Circular products are popular, but hard to scale

Consumers want circular

In the past six years, study after study conducted by RISE has shown that 25-60% of consumers prefer and are even willing to pay more for circular products, including used mobile phones and robot vacuum cleaners, used and recycled blue jeans, and shared-access residential spaces. This is good news, because circular products and services deliver the same or greater value to customers often at lower levels of resource and energy consumption, and lower levels of waste generation. 

Unfortunately, circular products are far from representing 25-60% of the marketplace in (almost) any sector. According to the 2025 Circularity Gap Report conducted by Circle Economy in collaboration with RISE, Sweden’s economy is about 96.6% linear. In other words, a meager 3.4% of material resources come from recirculated sources. This positions Sweden among the least circular countries in Europe. 

A yawning gap between supply and demand

What explains this apparent gap between what many consumers say they want and what the marketplace delivers? If the world operated according to Adam Smith’s 18^th century principles of supply and demand (brought together by an invisible hand), producers would respond to consumers’ desires for circular products by selling them at an equilibrium price—a price that satisfies both sides of the marketplace. Producers in a frictionless world, and with immediate access to perfect information about their customers and unbound desires for profit would match the apparent demand for circular products by filling shelves and online stores with re-used, recycled, and servitized products! Of course, by now we know that this is not the case and that  there is something “blocking” suppliers from meeting their customers’ true desires! 

We propose that is has something to do with the often-overlooked business model. 

To understand a business model, think of a bridge.

Business models are everywhere. They are all the “stuff” and all the “processes” that help a business owner deliver value to their customers. If Adam Smith believed that markets worked through an invisible hand then business models are the visible hand, helping where suppliers do not have perfect information, consumer products are made from countless components delivered by complex global logistics systems, and there is plenty of friction in the form of transaction costs, taxes, monopolies, and irrational behavior! 

Think of a business model as a bridge that connects the customer on one end to a business owner that is facilitating traffic somewhere on that bridge. At any moment, lots of stuff is flowing in both directions in different lanes over that bridge: Money has a lane, typically in one direction from customers to business owners, but also from business owners to their suppliers, and suppliers to their suppliers, and ultimately to raw material sources like mines, forests, and fisheries. Along the way, some of that money is taking an off-ramp to the government in the form of taxes, some of which is used for infrastructure and initiatives to keep this metaphorical bridge from collapsing (!), and some of that money is being used by the business owner for services like market research and advertising so that the business owner and customer can reach each other. Materials have a lane, flowing towards the customer, and the closer to the customer it gets the more valuable materials are. By the time a finished product and its packaging reach the customer it has undergone a transformation that adds value to the final offering. Information is flowing all over the bridge. Much of it is being handled by other businesses, in lanes moving toward the customer in the form of advertisements and logistical information about accessing the product, and away from the customer in the form of market research and purchase specifications, etc. Similarly, information is flowing bidirectionally from the business owners and suppliers, and all the other actors in the value network. 

Finally, waste is flowing all over the bridge. Scrap from material processes, runoff from chemical processes, exhaust from manufacturing and transportation, and obsolete products discarded by their users are flowing in both directions on the bridge. But what distinguishes a circular business model from a traditional linear business model are the different actors’ willingness/ability to “see,” “account for” and “mitigate” the flow of waste. In a linear business model every actor on the bridge finds the fastest way to get the way out of their own lane—out of sight, out of mind! In a circular business model, actors either figure out how to either turn that waste into useful material (a.k.a. “recycling”) or design our business model to reduce waste at every step. For example, a product service system might deliver a product to a customer, but the customer only leases that product temporarily, as a service. This creates an incentive for the business owner to make durable, easy-to-fix products that customers will want to lease for a long time.   

New types of products need new types of bridges

So, returning to our original question: why are circular products failing to live up to their potential? The answer, we believe, has to do with a mismatch between young circular products/services and old linear business models. Sticking with our bridge analogy: consumers may be very interested in circular products (yelling and screaming on their end of the bridge!), but building and repairing a bridge takes time. Transitioning to a new business model is like adding new lanes or (in the case of startups) building an entire new bridge. 

Let’s take, for example, used jeans and new jeans. The end-product is anatomically nearly the same, but they are delivered in entirely different ways (on bridges with different types of traffic). New jeans are delivered to customers on a very linear and very large bridge. A combination of chemically treated virgin cotton, zippers, and buttons are assembled at a factory probably in Asia, and sent through a network of distributors to a retail shop where you, the customer, can test an array of very similar options until you settle on the pair that perfectly fits your butt. Those jeans have arrived in the shop with hundreds of similar pairs after intensive market testing and advertising on highly tailored social media feeds. This is a high-volume, multi-lane bridge. In most cases, when your jeans no longer work for you, that business has lanes on the bridge for repairing or otherwise taking those jeans back. The jeans’ end-of-life is up to you, the consumer.

Contrast that with contemporary business models for used jeans, which can be sold on peer-to-peer platforms, second-hand stores, and vintage shops. How have these jeans been washed and maintained? Nobody can know for sure. It could be any brand and cut, and how well that is described in the sales channel depends on the dedication of the reseller and the former owner.  Most of the time, used jeans are not sold among an array of similar-style jeans, but as an effectively unique piece that probably doesn’t fit your unique butt. Retailers of used jeans may or may not sort and categorize their product and if you’re lucky you’ll find them among products of roughly similar color and size. So rather than a high-volume multi-lane bridge, used jeans are sold on many different types of bridges that are often shorter, lower-traffic, and with different types of information flowing over them. While “waste” is managed and mitigated, suppliers are not uniform or reliable, and channels for information (e.g. about size and customer needs) are not nearly as well developed as the information channels for new jeans. One hopeful exception is retail shops that take back, repair, and re-sell their own goods, which is becoming more and more common in Sweden. While such stores cannot offer the same volume and variety of goods, they can remove some of the uncertainty by using similar sales channels and shopping experiences as new jeans. Think of it for now as a special lane on their existing bridge. 

This analogy holds for all sorts of recycled, reused, and repaired products, from refurbished mobile phones to furniture repair. Carsharing and mobility-as-a-service (MaaS) are also examples of circular ideas that appear very popular when tested in opinion studies, but have had trouble gaining traction on the ground. Technologically, these ideas are no longer challenging, but it has been a challenging getting them to “stick” in regions built for personal vehicles and in cities where public transportation is controlled by slow-moving public authorities.

The good news is that once rare and risky business models can become boring, big and commonplace. One example is rental apartments. 150 years ago, cities were new. Urban housing was haphazard and dangerous in rapidly growing European and North American cities. Tenants flocking to industrial jobs in cities needed somewhere to live, and were regularly exploited by landlords (often their own employers). It took about 2-3 decades of innovation and public sector support to create stable rental markets. Today, rental apartments are so commonplace that we wouldn’t think of them as innovative or special, yet it is an example of an industry that has found incentives to retain value (e.g. through regular maintenance) for many use cycles. They have, over decades, developed sophisticated sales channels, quality checks, repair processes, and supportive infrastructure that make renting an apartment a mundane and (usually) safe option for tenants and a profitable business model. This metaphorical big bridge offers hope that one day accessing used jeans or a refurbished smart phone may be as commonplace as paying rent. 

So in summary, customers appear to be interested in circular products but many companies have just begun to build new bridges to repair and re-distribute them, and getting these bridges to operate at high volume may take time. 

I’m hopeful this bridge analogy helps clarify why transitioning to circular business models takes time, even if it seems consumers are ready for it. Consumers ARE interested in circular offerings, and business owners can be confident that customers will pay for circular products and services once they are connected by the right bridge. At RISE, we are experts in helping you plan the metaphorical bridge, estimate how “circular” it is, as well as identifying the customers waiting on the other side.