You can have it both ways: The circular business model
We know circular economy is the thing of the future, and manufacturers need to adapt to this philosophy. Nowadays the general thought on this topic is that it's is the right thing to do but is not profitable. It's time to bunk this myth and say that it's possible to have it both: a circular solution which is also profitable.
The Circular Business Model concept involves three parties: GooHoo as a platform and a facilitator; manufacturers as owners of the products; and customers as contributors with products as well renters/users.
The process has three parts:
- GooHoo in cooperation with manufacturers collects existing products from consumers which for different reasons might not be used anymore (old, broken, replaced by newer versions, not needed anymore).
- Manufacturers take the ownership of the products they have manufactured and make them suitable for entering the consumer market again by fixing, cleaning, refurbishing etc. the products.
- Consumers use products as a service, meaning they rent for a short-term or lease for a long-term, while the final ownership lies with the manufacturer.
At the end of the renting period the consumer returns the product which in turn(then) goes back to the manufacturer to be examined before being returned to the renting.
GooHoo: owner and provider of the platform. Enhancing circular economy from the companies/manufacturers and the users side. Nowadays they are selling second-hand refurbished products, but they want to expand to the "product as a service" field, approaching other companies and inviting them to use the platform and join the circular economy. They will be the facilitators for collecting products from customers and renting (leasing) them.
Companies/manufacturers: Owners of the products. They give their products as a service through GooHoo platform. They fix, clean, refurbish their own products every time before leasing them back. For the non-refurbishable products, they will send the components back to the production chain to be used in other ways (as a resource).
Users (of the products): clients interested in using products for a short time or temporarily, without having to pay the original full price, but still with ensured high quality standards.
Our vision and values:
We live in a consumerism economy, where status lies in the products we own and where we want to have every product of our own for every life situation. This reality brings a lot of things to our lives which have a very short period of use or we use rarely. For example, pregnancy- or baby clothes, ball dresses, GoPro's, wedding materials, etc. We have our living spaces full of things which we don't use anymore, but we're too lazy to get rid of them.
We live in a linear economy, where after purchasing a product the ownership lies with the consumer. Once the product has served its purpose for its owner, it's also his or her responsibility to dispose it. Often people don't know what to do with one or another product so they end up in garages collecting dust, in some cases they might be resold on the second-hand market, but eventually they end up in landfills.
We live in a world, where more and more resources are becoming scarce. The climate is changing due to unbearable levels of production and consumption, which poses global challenges we haven't faced before. This means that we also need to find ways of doing things like we haven't done before.
The vision of the Circular Business Model (CBM) is to keep existing products in the circulation as long as possible and to change the mindset of consumers from owners to renters. In addition, this model gives an opportunity for manufacturers to get access to their products which are not usable anymore and use the materials for something new. Everything that is still good can be rented after the manufacturer has checked the quality of the product and done necessary improvements (refurbishing, fixing, remanufacturing, etc.).
Providing products as a service puts manufacturers and customers in a continuous contact which provides companies with constant feedback, input for product improvement and as mentioned earlier raw resources from existing products. CBM encourages the development of companies towards more circular mindset and production, which also will contribute to the re-definition of production lines, structures of the company and in human capital. This all will contribute to the long-term global circular economy landscape.
Once the products are made circularly consumers are invited to re-think their purchasing needs and adapt a new mindset of products as a service which makes them also aligned with the circular economy. This will mean that consumers will use what they need and products are seen as resources once again.
… And we will live in a circular economy, where everything is seen as a resource and we have done something we haven't done before.
With two kinds of customers we need to be focusing on the multi-sided platform because we're dealing with two different types of customers that depend on each other.
On one side we have the users, the people who are looking for products to rent/lease.
On the other side are the companies/manufacturers who produce the products that are up for rent/lease.
In order to make the platform successful we need both kind of customers to join. GooHoo already has established a steady basis of users so we need to attract the manufacturers/companies to join the platform. To make joining attractive for the companies we can create favourable terms for them. For example, by offering our value-propositions for free, the circumstances are made attractive for the companies to join.
After we established a firm basis of companies we can introduce a fee. We need to take into account that the costs for waiving the fee are covered by the revenue generated by the users.
These are the values we can add to our customers:
Value propositions for companies and manufacturers:
- Extend their market and target consumers (they won't sell only new products anymore, but also refurbished products, which can reach people with a lower acquisition power);
- They are closer of being environmentally neutral;
- Positive social image, due to their more sustainable values;
- They’ll meet in a faster and easier way the legislation requirements regarding CO2 emissions and waste disposal (since they will be producing less of both);
- They can be pioneers in implementing this system and be an example for many other businesses regarding how to deal with the increasing pressure of being environmentally responsible. Also, pioneers in the changing of mindset from linear into circular behaviours;
- They can get feedback about what are the strong and weak points of their products and enhance them easily;
- By getting products back to the chain, the scarcity of resources will be faced and production costs will be reduced.
- As companies increase the channels they sell products through, they get higher revenue possibilities.
- Partial control over second-hand market and product as a service market.
- They can access a wider set of products for a more accessible price;
- They get the products substituted in case they get broken;
- They don’t accumulate the products at home without knowing where to throw them;
- They are actively contributing to the environmental sustainability (preservation of resources and waste production).
Besides, to GooHoo we add the next values:
- This is the starting point for companies that want to leave the Linear Economy. GooHoo is a facilitator for them, the starting point to make this change happen;
- They can become a pioneer, game-changer and a frontrunner in the field of products as a service;
- Positive brand image and reputation.
Users: Direct: website (1,2,3,4,5), advertisements (1), social media (Facebook/Instagram) (1,2,3), sales (3,4,5), web sales (3,4,5), Google AdWords (SEO) (1,3,5), Google review (1,2)
Manufacturers: personal approach (1,2,3,4,5), networking (1), lobbying (1), conferences (1), sales representative (1,2,3,4,5),
- After sales
User: automated service, co-creation
Manufacturer: assigned personal help, co-creation
A fee payed by the user of the products when leasing devices (sales).
A fee payed by the manufacturer for putting their product on the platform (user fee and/or subscription fee).
We are looking forward to your feedback. Thank you in advance!
Team Opportunity: Marta Pineda Gil, Mayri Tiido, Mert Burkan, Perry Martens.