September 27, 2021
Innovation sapblog Technology

Three Practical Steps To Gain Business Value In The Second-Hand Economy

Driven by clamoring sustainability mindsets and regulatory mandates, companies are increasingly making the circular economy an integral part of their business model. Turns out, what’s good for the planet can absolutely be good for business. IDC researchers predicted that by next year, most companies will realize greater value by combining digital and sustainability, making digitally-driven and sustainably enabled projects the de-facto standard. Consumer electronics and fashion have taken the lead in re-commerce, providing valuable lessons in how to succeed in the circular economy.

Generate revenue with second-hand product transformation

Given regulatory mandates like Right to Repair laws and the Waste from Electrical and Electronic Equipment directive, it’s not surprising that consumer electronics, specifically smartphones, are leading second-hand market initiatives. It’s also a prime revenue opportunity. Unlike declining rates of growth for new smartphones, the used market is exploding; IDC analysts expect it will total $65 billion by 2024.

The refurbished smartphone market is a good example of how companies are approaching sustainability with device lifecycle management. Using technology, major telecommunications companies are managing large-scale, global returns operations, with thousands of used devices entering the supply chain every day, regardless of their condition. The companies calculate each smartphone’s remaining value and potential profitability, channelling each device to its next-best-use based on quality attributes like cracked screens or water damage. They may repair and certify the smartphone ‘like-new’ for sale on the second-hand market or sell it for the spare parts across the company’s ecosystem. Keeping more devices out of landfills helps the environment, while adding value to the circular economy.

As stricter regulations continue to impact the circular economy, more consumer electronics retailers as well as manufacturers, will likely follow in the footsteps of the automotive industry. Second-hand sales, the spare parts economy, and a product lifetime connection with customers will come to the fore, opening new services-oriented opportunities for companies long after the original product sale.

Profits make sustainability fashionable

In the fashion industry, retailers are using intelligent technologies like AI and blockchain to operate more sustainably, including streamlining customer returns. Analytics and advanced automation are replacing error-prone human judgment with data-driven insights.

SAP has been working with customers to bring to market a pain-free returns experience that is also better for the business. In addition to providing a seamless consumer experience, the SAP Industry Cloud Solution will have an analytics engine. This will provide employees with data insights to make the best decisions and identify pattern anomalies. Brands can turn a painful return process into an opportunity.

“We want to empower fashion retailers to take control of their re-commerce at scale,” said Joanna Maryewska, entrepreneur in residence at SAP.iO Venture Studio. “Companies need integrated data from connected solutions enterprise-wide to realize the potential of re-commerce as a significant part of the business – something many companies have already set aspirational goals for.”

Another SAP.iO Venture Studio innovation tackles raw material tracing in re-cycled plastics. Plastic is one of the most important input materials for fast fashion. SAP is partnering to provide the Plastic-Tracing Blockchain System, which offers companies greater transparency in tracking raw plastic waste inputs and finished circular polymers outputs.

Ecosystem collaboration is central to circular economy

A spectrum analyser gathering dust in one laboratory can mean a great deal to an equipment-starved researcher elsewhere. A disused earlier generation iPad has tremendous value to people in emerging markets. Extending Say’s Law of Markets to the post-pandemic age of digitalization, when production is complete and the supply chain exists, modern technology extends the life and value of second-hand items. Market leaders are tapping their business networks to bring disparate parties together for a mutually beneficial exchange.

For example, fashion tech start-up, Queen of Raw, pairs unused fabric from suppliers and buyers, reselling and repurposing materials. This helps fashion brands save millions by extracting value embedded in their waste. Many fashion brands are launching collections `upcycled` from old garments or unused fabrics.

“We have been amazed by the compassion and purpose that allowed our Industry Cloud partner Queen of Raw to make a difference and drive profitable sustainability,” said Oliver Stocks, SAP vice president for business development. “Larger fashion corporations were challenged when it came to dealing with unused fabrics, especially during the pandemic as seasonal styles were no longer needed, stores remained closed, and consumer behaviors changed. Fashion leaders turned to SAP for integrated solutions.”

The lesson for businesses in just about every industry is that we are in a phase where resale, repair, reuse and recycling is desirable, needed, and more often than not, a customer demand. With the advent of intelligent technologies, the second-hand market is booming and an important new channel for sales. It delivers benefits to all parties from cheaper raw materials for business, inexpensive products for consumers, and a more sustainable world for everyone. Second-hand is here to stay and good for us all, so get excited and get involved!