The Great Retail Rodeo
Can Circular Economy Companies Keep Up with Changing Tides?
In the ever-changing retail landscape, the confluence of technology, shifting consumer preferences, and an emphasis on sustainability have reshaped how we shop. Millennials and Gen Z, the new maestros of online spending, increasingly prefer sustainable practices and circular commerce. The pandemic transformed circular economy companies into market darlings, but now they face the Herculean task of growing their market while preserving their values. With changing interest rates and operating costs, this landscape presents a challenging obstacle course for businesses.
It’s a sign of the times when a fast fashion champion like H&M expands its resale platform into the US market and fast fashion brands like Zara and Shein follow suit. You know circular consumption has become the trend du jour. Despite past accusations of greenwashing, H&M seeks to seize the opportunity created by sustainability-driven US consumers. But the retail giant must jockey for position against other brands in the resale arena because they need to continue winning their key millennial consumer.
Millennial consumers fuel the growth of these platforms with their online spending habits, favoring secondhand stores that offer vintage treasures at a lower price. As sustainability becomes an increasingly important value prop, services like Urban Outfitters’ Nuuly emerge, providing eco-friendly alternatives in the retail sector. Nuuly, launched in 2019, boasts 150,000 subscribers and $130 million in sales, with plans to accommodate 600,000 subscribers and reach $1 billion in sales. As eco-conscious consumers reshape the retail sector, fast fashion brands scramble to launch resale operations. Retail behemoths like Target and H&M have joined forces with online thrift store ThredUp, demonstrating the increasing influence of environmental awareness on consumer preferences.
In this new retail reality, rental services are crucial in promoting a circular economy by reducing waste and encouraging reuse. Despite the apparent consumer demand for circular economy companies, questions remain about their long-term viability. Online rental services have experienced mixed results, with The RealReal implementing cost-cutting measures despite their past success. Nuuly’s optimistic sales projections are constantly questioned despite showcasing efficient gross due to low marketing spend. Indie resale platforms like Poshmark and Depop resort to gimmicks such as “Make Offer” and “Posh Shows” to expand their reach and maintain their curated appeal.
Skeptics doubt whether indie resale can truly scale, arguing that the unique, curated experience is at odds with the growth strategies of larger companies. These companies risk losing the personal touch that makes vintage shopping appealing to their target audience.
As in-person shopping experiences a resurgence, Gen Z and millennial habits continue to evolve, raising questions about the long-term success of circular economy companies. Different generational cohorts and the ever-present influence of social media and cultural moments further complicate the retail landscape. The fate of these businesses will ultimately depend on their ability to adapt and evolve in response to consumer preferences and market conditions.
In this retail rodeo, circular economy companies must ride the wave of changing habits and economic factors while maintaining their core values. While some may falter, others may find innovative ways to balance growth, sustainability, and customer satisfaction. As the retail landscape continues to shift, the companies that can stay on their bucking bronco may just come out on top, blazing a trail toward a more sustainable and circular future for the industry, or it might not scale and continue to be a status signal for millennials who are unwilling to give up their avocado toast.
