The rise of the circular economy boosts usage of gift cards globally

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In order to address the fashion's wastage problem, many retail firms are revamping their business models to improve not only the planet's condition but also their balance sheet figures. Notably, firms are focusing on sustainability initiatives, moving toward a circular economy, where repair and recycling of existing materials are done as long as possible. This has paved the way for the birth of the recommerce industry, which the retailers are diving into. Notably, the trend of providing gift cards against reselling items witnessed across the retail space is also boosting the usage of gift cards in the economy.

• In April 2022, lululemon athletica, a United States-Canadian athletic apparel retailer, expanded its recommerce program nationwide to allow the consumers to shop for resale options online and exchange them for used lululemon athletica clothing through a gift card in the United States. The retailer, which launched its pilot recommerce program in May 2021, saw strong demand with an overwhelmingly positive response. Thus, the retailer expanded its business across the country to expand market share and increase its top-line growth.

lululemon athletica, like many others in the retail space, is also aiming for a multi-year plan to improve its environmental impact. The company, through its recommerce program, in partnership with resale technology provider Trove, is trying to reduce waste and develop products with sustainable materials. 

Notably, this trend of recommerce has been growing in the retail space for over the last two to four quarters, boosted by the preference for purchasing or renting previously-owned products by the Millennials and Gen Z consumers. Both demographic cohorts have historically been most vocal about sustainability issues.

With the option of buying these resale products through gift cards, lululemon athletica injected more convenience into the whole payment structure. Since, globally, the adoption of gift cards has seen a steady increase over the years, mostly by Gen Z and Millennials, the retail company introduced the option of gift cards to attract more consumers. 

Therefore, after its pilot in around 80 stores in 2021, lululemon started accepting clothing from consumers at around 390 stores in exchange for gift cards. The company will be accepting gift cards for apparel items for the Like New program, including pants, tops, shorts, jackets etc. Further, lululemon will reinvest the profits of Like New to make all of its products with sustainable materials and end-of-use solutions by 2030.

With the rise in the demand for recommerce, several other retailers are entering into a partnership with Resale-as-a-service (RaaS) platforms to allow customers to exchange old goods against gift cards. For instance,

• In April 2022, Pacsun, one of the key retailers offering emerging brands and trending fashion, entered a partnership with thredUP, an online resale platform, to launch a resale program called Pre-Loved Pac, allowing Pacsun customers to exchange old clothes with Pacsun credit and shop pre-loved clothing through Pacsun's website. This resale program includes a cleanout program, cash-out incentives and a resale shop on Pacsun.com. Importantly, the customers will get paid out through Pacsun gift cards for all the re-sellable products. Therefore, with the rise in sustainable fashion, brands are incorporating recommerce strategies to attract more millennials and the Gen Z population. 
• Similarly, in November 2021, Saks Fifth Avenue, a luxury store chain, partnered with The RealReal, an online platform for the resale of luxury goods, to launch Saks x The RealReal Pop-Up. Saks x The RealReal Pop-Up is a resale shop inside of one of Saks Fifth Avenue stores. This is an innovative pop-up experience for the customers, driving a circular economy. This collaboration will allow the consumers to recirculate their luxury items at the Saks x The RealReal Pop-Up at Saks Brickell and receive a US$100 Saks gift card.

On the other hand, in April 2022, Flipkart launched a Sell Back Program in India for smartphone users to easily sell their devices on Flipkart and receive Flipkart e-Gift Vouchers in return. The customers will be able to use these gift vouchers to buy any product from the Walmart-backed e-commerce giant. This Sell Back Program was basically launched by Flipkart to reduce the amount of e-waste generated from used smartphones and to help people sell any smartphone, regardless of the brand. Notably, this program was introduced after the e-commerce company's recent acquisition of a re-commerce company named Yaantra that mainly focuses on recommerce products to provide refurbished smartphones for customers.

Since Resale-as-a-service (RaaS) company thredUP revealed the recommerce and resale market is growing at a rate 11 times faster than B2C and is expected to double within the next five years, PayNXT360 projects more retailers will inject recommerce strategies in their businesses models to drive growth.

To know more and gain a deeper understanding of the global gift card market, click here.