Appliances Replacement Cycle

The circular economy is reshaping multiple industries. A new trend in purchase and replacement of home devices demands new strategies that manufacturers can use to reach new customers.

Is it possible for manufacturers and brands to benefit from helping users in a circular economy model?

It is possible, and it is working for some businesses replicating some of the strategies used by the auto and fashion industries. They have crafted new ways in which customers can be reached, including circular economy strategies such as renting and reselling to offer consumers a wider set of options during the replacement cycle.

The use and replacement cycles of appliances and devices vary among households. For example, replacement rate is more frequent for large-size appliances, high-income and households with younger people. Therefore, the strategies used by brands and manufacturers must attend to the need of different household segments.

Although many companies have identified early adopters of connected smart devices and appliances, few studies have examined households that have been using older — not connected — dumb devices and how their characteristics are associated with product replacement.

Manufacturers need to identify survival function and develop an economic model to evaluate the impact of household characteristics on device replacement. They could see some indicators of how the circular economy may affect the purchase or replacement of appliances and devices as consumers.

Using a circular economy method is not to suggest that people should only buy used appliances and devices, but to encourage brands and manufacturers to explore new ways of reaching customers for longer periods.

More than 30% of buyers would consider buying a pre-owned appliance if the cost was higher than their expected budget.

Depending on the type of device of appliance, most people prefer brand new, but the fact remains that billions of dollars a year are made by platforms like eBay, Gumtree or Craigslist because these products get old and many people want to resell and buy again the same type of device and brand, with newer features.

Global Second-Hand Appliances market experienced a growth of 5.3% in 2018. Moreover, the market is expected to flourish at a CAGR of 6.3% and is likely to garner USD 10,687.59 Million by the end of 2025.

Full Circle Customer Ownership

The Circular Economy is an effective system to ensure sustainable production and consumption; however, the appliance and consumer electronics industry is still at an early stage of implementation.

The new product replacement economy offers many advantages for manufacturers and brands — depending on how far they wish to reach into a customer lifetime. Here are some circular economy opportunities for manufacturers and brands open to a reselling system:

A New Revenue Opportunity.

Own a resale channel and make it a significant part of your engagement strategy. Buyers love authentic products, from a used appliance to parts or accessories.

Brand Loyalty & Credits.

Offer customers an easy way to resell their past purchases and convert their sale to brand/store credit to buy again within the brand ecosystem.

Sustainability.

Buying used increases the lifetime of an appliance by about two years, which reduces its combined carbon, waste, and water footprint significantly. If a manufacturer is committed about supporting sustainability, this should offer a win-win opportunity because consumers will see the brand as a lasting investment. This approach comes with many other benefits, for example, offering extended warranties, replacement parts, repairs, buy-back credits, etc.

Onboard New Customers.

Allow a new customer base access to the brand. Create a community of brand loyalists who are excited to buy and sell pre-owned items.

We must accept that post-sale opportunities to market accessories, financing, warranty, and repair services don’t stop at brand new items. Users want to buy the brand; the question is how? A marketplace to sell, resell, buy, repair, and recycle will attract multiple types of new loyal buyers.

Appliance and device usage analytics can be a great tool to inform brands and manufacturers about usage and replacement, but it is only effective if it covers all devices, not just connected or smart devices.

“Forrester: “For a typical Fortune 1000 company, just a 10% increase in data accessibility will result in more than $65 million additional net income… At the moment, less than 0.5% of all data is ever analyzed and used, just imagine the potential here…”

An ideal solution could be an all-in-one service to allow both consumers and manufacturers to resell, rent, repair and recycle appliances and consumer electronics. The good news is that they are some exciting multi-revenue solutions coming soon, stay tuned!