In the first episode of the ReCommerce podcast, host Karri Hiekkanen and guest Tuomo Laine, CEO & Co-founder of TWICE Commerce, explore the core principles of re-commerce, its contrast with traditional business, and the driving factors behind its rise.
Re-commerce is defined as any system that allows an item to be sold, rented, or utilized as part of a service, multiple times - twice or more. This encompasses unique items, distinguished by their condition or price, and it’s all about generating additional sales cycles.
Instead of the traditional focus on a single sale of a new item, re-commerce seeks to extend the lifecycle of products. The core of this idea is reflected in the name of the company, TWICE Commerce.
Although historically focused on refurbished goods, re-commerce today encompasses rentals, subscriptions, resales, refurbishing, and buybacks, which all work together towards optimizing sales cycles.
Linear commerce revolves around the model of manufacturing or buying items cheaply and then selling them at a higher price to generate profit. It is about repeating the process for more gains.
Re-commerce, however, starts with the items in the balance sheet that should be monetized several times, optimizing the lifespan value of the good through leasing.
This mindset shift leads to the recognition that inventory is not merely stock of new items. Instead it is composed of distinctive, individual products with their own specific history, conditions, or price points, requiring a more detailed approach to inventory management.
Re-commerce, in reality, has a ripple effect that impacts all business aspects from supply chains to catalog management, from the storefront to end user experiences and to reverse logistics.
Re-commerce includes multiple business models. The primary split lies between actually selling an (used) item or “servitizing” an item.
The (re)sales model is composed of refurbished sales and second hand items that the businesses get from an aftermarket and then sold.
Servitization models, on the other hand, focus on utilizing the product in a service with methods that include renting, short term leases, long term leases, or subscriptions, where the item actually becomes a part of a service.
New entrepreneurs should seriously consider a re-commerce model due to a combination of emerging market opportunities and inherent sustainability factors.
New business owners who have a passion for a specific product category and already possess knowledge of how to repair or get their hands on those goods should consider a re-commerce model. If, for instance, the interest is in bike parts, this already positions the new entrepreneur to source, repair and offer second-hand items more easily and cheaper.
Servitization also provides benefits by focusing on delivering the experiences people want and the product becomes a facilitator for it.
Even with a linear model, keep in mind that there is a second-hand market after the sale and create a relationship with your customers, where they can return items to your business.
The growing importance of re-commerce, and circularity overall, is propelled by a number of key factors:
The re-commerce market is predicted to grow faster than the general e-commerce sector in the coming years. Especially the resale and refurbished sectors are expected to grow significantly.
The models for servitization are expected to grow as well with different areas of products like sporting goods, DIY and cars.
Additionally, the largest driver for growth will be the manufacturers who will start to design new products that have composability and repairability as a priority from the beginning, making those products fit into the re-commerce market.
In the next 5 years, re-commerce will be a big market.
You can watch the whole episode on YouTube or listen the audio version on Spotify or on Apple Podcasts.