Circular Economy To Unlock Multi Billion-dollar Opportunities
The growing concerns around the adverse effects of ‘fast’ consumption and the lack of affordable and sustainable alternatives have given birth to the second-hand goods market.
1. Circular economy is the key trend driving the Second-hand market boom; Gen Z and Millennials are championing the sustainability theme and will be driving consumption in the next decade
The growing concerns around the adverse effects of ‘fast’ consumption and the lack of affordable and sustainable alternatives have given birth to the second-hand goods market. It is driven by the millennials and Zoomers, who are more conscious of their lifestyle choices and are expected to lead consumption in the coming years. These generations are even willing to pay a higher price for goods and services that promote a sustainable lifestyle.
Circular Economy Approach
ASEAN1 2020 Population split, By generation
Note: 1. ASEAN includes Indonesia, Malaysia, Vietnam, Singapore, Philippines, and Thailand Note: 2. Population below age 9 and above 75 not part of chart, hence doesn’t add up to 100%
2. Unlike the retail market, second-hand market is mainly dominated by Premium products
Second-hand Market accounts for a small fragment of the overall Retail market with sub 1% penetration (around mid-single digits in absolute billion dollar terms) in 2020. However, this is expected to grow significantly – contributing around 2-3% of overall retail sales and reach multi-billion dollar size in Southeast Asia.
The segment currently is dominated by the Electronics segment because of the longer product lifespan and customers’ preference to upgrade before hand. Fashion will soon become one of the significant contributors as second-hand luxury fashion picks up post-COVID. Home and Living is small but has the most promising growth outlook.
Price segmentation in retail vs Second-hand market by volume, % total units, ASEAN
Overall, circular economy will help to extend product lifecycles and improve accessibility for a wider cohort of consumers. Investors are supportive of companies who are actively working on this key dimension of sustainable growth.