FASHION INDUSTRY AND THE CIRCULAR ECONOMY: how can "circular" products be competitive? Information and certification are the keys to market success.

A study on the potential connection between the "circularity" of products and their competitiveness in the Italian and U.S. fashion markets, carried out by Gaia Pretner, Francesco Testa, Nicole Darnall and myself, has been recently published on the International Journal "Resource Conversion and Recycling". The main aim of this study is to assess the circumstance under which consumers pay more for circular economy products.

While prior research suggests that consumers are willing to pay higher prices for products with environmentally friendly attributes, this relationship may not apply to “circular economy” products because of their perceived quality issues. We examine consumers’ willingness to pay (WTP) for circular products in an experimental setting that considers three conditions: consumers’ WTP for garments that are made from either recycled fibers or are reused; WTP when consumers are provided information about the circular product's reduced environmental impacts; WTP when the source of environmental information is third-party verified. We use an online survey and randomly assignment to each one of the three conditions (n = 2,400).

Our study assesses consumers’ WTP for circular products’ and focuses specifically on garments that are either made from recycled material or second-hand. We evaluate whether the environmental attribute of a circular garment is recognized and valued by consumers and which type of environmental information affect their WTP for it. We examined consumers’ WTP through an experiment that considered three conditions: WTP for garments made from recycled fibres or reused; WTP when consumers are provided information about the circular product’s reduced environmental impacts; WTP when the source of environmental information is third-party verified. Our results suggest that WTP for circular garments is almost always lower that WTP for their regular alternative, i.e., brand new or made with virgin material garment. The only exception relates to US residents with a high level of environmental concern: this specific group of respondents showed to be always willing to pay more for a recycled garment, notwithstanding the type of information provided. In all the other cases, WTP is always lower for second-hand garments than for recycled ones but increases with the provision of environmental information and even more with the provision of third-party verified information. This study supports the hypothesis that circular garments should be considered a separate type of green product for which the dynamics of WTP are different. We believe that the negative perception of recycled and second-hand garments linked to feelings of contamination and poor hygiene counter-balances the positive evaluation of the product linked to?its?environmental attributes: for?this?reason, consumers are?not willing to pay a premium price for circular products as they normally are for green products.

The provision of environmental information improves consumers’ WTP but only to the same price level of the regular alternative: only highly concerned consumers for the environment show to be willing to pay a little bit more. These results suggest that companies that would like to sell circular products should highlight their environmental attribute via the provision of environmental information and that they should market highly concerned consumers for the environment. Future studies should deepen the antecedents to WTP a premium price for circular products, re-testing previous found interaction for green products.?

The full text of the article can be requested to the authors on Researchgate, e.g. through my personale webpage:

https://www.researchgate.net/publication/354364686_Are_consumers_willing_to_pay_for_circular_products_The_role_of_recycled_and_second-hand_attributes_messaging_and_third-party_certification

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