How to launch – and profit from – a buy-back program

Brands are facing increased demand to reduce waste. One solution is purchasing old goods back from customers, but what do businesses need to consider?
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How can a brand take responsibility for a product it has manufactured and sold once it's in the hands of a customer? As people continue to put pressure on companies to figure out their environmental sustainability credentials, brands – especially those in the apparel space – are closing the gap between purchase and disposal by buying old products back from consumers.

Buy-back programs make it easier for people to dispose of more heavy-duty and complex products, rather than sending them to landfill. In exchange, they typically get store credit. The programs prevent waste, as well as providing a financial incentive to keep shoppers returning, instead of selling their worn items through a third-party platform. For the company, however, it means deciding what to do with – and creating a whole new operational process for – the items that come back to them.

Big brands have started to get in on the action: furniture powerhouse IKEA and Italian fashion label Valentino are among the companies that have launched in-house schemes in the past year. Small businesses, however, don't necessarily have the loyalty, brand recognition or operational capacity to make a buy-back program work right off the bat. 

But that hasn't stopped some from trying to make it work. We caught up with the founders of fashion brands Dai and For Days and sneaker company Hylo to learn about how they've developed their buy-back programs – from customer awareness and user experience to new supply chains and financial decisions. 

Are people actually sending items back to brands?

According to an email poll from Vogue Business, not really. The majority of respondents (53%) said they don't donate clothing to brand-run buy-back programs at all. That might be because returning items at the moment is far too arduous a process, says Michael Doughty, co-founder of Hylo. For Michael, the way to prevent that is to improve the user experience of returns and offer a tangible incentive to customers.  

The first hurdle is making existing customers aware that they can exchange an old pair of shoes for a discount on a new pair: ‘If you're a Hylo customer, you get a ton of emails that talk about the Hyloop recycling program,’ Michael says. 

Then, he adds, it's critical to take as much of the cognitive load of sending items back away from the customer as possible.‘Customers can send their shoes back in their existing Hylo box, because we engineered it with returns in mind,’ he points out. ‘That way, the delivery mechanism is the same as the returns mechanism, and we can show customers that it's just as easy to send a product back as it is to buy a new one.’

Having a physical retail location also makes it much easier to get customers to trade their used items, he says. That way, they don't have to deal with the admin of shipping labels and postage, and they can much more easily try on the new item they want a discount on. For Joanna Dai, who is currently trialing a buy-back initiative at the London store of her workwear brand Dai, it's been a great way to test the concept, which she hopes will develop into a new revenue stream for the brand. 

But, at the same time, she recognizes that the buy-back option will need some technology applied to launch it online and therefore scale it up. ‘Our very engaged customers have been bringing their items back in-store, but it's certainly a program we want to amplify more,’ she says. ‘Online orders are the biggest source of revenue for our business, so we'd want to do a bigger roll-out of the buy-back offer online later this year.’

What happens once the items come back 

With any buy-back program, the aim is to prevent the item from going to landfill. But it's up to brands how that happens – and how much time and money they want to invest in what happens to the item now it's back in their hands. Outdoor clothing brand Patagonia, for instance, pushes all of its returned clothing to its Worn Wear site, a separate arm of the business dealing entirely in pre-loved goods. Fairphone, on the other hand, repairs or disassembles all phones that are sent its way. 

Which items the brand chooses to buy back and how it processes them have quite an impact on its supply chain and any resulting additional costs. While most brands will buy back only items that they produced themselves – because they know the components and materials, and can confidently sell the item on – a few have decided to buy any product that a customer chooses to send in. Hyloop, for example, buys back not only old Hylo footwear, but also any other worn sneakers a customer has. It's not a cheap process, Michael adds, and it’s still too early to tell if it'll be worth the investment.

‘It's a cost center for us,’ he says. ‘We're currently paying for the shipping [and] recycling, and giving store credit out to customers, and we don't know how many will convert to Hylo customers. We don't have enough data, but we'd hope that people would use their store credit to purchase as soon as possible.’

But there are several metrics that the Hylo team could play with to make it work more profitably, he says. ‘The customer could help with the shipping cost, we could offer it only in stores or we could offer the discount as a refund at the point of sale, rather than [as] a credit to use when they're ready. Then, the customer has already purchased, and it feels like an investment in them.’

Making a buy-back program profitable 

Charging customers to send back their old products might seem counterintuitive. But Los Angeles-based clothing brand For Days has started a buy-back program that passes some of the cost back to the customer. The brand's Take Back Bag costs $20, and it can be filled with textiles of any brand and in any condition. Customers earn store credit, while their old clothing is reused, recycled or repurposed – the product is currently the brand's best-selling item. 

‘In the past four years, we've sold more than 35,000 Take Back Bags and diverted 170,000 garments from landfill,’ says co-founder Kristy Caylor. 

The next step? Selling the bag as its own product to retail partners. For Days has now partnered with the likes of lifestyle store Package Free Shop, footwear brand Cariuma and children's clothing brand Maisonette to sell the Take Back Bag on their platforms and, in the process, get the For Days brand name out to new customers, too.

A version of this article was published in the Courier Weekly newsletter. For more useful stories, tips, tricks and simply good advice, sign up here.

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