Circular Economy: Can usership be the future of commerce?

Ownership is at the heart of commerce but in the wake of increasing prices, climate change, and new technologies, a sharing economy has opened up – and could create a more sustainable market philosophy.

What is a circular economy?

A circular economy aims at a more sustainable economy, from the supply chain to the market up to the longevity of its products. As such, its main principles are:

• durability (the product lasts longer)
• reuse (the product is not just for a one-time use)
• remanufacturing (the product can be rebuilt with old and new components for lesser waste)
• recycling (waste can be turned into new resources and materials for production, etc.)

Aside from the many aspects of a circular economy that cover the manufacturing and delivering of products (e.g., alternative resources, lower energy consumption, closer production centers, shorter delivery routes, etc.), the user-side is just as important to uphold the principles of the circular economy.

Whereas ownership has been a staple of the economy for decades if not centuries, the past years have shown an increase in business models that are more based on sharing goods and services.

Advantages & Example 

• to keep prices low,
• to increase the usage of otherwise “idle assets”,
• to shift individual responsibility for products to the vendor who suddenly has a much higher interest in the longevity of their products.

Example:

A car vendor usually does not need to make sure that their customers keep their new cars in good condition. In fact, if the customers are in need of a new car a few years after purchasing, it would even benefit the vendor’s business.    

The manager of a car sharing service, however, takes maintenance services over from the customer and has a much higher interest in the longevity of the fleet because the longer his cars can be used by his customers, the more he gets out of his initial investment in the cars.

Usership demands access

Usership has truly changed or at least expanded business models and opened up the market to new opportunities which could lead to long-lasting changes in the way we treat the product and usage lifecycle.

Especially retail has a huge impact on our carbon footprint from packaging waste to shorter “trend” cycles and concepts such as “fast fashion” and “planned obsolescence” which basically incorporate waste-for-profit into business models by manufacturing products that are bound to have a shorter durability only to increase the need to purchase newer replacements. With companies making it more difficult for consumers to repair their own products, waste has increased over the years.

According to Business Insider, fast fashion is responsible for a whopping 10% of all carbon emissions globally with 85% of all textiles being thrown away.

Sharing is caring

In contrast to these wasteful trends, the circular economy as well as the focus on usership instead of ownership aim to shift the consumer’s perspective of why they even buy products in the first place: to use them.

Ownership is mainly needed to guarantee access when the product is needed. But if business models allow for reliable access and add options and choices to the offer, users could gain a lot more through sharing many different products and services instead of owning them.

A great example is the Danish Wardrobe Collective, which supports the sharing of clothing items. The collective is responsible for the logistics and the management of local stores in Denmark, and they provide an app to see store locations as well as manage the member profile. Members pay a monthly fee to access these stores where they hand in their “old” clothes to gain points which they can then use to pick “new” clothes from any of the available stores.

Subscriptions enable sharing

Subscription-based business models are at the heart of usership whether users pay a monthly fee to gain access to a resource (and often additional services) or keep a free account to pay only when they use a product (e.g., car sharing, Airbnb).

Even subscription models that don’t feature physical products can decrease the carbon footprint. For example, cloud-based services initially started out when companies such as Amazon realized that they could simply “rent out” their unused servers via the cloud. That way, the energy consumption of these servers was not wasted, and other companies didn’t need to maintain their own servers.

In any case, subscriptions usually not only allow access to the product or service itself. In many cases, they gain access to a community, to further support and information, and their own interactions and feedback can even directly impact the development of the products and services itself.

For example, Billwerk+ closely listens to its users when it comes to the product roadmaps and the prioritization of planned features. The more users ask for a specific feature, the higher it goes up the priority list (as long as it fits the product scope). The marketing automation platform HubSpot works similarly with their community page where users can openly request features which can be upvoted by other users to show interest.

Usership, and in relation subscription membership, is therefore not just a shift away from product ownership but also towards a more engaged communication with a business – if done well. As such, it offers a symbiotic relationship that is – just like its core philosophy – circular.

Read in our newest Subscription Industry Report: From Ownership to Usership – The Rise of Circular Economy in Europe, how you can align your subscription business model with circular principles.