Marketplace Trends
June 2, 2022
This article was originally published in Navigating Commerce.
The concept of a circular economy has been gaining momentum in recent years as a way to minimize waste and optimize resource usage to combat climate change. And with an impressive projected global value of $4.5 trillion by 2030, it’s an emerging economic sector.
At its core, a circular economy is an economic system aimed at eliminating waste. It is characterized by closing the loop on product life cycles through reuse, recycling, and recovery, rather than following the traditional linear economy of ‘take, make, and dispose’.
A key player in this landscape is the platform-model ecommerce business—especially online marketplaces. These platforms, which connect buyers and sellers, offer unique opportunities for promoting reuse and recycling in a way that brick-and-mortar retailers simply can’t. This article explores how online marketplaces drive circularity, regulatory and compliance motives, and the five major types of circular platforms.
Marketplaces in the United States alone will account for approximately $385 billion in sales in 2023, exploding to over $600 billion in 2027. It’s no stretch to say that online marketplaces have fundamentally transformed the way people buy and sell goods. They have also democratized commerce and created a platform for the exchange of used goods. This model is inherently conducive to the circular economy.
By facilitating the buying and selling of pre-owned items, online marketplaces extend the lifecycle of products, reduce the demand for new goods, and minimize waste. This means less production, less extraction of raw materials, and less energy used in manufacturing–all of which contribute to the reduction of carbon emissions and environmental impacts.
Online marketplaces also serve as platforms for complying with regulatory measures that promote a circular economy. For example, the European Union’s Circular Economy Action Plan mandates increased product durability, reparability, and recyclability, along with waste reduction. Online marketplaces can play a crucial role in meeting these requirements by promoting the sale and purchase of used, repaired, and refurbished goods.
Additionally, online marketplaces can comply with Extended Producer Responsibility (EPR) regulations by enabling manufacturers to take back products at the end of their lifecycle for reuse or recycling.
There are five key types of circular platforms:
Each serves a unique role in fostering a more sustainable and efficient economy, redefining our understanding of value creation and resource optimization in an increasingly interconnected world.
As these platforms gain momentum with both sellers and buyers, network effects increase—resulting in a positive impact on business growth and the environment.
These platforms connect businesses to exchange surplus or waste materials that can be used as inputs for manufacturing other products. This reduces waste and keeps materials circulating in use. Examples include:
Online marketplaces for selling or giving away used consumer products help extend product lifecycles. Companies can partner with these marketplaces to resell returned or used products.
Examples include:
Companies can participate in sharing platforms for assets like cars, equipment, spaces, and more. This promotes efficient asset utilization and reduces idle capacity.
Examples include:
Companies can join a network of suppliers committed to circular practices like take-back programs, recycled inputs, waste reduction, and more. This amplifies sustainability efforts across supply chains.
Examples include:
Collaborating with other shippers on logistics optimization, backhauling, asset sharing, and more helps to reduce empty miles and carbon emissions. More partners increase efficiency and impact.
Examples include:
Research from Material Economics shows that circularity could reduce Europe’s industrial carbon dioxide emissions by 56% by 2050. It's clear that the potential benefits of embracing circular platforms are great. Widespread adoption will require vision, collaboration, and the audacity to rewrite old rules. But if we do, we will not only ensure the longevity of our businesses but also of our planet. The future is circular; let’s be the architects of its design.
Author bio: Peter Evans is the Chief Strategy Officer at McFadyen Digital & Tom Gaydos is the Chief Marketing Officer at McFadyen Digital. McFadyen Digital is the leading global marketplace strategy and implementation agency that creates award-winning online marketplace and ecommerce experiences for the world’s most prominent brands.
🔵 Subscribe to Nautical emails for marketplace insights directly to your inbox🔵