"In an economy where buying and holding is no longer valued, how do you get people to shop? Give them an easy way to replace what they have with what they want."
Strategic sustainability campaigns enable retailers to meet customer needs while driving sales, engagement, and increased brand loyalty. Customers know they have options when it comes to buying products as well as disposing of them. They are looking to retailers to make this easier and to help them transition to their next item. This is true for fashion and home retailers of all sizes.
In this post we'll cover how retailers can use strategic sustainability to encourage shoppers to replace the items they bought yesterday with things they want today. We'll include an explanation as to why providing personalized and sustainable offers are important, how to implement and measure the effectiveness of these programs, and offer suggestions for designing these campaigns.
Strategic sustainability is the design and delivery of socially and environmentally beneficial business processes that also drive profitability.
It used to be that customers would buy items and use them until they wore out or were no longer usable. Today, customer utility is often shorter than item utility. Customers become bored with the items they've purchased, or find these items no longer fit their lifestyle, yet the items are often still in usable condition.
Vehicles are one example of these types of items. Customers are often ready to buy a car with different features long before their existing vehicle stops working. For most customers, holding onto their old car once they buy a new one doesn't make sense. They don't have the room to park many cars and there is an associated carrying cost, so they trade in or sell their old vehicle. For some models, it can drive as much as 75 percent of new vehicle sales.
This is also common with electronics. Throwing old electronics in the trash when they're no longer of use doesn't make sense. Often parties can be found who value the old technology enough to pay something to take it off your hands - and if not, many organizations repurpose old technology into parts or learning tools today. For instance, Apples offers a robust trade-in program for iPhones. In a recent investor report Apple states their desire to increase this program as it "places them in the center of the customer relationship".
Fashion retailers have traditionally viewed sustainability in terms of sourcing, for example, buying items that are made from ecologically favorable materials, or from socially responsible producers. But they have been slower to recognize the value of participating in the end of life process for their items sold. The mindset has largely been that once the sale has been made, the item is forgotten, and all emphasis is on getting the customer to buy something new.
This is an outdated mindset. It has resulted in this inauthentic dialogue between customer and retailer where the retailer relies on a one-way message of "buy more, buy more", offering the same old sales and discounts and then expressing frustration that customers price shop. It's become expected that 75 percent of customers retailers acquire will never return.
In an era of heightened competitiveness, the value of retention cannot be ignored. By increasing customer retention rates 5 percent, retailers have the opportunity to increase profits more than 25 percent, according to a report from Bain & Company. The key to driving this increase in spending and loyalty is a combination of clienteling and technology. Both of these are achieved through Rohvi's platform.
Rohvi has developed a way for fashion retailers to better serve their customers, the environment, and themselves by using recommerce as an acquisition and retention sales tool. It is strategic, sustainable, data-driven, and profitable. With Rohvi, retailers use past sales data to generate unique trade-in offers. They invite customers to exchange previously purchased items for a fixed amount of store credit. The customers accepts the offer online. In addition to offer generation, Rohvi providers retailers item routing, reporting, and access to fulfillment capabilities. Customer ownership and data remains the property of the retailer using the Rohvi platform.
In the early 2000's, companies appointed eBusiness managers to handle all things Internet related. It was perceived that this new digital channel was a niche opportunity. Before long, not only did web related commerce gain equal strength to traditional channels, for many retailers, it eclipsed it.
Sustainability and recommerce is experiencing a similar movement today. Once relegated to the fringe of corporate concerns, sustainability and recommerce are mainstream considerations.
Let's define these terms no frequently found in headlines...
By ignoring the growth of the resale market, retailers are missing out. The resale market today is worth $24 billion and is expected to double in less than 5 years. Retailers have something that the resale market doesn’t have – they know what their customers purchased and when. They can use this to their advantage.
The benefits of strategic sustainability are many. They include:
Consumers are open to having more than just a transactional relationship with retailers. Cognizant, an IT consultancy wrote in a recent whitepaper, “Retailers that will thrive and prosper in the digital economy will be those that think beyond the products they sell to providing hyper-personalized shopping experiences that surprise and delight the consumer at each interaction, regardless of channel or touchpoint. With an increasing focus on convenience, community, curation and immersion, these retail experiences will become synonymous with the retailer’s differentiated brand promise and, therefore, core to building consumer loyalty and advocacy”.
Personalization can be a catalyst for deepening customer engagement. It can cut through the noise of irrelevant offers and the repetitiveness of sale and discount messaging. Consumers would much rather hear something relevant than waste their time on messages that don’t matter to them. As such, 61% of American consumers say that they are willing to share data with a company if it means that the messages they receive from them are customized. More and more, this desire for personalized communications is becoming a purchasing determinant. Research shows that more than half of consumers are somewhat likely to switch brands if a company doesn’t make an effort to personalize their communications to them.
There are some cons associated with strategic sustainability.
While it’s easier to stay the course and keep doing what you’re doing, retail trends are saying loud and clear that that’s not working for most retailers. Consumer needs have changed as have retailer capabilities.
Strategic sustainability is one way to meet these consumer changes head on in a retailer positive way.
Sustainability is a buzzword that can mean a lot or very little. For some retailers it is merely a marketing slogan. For others, it is fundamental to who they are. Most retailers exist somewhere in the middle. As do many consumers. But it is increasingly important for Millennials and Gen Z who proactively consider a company’s environmental impact when making purchasing decisions. Seventy-two percent of consumers say they prefer to buy from environmentally friendly brands – a fifteen-point increase in the past five years.
There are several types of sustainable trade-in programs today.
When it comes to personalized sustainability, three industries have been leading the way:
Rohvi’s retailer trade-in platform offers personalized sustainability to all retailers. It embraces commitment-free ownership without impacting the upfront buying experience. Customers shop as they normally would and receive offers from the retailer in subsequent seasons to exchange the item purchased for store credit. Customers get all of the benefits of ownership, with an option to hand it back in the future. Retailers control what offers are extended, when, and to whom, so they are viewed as invitations rather than requirements.
While these are examples of approaches that are both sustainable and strategic, there are sustainable efforts that are not strategic.
Introducing customers to a branded resale site creates a different set of issues for retailers. Customers are now handed over to a two-sided marketplace. The Real Real and ThredUp, for example, are looking for both sellers and buyers. Once a customer interacts with one of these online resale marketplaces, they become their customers too. Sellers are actively marketed to as buyers. The growing popularity of these online resellers has put them under significant pressure to attract shoppers. With these partnerships, retailers are handing over more than just customers – they are giving competitor marketplaces valuable data. As these sites deepen relationships with retailer customers, they learn what other brands they buy, how long they use their items, etc. This information is valuable to the original brand partner.
Fashion. Home goods. Furniture. Sporting goods. All of these retailers have seen a new level of saturation and the simultaneous development of external resale ecosystems. Mixing designer and mainstream items in homes décor and fashion has been practiced by consumers for many years. Now, the practice has extended to a mixing of new and used items. Searching for “vintage” or used items gives consumers the opportunity to be unique and show off one of kind style. The desire to buy new items is still strong. It’s just that consumers have expanded the definition of “new” to mean not just “unused” but “new to me”.
The visibility of a “used” marketplace for these items has awakened the realization in consumers that the items they are currently holding onto have value. Just as trading in a vehicle or a phone is seen as a smart financial and environmental choice, other retail recommerce is now viewed the same way. Forty percent of fashion shoppers now consider resale value before they purchase a fashion item. This mindset of shopping as “investing” in something that can provide returns beyond personal utility has become a part of the Millennial / Gen Z shopping experience.
With this in mind, these are the five themes retailers should be concerned with as they construct a strategic sustainability plan:
For strategic sustainability to work, you have to know yourself as a retailer and know your customers.
These questions can help you assess what type of strategic sustainability process is right for you and for your customers.
Scarpa, a mid-tier luxury fashion retailer, has embraced strategic sustainability. Scarpa has partnered with Rohvi to run trade-in campaigns. Using sales data, Rohvi generates personalized offers for Scarpa that are unique for each customer. Customers receive invitations to exchange a specific item they have purchased in the past for a fixed amount of store credit.
Customers appreciate the simple process and knowing the offer amount upfront. Because the offers are personalized to each individual, the engagement with these emails is double Scarpa's average email open rate.
Most significantly, Scarpa is able to maintain ownership over their customer and the related data. They can see what customers choose to exchange and how long they own their items before they are ready to swap them for something else. This proved valuable when numerous customers returned the same shoe, noting that the straps never loosened and remained too uncomfortable to wear regularly.
The data generated by these transactions also informs future pricing decisions. For example, if after 3 years of ownership customers are not willing to exchange an item for 25 percent of its original value, it indicates a potential pricing and discount floor for similar items. Retailers get a real-time estimation of resale value of past - and current - items.
Repurchase behavior differs when customers are using Rohvi-generated incentives. Customers given a 20 percent off coupon seek the best deal. Their mindset is that of wanting to get the best bargain possible. Rohvi offers engender a different mindset. Because customers have to relinquish an item to get the store credit, they have some skin in the game for the transaction. Plus, the retailer has created a "hole" in their closet; an empty hanger looking to be filled. The mindset shifts to an "upgrade" rather than an "add". Customers choose to use their trade-in incentive to get something that is better than what they gave up. The result is higher spend and higher volume at time of repurchase.
Coupled with the the convenience and the certainty of the transaction, Scarpa is spending less per incentive than they do with a 20 percent off coupon and are getting higher repurchase ROI. Moreover, these incentives are targeted so they support overall customer value and can be leveraged to drive specific customer purchase and product sales strategies.
Strategic sustainability works because it aligns value, process, and messaging for the benefit of both the retailer and the consumer.
It is time for retail brands to get in the game. Brands and retailers have invested in building brand equity. Now other sites and brands are profiting from this long-term value. A majority of retail execs have said they want to engage with the circular economy in some way. As retail insiders have commented to Rohvi, “We know that recommerce is a problem. We just don’t know what to do about it.”
Resale and the circular economy does not have to be a problem. It can be the solution. It can be a significant brand interaction point. And a way to deepen customer relationships.
The circular economy is good for the environment. And it is good for customers. Now it can be good for brands and retailers too.
Contact us to learn more about how retailers and brands of all sizes in fashion, furniture, homewares, and sporting goods are making strategic sustainability work for them.