What role for brands in a ‘circular economy’?

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The circular economy takes the relationship between a brand and its customers a step further than before.

Five years ago, I paid a woman in her mid-twenties to show me the contents of her wardrobe – for professional purposes of course!

Among the 200 or so items she showed me were a pair of high gloss leggings from a high street store. She had bought them on a Saturday afternoon around a month beforehand to wear to a party that evening. She hadn’t worn them since and only planned to wear them one more time – at most – as the leggings had already lost a substantial amount of their gloss in a single wash. She imagined after a second wash they may no longer be glossy at all and would only be good for the bin.

Not a recycling bin. Not a charity shop donation. The bin in her kitchen.

I asked if perhaps instead she might consider recycling the leggings or donating them to charity. Her response was as stupefied as it was swift: “Who would want leggings that aren’t glossy?” I didn’t press the point any further.

We often hear the opposite story: that as a society we are far more motivated than previous generations to consider the social and environmental consequences of our consumption habits. David Attenborough’s rallying cry against ocean plastic on Blue Planet II last year spurred a popular (media) backlash against single use plastics – particularly plastic straws, which have since been banned by the Queen, McDonald’s, Wetherspoons and Wagamama.

Meanwhile, market research companies like BBMG and Globescan have spent a significant amount of time and effort peddling the idea of an emergent “aspirational” generation of consumer. Representing 40% of the global adult population, this is the group who we’re told prefer experiences over products, authenticity over perfection and use their consumption as a way to signal to big business the causes they believe in.

Despite this, according to WRAP estimates, the UK sends around £140 million of clothing to landfill each year. We buy an average of eight pairs of shoes each year. And we’re no less wasteful when it comes to ‘experiences’: UK households waste over 7 million tonnes of food each year, which means the average UK household is chucking away the equivalent of 21 Big Macs a week.

Given the damning behavioural data, the notion of an emergent generation of socially and environmentally motivated consumer-activists seems optimistic to the point of delusion. If anything, it is members of older generations who are most embracing of sustainable forms of consumption.

A segmentation of the UK population commissioned by the Ellen Macarthur Foundation found that the largest and most wasteful consumers tend to be younger and more motivated by novelty than responsibility. In contrast, the most resource-efficient consumers are those who prefer old fashioned notions of making-do-and-mending. It’s no accident that the poster children of social and environmental responsibility in the UK tend to belong to generations that remember what it’s like to live with scarce resources. David Attenborough is 92 for crying out loud…

Circular economy thinking

Last year, delivery service Milk & More invested £6.5 million in 200 electric vans to help meet the needs of an online customer base that had increased by 40,000 households in the first six months of the year. 90% of their customers order milk in one pint glass bottles, which are reused on average 25 times. This is the essence of the transition to a circular economy: replacing a fossil-fuelled take-make-dispose value chain and replacing it with a system in which valuable resources (including packaging) are reused, refurbished, remanufactured or recycled – and ideally powered by sustainable energy sources.

And although the idea of delivering milk in reusable bottles through electric floats seems like a quaint throwback to the past, their return is part of a broader interest in “direct-to-consumer” (D2C) brands like Dollar Shave Club and Graze, which have both been acquired by Unilever for over US$1 billion. Direct-to-consumer relationships present obvious benefits for brand owners: cutting out middle men means more margin for them; and product manufacturers can restyle themselves as providers of a service, with positive implications for customer loyalty and engagement.

Moving to a D2C model means that Unilever can gain a much better understanding of who is buying its products, their preferences, habits and attitudes. The more personal care and household products Unilever can provide directly to consumers, the more complete its understanding of its customers and the greater its ability to anticipate their needs – just like a friendly milkman.

From linear to loyal

The circular economy takes the relationship between a brand and its customers a step further than the direct-to-consumer model. Imagine a world where your milkman doesn’t just deposit and collect your milk bottle. Imagine he also collects your empty shampoo bottles and razor blades. Imagine he delivers food and other drinks in reusable containers, which he also collects once you’ve used them. Imagine he collects food you no longer intend to eat and sells it on your behalf to your neighbours. Imagine he collects your food waste and uses it to power his milk float. And imagine that he offers you rewards and discounts for the privilege of carrying out all of these services on your behalf.

This is the vision Unilever is working towards. Not only is it investing in D2C models, it is also piloting a circular packaging concept called LOOP, along with P&G, Danone, Pepsico, and The Coca-Cola Company. The long-term vision for these brands is that they will become a milkman for every product your household uses.

Meanwhile, the likes of Zara, H&M and M&S are working towards a similar vision for everything you wear. If you want to rock a pair of glossy leggings on a Saturday night, they will deliver them in the afternoon and then pick them up the following day to be washed and re-used, re-sold or re-rented to another customer.

These 'circular' relationships present huge opportunities and challenges for brand owners. The potential for greater intimacy, personalisation and loyalty is huge. But in the process, marketers will have to drop traditional ‘linear’ ways of thinking. We will need to think in terms of ‘communities’ rather than ‘consumers’. Supplier loyalty will go hand-in-hand with customer loyalty as the distinction between the two breaks down. The circular economy is also vastly more competitive than the linear economy; while people will have more intimate and involved relationships with brand owners, it’s very likely that this will mean we will have fewer of them.

Large brands like Unilever and P&G are racing furiously to be the first businesses we trust enough to become our milkman-for-everything. They will face huge competition from the likes of Amazon, Walmart and Ocado who already hold a default role as brands we expect to receive deliveries from. It’s very likely that the likes of Google will want to muscle in on the act, too. Ultimately, the winners will be the brands we feel most comfortable inviting into our homes and our lives – and those who devise truly circular models of doing business.

Nick Liddell is director of consulting at The Clearing

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