A circular economy is a business model that aims to minimize waste by reusing, repairing, refurbishing, and recycling products, materials, and resources, unlike the traditional linear economy, which follows the “take, make, dispose” model. Through this the life cycle is maximized, reducing environmental impact and helping create a sustainable economy. For example, digital platforms like Uber allow people to share resources, such as cars, instead of purchasing new ones. This decreases the need for new products and supports the reutilization of current resources.

A circular economy is beneficial to the planet as it reduces the use of non-renewable resources and reduces waste, resulting in lower carbon emissions. Besides the environmental advantage, the circular economy is characterized by increased traffic, with customers being increasingly drawn to stores that offer drop-off points for their pre-loved items. It’s also exemplified by its reduced return rates and upsell and cross-sell opportunities. By extending the lifespan of products through resale or refurbishment, retailers can significantly lower the number of returns, cutting down on waste and saving money. When customers bring in products for resale or recycling, retailers can seize the opportunity to upsell new items or cross-sell complementary products, increasing revenue.

A challenge in the circular economy is consumer behavior. Encouraging consumers to transition from the traditional linear economy to adopting circular practices like reusing, repairing, and recycling can be difficult. However, this can be counteracted by brands presenting certain services. Businesses can make circular economy options more convenient by offering easy access to repair services, recycling options, and more to persuade customers to make an eco-friendly impact.