Many of the things we buy today have a predetermined fate: they are manufactured, used and thrown away. This is known as the linear economy.
But there is an alternative. Products can be given new life through resale. Items that would otherwise have been thrown away can acquire new economic value. This is how a circular economy emerges. Today, it makes up only a very small share of the overall economy – but that may be about to change.
“There’s great interest in circular business models among Swedish retail companies today. Among the companies I’ve spoken to, the ambition is to reach 5–15 per cent of turnover,” says Erik Sandberg, professor at the Department of Management and Engineering at Linköping University.
Many challenges
The key is to make these ventures work commercially. In collaboration with Arne Andersson at Svensk Handel, Erik Sandberg has produced a report on how to achieve profitability in circular business models. The report highlights logistics as a crucial factor – that is, how goods are transported, stored and managed. In a circular economy, this means collecting used products from consumers, sorting what can be reused and ensuring that the rest is recycled or repurposed.
The authors of the report identify three challenges that bring extra work, higher costs and greater uncertainty. First, the quality of each product in the circular flow must be assessed individually, since items are likely to have been subjected to different levels of wear and tear. Second, used products generally have a lower value, while the logistics costs remain the same – which means the relative costs increase.
A third challenge is that customers suddenly become both consumers and suppliers. Companies now need to understand not only what customers want to buy, but also what they are willing and able to return.
“The question is: how can we get the goods out of the consumer’s wardrobe or garage? How do we create convenient collection systems? How do we give all the products out there a chance to enter circular flows again?”
Some advice
The report offers several pieces of advice to businesses. One is to think smart and make use of existing logistics infrastructure, such as transport networks and warehouses. For example, companies could collect products or sell second-hand goods through their existing shops. Another recommendation is to decide early on which products to collect, what expertise is required and how profitability can be ensured. A third is to carefully analyse the new costs involved. By addressing these questions from the start, it is easier for companies to scale up their operations.
“This has to be profitable, otherwise companies will never scale it up. It will just remain a small side project, almost like a form of greenwashing,” says Erik Sandberg.
A bright future
Nevertheless, he is optimistic that retail will become more sustainable over the next decade. Circular models will not have taken over, but they will be established in more companies, and more customers will be attracted by the idea of buying a unique product that not everyone else has.
“That’s why I think there’s quite a bright future ahead. I think society is slowly moving in that direction,” says Erik Sandberg.
The research project has been funded by ASTER (Alliance for Sustainable E-commerce) and Vinnova.
Translation: Simon Philips
Rapporten:Logistikens roll för lönsamhet i detaljhandelns cirkulära affärsmodeller (2025), E Sandberg, A Andersson, publicerad 15 september
