3rd PLATE Conference
September 18 – 20, 2019
Berlin, Germany
Nils F. Nissen
Melanie Jaeger-Erben (eds.)
Universitätsverlag der TU Berlin
Hultberg, Emelie; Pal, Rudrajeet; Sandberg, Erik: Towards developing a
framework for circular business model scalability analysis: evidences
from fashion retail value chain . In: Nissen, Nils F.; Jaeger-Erben, Melanie
(Eds.): PLATE – Product Lifetimes And The Environment : Proceedings,
3rd PLATE CONFERENCE, BERLIN, GERMANY, 18 – 20 September 2019.
Berlin: Universitätsverlag der TU Berlin, 2021. pp. 381 – 385. ISBN 978-3-
7983-3125-9 (online). https://doi.org/10.14279/depositonce-9253.
This article – except for quotes, fi gures and where otherwise noted – is
licensed under a CC BY 4.0 License (Creative Commons Attribution 4.0).
https://creativecommons.org/licenses/by/4.0/.
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3rd PLATE 2019 Conference
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Towards Developing a Framework for Circular Business Model
Scalability Analysis: Evidences from Fashion Retail Value Chain
Hultberg, Emelie(a); Pal, Rudrajeet(a); Sandberg, Erik(a,b)
a) Swedish School of Textiles, University of Borås, Sweden
b) Department of Management and Engineering, Linköping University, Sweden
Keywords: Circular Business Models; Scalability; Fashion.
Abstract: The concept of circular economy and circular business models have received increasing
attention in recent years, especially when it comes to innovation and implementation. The scalability
aspect of these models is however less explored. This can also be seen in one off the world’s most
resource draining industries; the fashion industry. In recent years circular economy has frequently
been mentioned in sustainability reports and new business models have emerged. This paper aims to
create a framework that can be used for further analysis of scalability of circular business models in
the fashion industry. To do this we draw on the literature on business model scalability and apply
learnings form these papers to a CBM context in the fashion industry. Through a systematic literature
review of 25 articles, we find three different themes of scalability: central strategies, supporting
activities and required resources. In this paper, we have further explored the central strategies and
their different orientations, namely growth, connection, efficiency and adaptability. The implications of
these findings are discussed in relation to circular business action points as stated by 94 fashion
companies, and reported in Global Fashion Agenda report. Further research is needed to elaborate
these themes for understanding scalability of circular business models in the fashion industry, explore
the underpinning logics, and prescribe a comprehensive framework on its basis.
Introduction
The concept of circular economy and circular
business models (CBMs) has received
increasing attention in recent years. Despite
this, the logics underpinning the scalability
aspects of these models are still lacking (Pal &
Gander, 2018). In the linear economy,
scalability often builds on the logic of economy
of scale in production where the unit cost
decreases as volume increases. In circular
economy, production is decoupled from
consumption (Stål & Corvellec, 2018) in that
value can be created without ending up in a
take-make-dispose system. The concept of
value creation, thus get a wider perspective,
which may affect the scalability of these
business models (Pal & Gander, 2018). Further
study is therefore needed to explore what types
of scaling logics apply to CBM, and if new logics
need to be developed to fit the requirements.
The fashion retail industry, being one of the
world's most resource draining and
environmentally stressing industries, has in
recent years adopted CBMs at a greater scale.
The mention of circular economy and circular
business model can be seen in several
sustainability reports (Stål & Corvellec, 2018;
H&M Group, 2018) and examples of
companies engaged in resale of used clothes,
take-back services, renting or sharing
platforms can be found (Pal, 2017).
Even if many are successful, these are often
small-scale initiatives that will not have a large
effect on the economy as a whole. The reason
for this is in part due to barriers and challenges
such as lack of consumer acceptance and
absence of regulatory or technical support
(Franco, 2017). The “fast-fashion”-focus and
functional limitations that the fashion industry
offers also add to the complexity when
creating and capturing value from CBMs (Stål
& Corvellec, 2018; Pal & Gander, 2018).
Knowledge regarding how to overcome these
barriers and the underpinning logics for scaling
CBMs in the fashion retail industry is still
lacking. This could be another reason for the
low degree of scalability that we see. Even
though a recent report by the Global Fashion
Agenda (“2020 Commitment - Status Report”
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3rd PLATE Conference Berlin, Germany, 18-20 September 2019
Hultberg E., Pal R., Sandberg E.
Towards developing a framework for circular business model scalability
analysis: Evidences from fashion retail value chain
2018) highlights many action points for
transitioning the fashion industry towards
circularity, there is a lack of a scientific
elaboration of these practices.
The purpose of this article is to create a better
understanding of how CBMs can be scaled. In
order to do this, basic assumptions of different
scalability strategies and processes in the
literature have been studied.
Method
The paper is based on a systematic literature
review (SLR) where papers relevant to the
subject of business model scalability were
identified and analysed.
The body of literature on scalability of business
models in the fashion industry, as well as
scalability of circular economy and CBMs, was
found to be quite limited. To deal with this
limitation, the literature review was widened to
cover business model scalability in general
(e.g. not limited to a specific industry or
context).
A literature search was carried out using
Scopus database and the search words
“business model” and “scal*” in title, key words
or abstract. This search gave 269 papers.
After further review of abstracts and in full text,
25 papers were identified that were relevant to
the research subject.
In order to analyse the data an inductive
method building on thematic coding, as
described by Flick (2009), was used. The
papers were summarised with focus on
scalability, after which the information was
coded by all three authors and structured into
different themes guided by a process
perspective adapted from Van de Ven (1992).
In the next step cross analysis was performed
to look at patterns within each theme. This was
done by one of the authors by using different
colour schemes to group similar findings to
build clusters. From these clusters the central
strategy orientations emerged iteratively
through discussion with the other authors.
The findings from the SLR were then applied to
a CBM context from the fashion industry. To do
this a report from Global Fashion Agenda has
been used (Global Fashion Agenda, 2018). The
report includes a set of action points on
circularity that 94 companies has committed to.
The aim is to accelerate the industry's transition
to a circular fashion system and the report
therefore give a good representation of
strategies currently used in the industry.
Findings
When analysing the literature we found that
the strategies and processes behind scaling a
business model could be categorized from
different views and at different levels. Guided
by Van de Ven’s (1992) perspective of
process, this understanding lead to three
themes; (i) central strategies, (ii) supporting
activities and (iii) required resources, as
described in table 1. In this working paper we
mainly elaborate on the central strategies and
apply them to circular fashion retail.
Central
strategies
The central strategies have
direct causal relationship to
scaling. They do not explain in
detail how scaling is done but
map out a direction.
Supporting
activities
Supporting activities help the
central strategy to be realized.
These activities are more
detailed and can either be a
sequential process, or an
individual action.
Required
resources
Required resources are fixed
entities that a business needs to
be able to scale.
Table 1. Definitions of the themes.
When analysing the central strategies, four
distinct strategy orientations emerged; (i)
growth oriented, (ii) connection oriented, (iii)
efficiency oriented and (iv) adaptability
oriented.
The growth oriented strategies revolve around
a more traditional understanding of scaling as
a process of growing a company in size and
market share. For example, Biloshapka and
Osiyevskyy (2018) argue that a constant
scaling up process of the business model is
the principal way to satisfy shareholders'
expectation of growth. To do this they discuss
increase in sales to existing customers as well
as introducing new products and finding new
customers as key mechanisms.
The connection oriented strategies builds on
relationships between individuals and/or
organisations. Building strategic partnerships
and collaborations with other industry players
as well as policy makers are identified as
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Towards developing a framework for circular business model scalability
analysis: Evidences from fashion retail value chain
important for the scaling process (Nielsen &
Lund, 2018; Ma, Lan, Thornton, Mangalagiu &
Zhu 2018). Ma et al. (2018) also recognise the
importance of establishing these connections
early on, especially with local governments. If
this is not done, it could create barriers that
hinder the scaling process at a later stage.
Another type of connection is made with the
customers, here the literature for example
discuss freemium models (Täuscher &
Abdelkafi, 2018) and different type of network
effects (Stampfl, Prügl & Osterloh, 2013).
There is two different efficiency oriented
strategies in the literature. The first is
connected to technology and how that can be
utilised to automate processes for improved
efficiency (Stampfl et al., 2013; Makides &
Anderson 2006). Nielsen and Lund (2018)
discuss another, more general area, that deals
with overcoming capacity constraints. They
argue that scalability can be achieved by
identifying and removing traditional capacity
constraints related to the specific market that
the business operates in.
The last of the four orientations that was
discovered is adaptability. To achieve scale, a
business model should be able to adapt to
market needs, which also includes identifying
unmet needs as opportunity to scale (Mohan &
Potnis 2010). It is also important to adapt to
the customers’ existing knowledge for easier
adoption (Stampfl et al. 2013). Another area is
adaption to different laws or policies, either
when entering new markets or changing
regimes in current markets (Stampfl et al.,
2013).
Implications for the context of
circular fashion retail
In this paper we focus on the four CBM
strategies identified by the Global Fashion
Agenda (2018) as tactical areas where the
fashion industry need to achieve scale in the
transition towards circularity. Below we will
discuss these tactical areas in relation to the
scaling orientations that were identified though
the SLR, i.e. those related to growth,
connection, efficiency and adaptability.
Design for recyclability
Designing for recyclability could be an important
step toward adapting to a circular business
model. Depending on the product and the
business model, this could include designing for
functional durability and repair to prolong the
garments life, and/or designing with material
recycling in mind by using mono-materials. The
companies involved in Global Fashion Agenda
report that the barrier they face in this area is
lack of knowledge. According to the report
(Global Fashion Agenda, 2018), circular
economy is still a rather new concept, which
means that suitable tools and training material
still need time to be developed.
The strategy that the companies have to
increase recyclability through design, builds on
adaptability oriented strategies. By educating
design and development teams in circular
design strategies and include circularity into
their design briefs, they aim to adapt their
current strategies to the new context and what
they believe will be the future market need.
Furthermore, some companies have explored
new business opportunities such as repair
services. This requires a flexible organisation
that can adapt to new business opportunities as
they develop. In our findings, we also saw that
adaptability oriented strategies refer to adapting
the offer to customers’ existing knowledge for
easier adoption (Stampfl et al. 2013). This
could be an important aspect to consider, since
adoption will be slower if the switching cost
from conventional offerings is high.
Garment collection
Building garment collection systems is another
important area to achieve circularity. Perhaps it
is also the CBM area in the fashion industry that
has been scaled the most at this point (Stål &
Corvellec, 2018). For example, in 2018 H&M
collected 20 649 tonnes of garments in their
take-back service (H&M Group, 2018). This is
however only a fraction of new garments sold.
The companies in the Global Fashion Agenda
generally follow a growth oriented strategies
where new distribution channels are added, or
already existing expanded, to reach new
markets and more customers and thereby
increase the collected volumes. In- store
collection, where existing infrastructure is
utilized, seem to be the most common practice
even though other initiatives also exist. Marks
& Spencer are for example exploring home
collection as an alternative (Global Fashion
Agenda, 2018).
In addition to this, the companies in the Global
Fashion Agenda have activities involving
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Towards developing a framework for circular business model scalability
analysis: Evidences from fashion retail value chain
customer engagement. These activities, as
described in the report, also follow a growth
oriented strategies where advertising and pop-
up stores are used to achieve customer
awareness. There seem to be an opportunity
here for more connection oriented strategies,
where stronger relationships with the customers
can be built to achieve engagement. These
types of activities might exist but not as well-
known or well represented cases, hence not
evidenced through current reports.
However, connection oriented strategies are
prescribed when it comes to influencing legal
regimes and creating a more efficient system
overall. Collaboration between brands, NGOs,
local authorities and other stakeholders is
suggested for developing a more efficient
garment collection system (Global Fashion
Agenda, 2018).
Resale and reuse
Resale of clothes is not a new concept, but a
new take on it is perhaps needed for the
transition to CBM to succeed. The most scaled
method mentioned in the report is collaboration
with partners who already have the distribution
channels needed. For example, H&M work with
both international sorting companies and
national charity organisations for the resale of
their collected garments (Global Fashion
Agenda, 2018; H&M Group, 2018), this shows
the use of connection oriented strategies.
Finding a suitable match would be vital for a
large global company like H&M. They would
need a partner able to handle the large
volumes in their garment collection service as
well as working with international solutions.
Other companies use growth oriented
strategies and add resale as an additional
sales channel. Seeing a positive outcome they
have then expanded this channel using
traditional growth oriented strategies such as
market development and penetration. Eileen
Fisher have for example set goals to increase
resale by both opening a new resale store and
expanding resale in their normal stores (Global
Fashion Agenda, 2018).
The challenge with resale is the unpredictability
when it comes to availability and quality of the
collected garments. In addition, the Global
Fashion Agenda report (2018) also identifies
the costly handling including shipping, sorting
and repair as major barriers to scale. This can
be related to what we found in the SLR where
Kohler (2018) for example, discusses how
managing a growing crowd can lead to
diseconomy of scale when each task needs
specialized coordination. Even though he
discuss this in the context of crowdsourcing it
could be true for the resale of fashion with its
high degree of customization in common. It
could therefore be interesting to look more into
how efficiency oriented scaling strategies could
help this process forward.
Recycled post-consumer textile material
The last area that was identified by the Global
Fashion Agenda (2018) is to scale up the use
of recycled post-consumer materials.
Companies report that the biggest barrier for
this is that the supply of material does not
meet the demand. Consequently, to find a
solution to scaling up the use of recycled
material the supply must first be solved. This is
however primarily identified as an industry
problem rather than a company problem.
Some companies have adopted connection
oriented strategies where they identify key
partners to collaborate with, or invest in, to
develop and test new technology. In this way
both the company and the industry at large will
eventually be able to scale the use of recycled
materials. However, the report also mention
that regulatory incentives and further
involvement from policy makers is needed.
Conclusions
This paper contributes to the understanding of
CBM scalability by identifying three themes of
scalability from a strategy-activity-resource
perspective. From the themes we have also
found four different scalability orientations that
can be used when scaling business models.
We have further applied this prescribed
framework to a CBM context in the fashion
industry.
The framework needs more elaboration along
the other two themes identified within business
model scalability literature. In the future, this
framework could be used as a starting point,
and for assistance, when locating right
strategies for fashion retail business looking to
scale their circular models. Another approach
could be to explore the combination of the
framework with the value mapping tool by
Bocken, Lenssen, Short, Rana & Evans (2013)
in order to investigate what values are scaled,
using which scalability strategy, for multiple
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stakeholders. Case studies can conducted to
explore these aspects of CBM from the fashion
retail industry.
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