Circular Economy 2.0: Reinventing the retail customer journey
Circular Economy 2.0: Reinventing the retail customer journey
This article has been adapted for the Australian retail context from content originally published by BDO USA.
Imagine you’re standing in a high-end store under soft, energy-efficient lighting, having a look at a digital display of eco-friendly fragrances. The shelves are empty, and even the tester bottle is out of stock — but the electronic display is showing digital product information. Augmented Reality (AR) technology shows the product’s origin, supply chain, material sourcing and sustainability credentials, giving you confidence in choosing a more environmentally conscious option. If the item isn’t available in-store, you know that click and collect and home delivery options are easily accessible.
But even in the high-tech world of tomorrow, not every purchase is a perfect match. What happens if your order arrives, and the fragrance isn’t quite what you had in mind. Instead of a traditional return, the retailer offers a different solution: Circular Economy 2.0. For retailers looking to future-proof their business, this means partnering with peer-to-peer resale platforms. When you initiate a return, you’re incentivised with a discount on your next purchase if you choose to resell the item instead. The retailer covers shipping, and your unwanted perfume finds a new home — dodging the costly, wasteful cycle of returns and restocking.
This approach saves resources, cuts shipping emissions, and keeps products out of landfill. Customers get a smooth experience (plus a sense of satisfaction for shopping sustainably). The retailer benefits from lower costs and a stronger reputation for doing the right thing. This is the Circular Economy 2.0, where every bottle, every box, and every decision is part of a bigger picture.
Building on the principles of Circular Economy 2.0, re‑commerce refers to the resale, refurbishment or redistribution of products already in use, extending their life and keeping them in circulation for longer. By 2035, re-commerce is expected to become a strategic cornerstone for retailers looking to future proof their business, and for customers who believe sustainability matters. Reselling cuts the number of new units produced by linking customers with products already in circulation, rather than relying on manufacturers to churn out excess inventory that may never be needed.
Materials matter: Rethinking production for sustainability
While consumers look for ways to shop more sustainably, the onus is on retailers and manufacturers to find more sustainable ways to use materials in the products they make. Plenty have already started lifting their game by using more sustainable production methods, particularly where the tech and recycling infrastructure already exist. Packaging, for instance, often uses components such as cardboard, plastic, and glass that are well established in the recycling stream. Some resources, like glass, can also be repurposed without the need for recycling.
At the heart of the circular economy is what goes into production from the outset. When inputs rely on virgin materials, energy-intensive processes, and components that are difficult to recover, waste is effectively designed in. By contrast, selecting circular inputs — recycled or renewable feedstocks, non-toxic materials, fit-for-purpose packaging, cleaner energy, and better data to support traceability — makes it far easier to repair, reuse, recycle, or remanufacture products at end of life. In practical terms, getting inputs right upfront is what turns a linear supply chain into a closed-loop model that keeps valuable materials in circulation.
Retailers looking to future-proof their business must go beyond the usual sustainability moves and properly implement circular economy principles, such as designing products and processes that cut waste, prioritise reuse, and keep materials in circulation. This includes sourcing sustainable materials, reducing waste during production, and implementing return or recycling programs. Retailers can also boost energy efficiency and shift to renewable sources to reduce carbon footprints.
In some manufacturing and retail areas, recycling and reusing materials isn’t just a way to reduce resource consumption, it’s essential to environmental protection. The electronics industry, for instance, often uses elements in product components that can’t be disposed of through the standard waste stream. They must either be recycled through specialised processing or salvaged and repurposed to stop toxic elements like lead, cadmium, and mercury from leaching into the soil. Beyond keeping hazardous waste out of the environment, reusing and recycling provide retailers with cost savings and a steadier supply of critical resources, including those that can be tricky to source.
While technologies and processes exist to make retail manufacturing more sustainable, companies do not need to rush integration. Instead, as they work to embrace the circular economic model, retailers should focus on making gradual progress and maintaining compliance with evolving regulations. As scientific discoveries and manufacturing capabilities advance in the coming years, retailers can then further refine their supply chains and production methods.
Smarter manufacturing: AI, agile manufacturing and waste reduction
Retailers have an opportunity to show their sustainability efforts to switched-on consumers by being transparent about how things are made. While recycling is an effective starting point for repurposing used materials to keep them out of landfills, manufacturers can do more. As artificial intelligence-powered predictive tools become increasingly accurate, manufacturers can avoid making products no one wants by predicting demand more precisely, further reducing waste.
In this era of increasing costs of raw materials, energy, and logistics, improvements to agile manufacturing will help companies respond faster to what the market’s doing, reducing unnecessary volume and ensuring demand and production better aligned. This includes enhanced rapid manufacturing capabilities, allowing retailers to produce quickly while moving toward ahead-of-time models. Small-batch production and flexibility with contractors will be essential to making this shift work, with contracts potentially including adjustable terms that allow manufacturers to acquire only the necessary amounts of material.
The materials themselves will be upgraded as well. Continued innovations in biodegradables will reduce the amount of waste that ultimately remains in landfills, meaning discarded items will take up less space and have a smaller environmental footprint as they break down faster and more completely. By taking a proper, end-to-end look at product life cycles, retailers can spot where to build sustainable practices into production, meeting customer expectations and regulatory requirements.
Australian perspective: Circular retail is already taking shape locally
For Australian retailers, the shift towards the Circular Economy 2.0 model is no longer theoretical. Industry-led initiatives such as the Australian Fashion Council’s Roadmap to clothing circularity highlight a growing national focus on redesigning how products are made, sold, reused, and recovered throughout their lifecycles.
Importantly, the roadmap recognises that achieving circularity requires collaboration across the value chain. Retailers, brands, recyclers and consumers all have a role to play in reducing waste and improving resource efficiency. For retailers, this creates an opportunity to rethink traditional approaches to returns, excess inventory and customer engagement, replacing linear models with circular experiences that reward reuse and resale, while strengthening supply chain resilience.
As Australian consumers become more conscious of sustainability and waste, retailers that embed circular principles into the customer journey — from product design through to end‑of‑life — are better positioned to meet expectations, manage risk and adapt to future policy and market shifts. The message for local retailers is clear: circular economy models are not a distant ambition, but an emerging part of how retail operates in Australia today.
How BDO supports circular retail models
BDO’s retail team works with retailers to assess supply chain resilience, reduce waste, and embed circular-economy principles into sourcing, inventory, and distribution decisions, helping businesses build more sustainable, future-ready operations.
This article is part of our series Future-proofing Australian retail.
