Sustainable business

Circular Economy: If not now, then when?

The goal of the Circular Economy is to decouple economic growth from the use of natural resources and ecosystems by using these resources more effectively. In the areas of material, component and product recycling, this is a motor for innovation and a key factor for new business models. The furniture industry is predestined for this.

Aug 17 2020

Circular Economy - basics, objectives and contents 

A UN resolution from 2015 with 17 goals for sustainable development, to which the German government has also subscribed, forms a key basis for the concrete implementation of the circular economy.  

The circular economy is based on the principle of keeping raw materials and products in the production cycle as long as possible. The aim is therefore to design systems in such a way that no more waste is produced and dependence on finite resource reserves is reduced.  

  • A circular economy stimulates industrial competition, both nationally and internationally. It promotes greater resource productivity and reduces long-term dependence on raw materials.  
  • Companies can thus not only open up new sources of added value, but also contribute to the stable development of existing and new markets and their supply chains through cost savings. 
  • Circular business models are resource-stable because they involve the physical reallocation or reuse of old products for new purposes in accordance with the sales objective of the value-added cycle (see chart). 
  • Circular Economy focuses on sharing material resources through a more collaborative form of consumption, where customers pay for the benefits of using a product rather than owning it for themselves. 

Following the logic of the circular economy, companies sell the use of their products (product-service models) through rental or access agreements. This means that they remain the owners of their goods throughout their life cycle, while at the same time they can expand their service capabilities through maintenance, repair and reuse. 

A KPMG study from 2019 also shows that renting objects can replace buying them in the future: "For many consumers, access to or use of goods is more important than their possessions - at the same time, the need for sustainability is increasing... The QVC future study "Living 2038: How will Germany live the day after tomorrow? "In the year 2038, possession as a status symbol will be obsolete. Renting and borrowing replaces buying." 

The total package does it - the options for the furniture industry

As in other industries, digitization is increasingly making inroads in the Home & Interior sector. As a result, online trade in the sales-dominant furniture segment is also becoming increasingly important.  

At the same time, new technologies are also changing the requirements and purchasing behavior of customers. For manufacturers and retailers, this results in a multitude of innovative opportunities to better pick up customers through interesting touch points and new customer journeys.  

KPMG/IHF Cologne stated in their 2018 market study "Focused on the future - Study on the future of the furniture market in Germany" that customers in Germany spend more than 40 billion euros a year on furniture. However, the planning horizon of the customers surveyed for the purchase of furniture in 2018 already covered a period of more than 12 months.  

According to the results of another market study on "Sharing Economy and Consumption Models of the Future" by KPMG/IFH Cologne from as early as 2017, approximately 20 % of those surveyed would consider it important to have the option of using furniture through rent versus purchase. 

For the furniture industry, the establishment of sharing and rental systems offers corresponding options for creating new planning periods and thus further securing and developing customer relationships. 

The furniture industry is predestined for multiple use to a large extent, primarily due to the use of materials, production and the nature of the products. In concrete terms, this means the use of recycled or responsibly sourced renewable materials, the longevity of the products and the creation of conditions for repurchase (rebuy), reprocessing or upcycling possibilities

The crisis as an opportunity - megatrends as drivers 

The current situation poses major challenges for all sectors and the social and economic effects are not yet foreseeable. The rapid pace of digitization in recent months has shown that upheavals, especially in times of crisis, also offer enormous opportunities. The global megatrends are more clearly perceived in these developments, and are established more quickly and sustainably than usual. The furniture industry is no exception. 

  • The megatrend New Work, for example, is forcing a rethink with regard to the integration of new stakeholders and changes in cooperation. And not only within their own supply chain. Coopetition is the magic word.  
  • Urban-Manufacturing (Megatrend Urbanization) gives the furniture industry the opportunity to revise and reorient itself for modern partnerships manufacturing - trade - services (e.g. showrooms, reprocessing, storage, logistics). 
  • Demographic change with new generations of customers, a different way of thinking in terms of consumption and ownership as well as changes in target groups (megatrends mobility and individualisation) give the industry great opportunities for building new and long-term customer relationships. 

But one thing is clear. It will not be possible to succeed by "keeping it up". The progressive implementation of the circular economy and the dynamics of the megatrends show this.

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