Supporting customers to sell used goods: Profitability and environmental implications

As part of their environmental sustainability efforts, retailers in a number of industries offer programs to encourage their customers to sell and purchase used products. To support such “Go Green” initiatives, some firms even provide online peer-to-peer (P2P) platforms. We investigate the economic and environmental potential of encouraging the reuse and reselling of secondhand goods through these firm-enabled P2P platforms. In a two-period model, we consider a firm that sells two versions of a product, an original version and an improved version, and we endogenize the firm's choice between two sales options — one without and another with a secondhand marketplace where used original products can be resold. Customers are heterogeneous in their valuations of the products, and the valuations of used and improved versions are affected by the “reuse value” and “improvement value” parameters, respectively. Environmental impact is measured corresponding to the production, use, and disposal stages of the products' lifecycle. We find that whether encouraging secondhand trading is greener and/or more profitable depends largely on the products' reuse and improvement values, as well as their environmental impact during the use stage compared to the impact during the production and disposal stages. While encouraging secondhand sales can lead to win-win outcomes with respect to the firm's profits and the total environmental impact, other outcomes exist where one or both of these performance measures are adversely affected with the introduction of the secondhand market. Our findings suggest that decision-makers seeking to simultaneously increase profits and pursue greener outcomes by enabling P2P platforms should carefully evaluate product characteristics relating to the reuse value, improvement value, and the use impact on the environment.