International forecasts indicate that by 2030 23 percent of the global fashion market will be from circular business models. The secondhand market is expected to grow globally between 15 to 20 percent per year for the next five years. 

– There are indications of enormous growth in circular economy and there are currently many companies considering which model to adopt. Forecasts predict that in the following years each brand and retail company will go into secondhand business. A significant change will be occurring in the next years, says Emilia Gädda, Chief Advisor, Sustainability and Circular Economy, at Finnish Textile and Fashion. 

Timo Huhtamäki, CEO of Finland’s largest secondhand online store, Emmy, concurs that companies have taken serious interest in circular economy in the recent years. 

– If we look at purchases, circular economy has not yet penetrated the structures of trade. New and used products are not actual options at the time of purchase, but this will be the case in the future. We have clear signs of it, such as S Group (Finnish retailing co-operative organisation) taking its first steps towards the secondhand business with Emmy. S Group set up a secondhand shop together with Emmy at a Sokos department store and created an easy way for the customers to sell their clothes by placing collecting boxes in all Sokos department stores, he says. 

– Conventional business thinking and consumption patterns are in a state of transformation. Solutions can be found only if consumers and companies act together. The pace of development and the growth potential in circular economy are so significant that changes may happen quite quickly, adds Gädda. 

Finnish brands hold a strong position in circular economy 

Both Huhtamäki and Gädda agree that circular economy can enhance the position of Finnish brands and strengthen entire textile industry. 

– In Emmy we see that Finnish brands are selling and retaining their value better than foreign brands. This gives pricing power to Finnish brands and enables investing into quality making the value of the item increase. At the same time it reduces the carbon footprint of the clothing industry. This could be the new renaissance of the textile industry, Huhtamäki says.

– For Finnish brands investing in quality has always been important and clothes are designed to last. In addition to the technical quality, the essential aspect in circular economy is the emotional quality. The consumer sees the value of the product and wants to take good care of it. This also retains the value of the product, Gädda states. 

Huhtamäki mentions that with circular economy being centred around waste and material, less attention has been given to the relationship between people and goods as well as to the resale market of pre-owned items and their price formation. 

– Why isn’t a piece of clothing seen as an investment and how come the marketing of clothing is not built around this idea? 

The lack of routines and structures for circular economy 

The main bottleneck in the secondhand business is, and will be, supply. The problem is that 66 percent of clothing is forgotten in the back of the wardrobe. 

– When you eventually come around to selling your items, it happens at the wrong  time – often at the end of a season. The high demand of the beginning of the season has been met with scarcity of available secondhand goods. This results in new items being in demand, Huhtamäki says. 

At the end of a season used items do not sell well and they do not match the demand for new goods. Everyone loses in this scenario: the buyer has to purchase a new, costly item, and the seller does not make profit from theirs. The national economy and trade balance suffer, too, because most of the new products come from abroad. 

– We are lacking routines when it comes to selling secondhand products. We are already used to the return system of bottles as a part of our daily life. The procedure has been made easy. The same should be done with clothes and other utility goods. The level of consumer awareness regarding the availability of services that help product circulation, is still low, says Huhtamäki. 

“We are lacking routines when it comes to selling secondhand products. We are already used to the return system of bottles as a part of our daily life. The procedure has been made easy.“

It is also crucial that clothes that end up in circulation are high quality garments. Fast fashion and its high volumes of production have affected people’s perceptions that clothes are available at a low cost. Each week fast fashion companies create new needs and trends. 

– Circular economy requires challenging the mentality and ways of shopping created by the fast fashion industry. The idea would be that you buy something out of necessity, that clothes are appreciated and there would be willingness to pay more for a product. The fact that some secondhand platforms, like Emmy, list the brands they accept to be sold, says something about the quality of said brands, says Gädda. 

Incentives for switching to secondhand shopping

The mainstreaming of circular economy will have a huge impact. The emissions of the entire clothing industry would decrease by up to 44 percent, if people doubled the number of times a garment is worn. 

The change is clearly visible among younger consumers: 64 percent of the Generation Z begin their customer journey by looking into secondhand options especially when it comes to clothing. There is a significant increase of 6 percent from the previous year. Unlike previously, men of the younger generations show more interest in recycling and secondhand. 

Structures and systems can act as incentives: Huhtamäki highlights the double taxation of secondhand goods, which means that a new item and a secondhand item do not have equal starting positions. Even though a used product has reduced in value, it is still subject to tax. This hinders the mainstreaming of secondhand culture. 

– Double taxation is a counterproductive equation. Its elimination would help the selling of secondhand clothing in retail become mainstream. Achieving higher margin on secondhand goods would make it profitable for the store, Huhtamäki says. 

Secondhand as part of grocery retail trade 

The shift from linear to circular business models requires combining local and global business networks in a novel way. 

Emmy has formed partnerships with several brands and companies. There is no set model to follow. Key priority is experimenting and discovering what works for your company. 

Emmy and S Group launched a wide-scale co-operation in the beginning of 2023 and equipped every Sokos department store with an Emmy box for collecting apparel to be sold. The first Emmy shop was set up in the department store in Tampere, central Finland. The objective of the co-operation is to extend the lifecycle of clothing, accessories and footwear, and provide an easier way to recycle clothes that are in good condition. 

– This is the first experimentation where a retail store receives used clothes and offers them as part of their selection. The consumer feedback has been excellent. 

The Emmy shop is driven by data at Sokos. Demand-driven restocking means the selection is relevant and on-season, with different sizes being restocked according to sales. This way there is always an interesting range of products for the consumer. 

– This is how it differs from a traditional secondhand store – especially from one where consumers bring their own garments to be sold. The selection in that case is always a bit of a mystery and depends on whatever happens to be brought in, says Huhtamäki. 

Circular economy creates jobs 

Circular economy requires infrastructure to create an effortless system of selling clothes and to enable an easy access for the retail sector to participate in the process. 

– Partnerships are key in mainstreaming secondhand. We have continuously improved our profitability and our accumulated gross margin has improved by 50 percent, but we are still making a loss. When secondhand becomes mainstream, we can expect results, Huhtamäki says. 

Artificial intelligence is fundamental in creating a circular economy infrastructure along with data, which helps, for example, with pricing.  Emmy has gathered data on over one million products, which has enabled the growth of automation. 

– Artificial intelligence offers huge opportunities and we are monitoring the developments taking place, for example, with applications related to the identification of different materials. Nevertheless, secondhand is a labour intensive sector that will always require work performed by humans. This means that when circular economy becomes more prevalent, it will create more jobs, Huhtamäki states.