ program where they sell products meant to be recycled
  • Patagonia, a pioneer in sustainability, has a Worn Wear program encouraging customers to repair, reuse, and recycle their Patagonia clothing. They offer repair services, buy back used Patagonia items, and even sell “Worn Wear” products made from recycled materials.
  • LEGO’s Replay initiative enables families to pass LEGO bricks to children in need of play. 
  • H&M’s Garment Collecting Initiative to “Close the Loop”: The company encourages customers to return unwanted clothing for recycling or reuse, offering vouchers as incentives.
  • Levi’s SecondHand where shoppers can buy pre-loved items directly from Levi’s website 

How Returns Drive Circularity

For many retailers, brands, and 3PLs, returns can be a sustainability nightmare. Outbound fulfillment involves new inventory— while returns can be in a variety of conditions and need to be validated before resale. 

First and foremost, operators and associates need a simple, systematic way to assess the condition of a return. Since most point of sale (POS) and warehouse management systems (WMS) weren’t made for returns, the “test and grade” process is often error-prone without a returns management system (RMS). An RMS is purpose built to easily enable associates to objectively assess the condition of an item.

Once an item is deemed as resalable or in reusable condition, the next hurdle is to quickly disposition the item to the next-best channel (i.e. the resale channel that will yield the highest margin for the retailer with the minimal impact on the environment). This requires a SmartDisposition® engine with machine learning that eliminates the need for subjective decision-making.

Next, retailers and brands should leverage pre-built workflows and connectors in an RMS to secondary sales channels. Optoro’s RMS, for example, has configurable workflows to recommerce vendors like Trove, Rebelstork, Arrive, and Recurate — enabling retailers and brands to efficiently identify resalable inventory and instantly route inventory it to its next-best home, also avoiding backlogs in the store/warehouse and preventing goods from going to landfills.

By leveraging Optoro, a popular multibrand retailer was able to seamlessly route resalable baby gear to the recommerce vendor, Rebelstork, and experienced a 35% increase in financial recovery and $1M+ from net-new revenue stream in 2 months, all while keeping non-defective products out of the landfill.

Learn more about Optoro’s Returns Processing Software and how it powers circularity

Conclusion

Circular practices are key to a sustainable retail future. Legislation like ACT and initiatives by brands and technology providers all contribute to a more responsible and environmentally conscious world. By embracing circularity, we can create a win-win for the environment and the economy.

Read Optoro’s 2023 Impact Report to see how returns impact circularity, and our effort to enable sustainability

Natalie Walkley

Vice President, Marketing

Natalie has spent the last 15 years in marketing, with the last 7 years in supply chain technology for retailers and 3PLs. When she’s not geeking out about ecommerce news, she may be supporting brands through retail therapy. Natalie lives in the music capital of the world (Nashville, TN) with her husband and three children.

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