“Our goal is quite simple – to enable the brands we all love and whose physical products we constantly use to shift towards a circular economy.” – Hendrik Roosna.
The last decade saw the disruption of the consumer sphere and gave rise to the dominance of the subscription market. Most people now pay monthly or annual subscriptions for their frequently used digital products like Spotify, Netflix, Apple Fitness, LinkedIn Premium, Microsoft 365, Forbes, and The Wall Street Journal.
While digital products have gone “the sub-way,” the physical product market is adapting rather slowly. Most hardware products are only available for full-value sale, not lease or pay-per-use. Sadly, this is uneconomical and ecologically unsustainable given the rate at which hardware products such as smart gadgets get dumped for newer models by users.
10x faster product subscription model
Fairown is threading a subscription-based path for physical goods by enabling the offering of products as a service. Founded in 2018 by Hendrik Roosna and Taivo Türnpu, Fairown is an Estonian fintech startup aiming to allow companies’ swift shift from a linear to a circular economy. They provide a unique platform that enables environmentally-conscious brands to offer their products on a subscription basis and ensure a smooth product renewal cycle by collecting and redistributing the used products.
For hardware products brands wanting to shift from the linear to the circular economy model, gaining complete control of their products’ life cycles is a major aspect, but it is pretty challenging to attain. “It takes no less than a year for the average hardware product manufacturing company to set up a standard subscription model due to diverse industry complexities and dynamics. Fairown presents a 10x more efficient and faster solution. With our platform, companies can have a customised product subscription system launched within five weeks depending on the country involved,” says Hendrik Roosna, Fairown’s CEO and co-founder.
How it works
From iPhones to PCs, down to furniture, every product with a proper value and potential for a second life has a specific checklist to evaluate its subscription value model. Fairown uses this to customise its subscription model for brands and retailers. At the front end, it is all so simple for the consumers. All they need to do is swipe for Fairown’s monthly payment method on the brand’s or retailer’s e-commerce platform and later give up the used product to Fairown.
At the back end, it is more complicated. When a customer checks out a Fairown partner’s product at the Point of Sale, Fairown initiates an unsecured loan contract with the local financial service provider. At the same time, the buyer is placed on a subscription-based payment plan. At the end of the subscription plan, the buyer can upgrade to a new model of the product while returning the used one to Fairown for upcycling or recycling. “If companies have only a small quantity of used products coming back, there’s not much they can do with that. But if these old and used products come back in more significant product model amounts, probably 100,000 units and above per year, the factory would know what to do with them.
For instance, instead of buying new metal components and frames for new iPhones, they can use old ones or refurbish them. We bridge the gap between the used products and their new destination or final destination in the life cycle. And at the end of the products’ primary life, we step in to retrieve them from the consumers and redistribute them to the manufacturers, if the returns are in large volume, or to resellers, if in smaller quantities,” Hendrik explains.
A win-win-win solution for all stakeholders
“In the case of smart devices, it is a tedious and endless cycle going from one model to the next as newer versions get released. You never get to use the full product value before replacing it. And where does the old one end up? At a garbage dump or in a drawer, never to be used again. We take this burden away. With our model, consumers do not need to pay for their products’ full value since they never use the full value either. For instance, laptops and phones are designed for longer usage; meanwhile, most people now use them for less than a year,” Hendrik illustrates.
Unlike buy-now-pay-later services, which encourage zealous and unrestricted consumption that solely benefits brands, Fairown’s subscription model offers a better prospect. It improves conscious and controlled spending at the consumers’ end, encourages customer loyalty, helps the companies, and ensures ecological sustainability. The consumers get to buy products they might otherwise not have been able to afford and return them to Fairown after use, sustainably. By the end of their subscription plan, they would only have paid for the product value they used and not the total value. Of course, the consumers also get to buy/lease secondhand or refurbished devices at lower prices than new ones.
Since the subscription model allows the customers to replace their devices regularly without financial constraints, the brands will keep getting more customers while retaining the existing ones. And in the long run, production costs are also reduced because the manufacturers can recycle used products, which also improves their business efficiency. The ecosystem equally wins because less waste is being generated. It’s a win-win-win solution for all.
A rapidly growing market
Consumers now thrive under convenience and prefer access to products, when needed, over full ownership. Already, this is the case in the entertainment industry, where streaming services now rule. With more people being aware of how their carbon footprint impacts the ecosystem and wanting to reduce it, as well as regulatory and social initiatives like the European Green Deal and Estonian companies’ Green Pledge, there couldn’t have been a better time than now to introduce this solution.
Fairown’s subscription-based payment platform is already being used by various brands and retailers in the Baltics and Nordics. It is gaining popularity as a top payment option. “There is one particular standout scenario that comes to mind,” says Hendrik. “Our service option, which is integrated with one of our partner brand’s e-commerce Point of Sale checkout, gained huge popularity. At the checkout, the payment methods are displayed in the order of popularity. Direct invoice payment, Visa, Mastercard, Fairown, and other digital payment methods are all there. What happened was that we beat Mastercard to the top spot. And this has happened a couple of times,” Roosna explains. This shows that more customers now aim for sustainability and conscious spending instead of just swiping their credit cards to pay the total price value for products they’ll only use for a short period.
€4.2 million seed round secured
Since launching in 2018, Fairown, at a growing speed, has now served transactions worth €5 million. “We moved from 0 to 1 at the speed of lightning. As of October, we have served transactions summing up to €5 million, climbing up from €151K in January this year,” Hendrik divulges. “We wouldn’t have been able to do what we are doing at this scale and speed without COVID-19 and its impact on e-commerce,” Hendrik says.
The startup has also secured a €4.2 million seed round towards advancing product subscriptions and waste reduction. The funding round was led by the Main Incubator (Commerzbank Group’s R&D unit) and was backed by primeCROWD, and STIHL Digital. Fairown intends to scale its solution from market to market and reach global expansion with the funds raised. Currently, they are operating in 8 markets across the Nordics and Baltics and servicing industries such as electronics, robotics, luxury goods, and fashion. Among their clients are industry giants such as Apple, STIHL, and Komplett.
“This investment paves the way for a sustainable future for Fairown as we expand within and beyond Europe. We’ll be launching in Poland in a couple of weeks, and we have also gotten a headstart in Germany with the help of Commerzbank (one of the biggest corporate banks in Germany), our lead investor. They are introducing potential German clients to us and also providing us with their financial services. After adding more countries within Europe to our market reach, the next step would be approaching the USA,” Roosna reveals.
The state of Estonia’s circular economy
Hendrik believes that the current state of Estonia’s circular economy is in bits and pieces. “Some aspects are doing great while others, not so much,” he notes. “Of course, there’s our company and others like it with a focus on sustainability and circularity, but it seems there’s no concrete plan towards a total shift,” he says. “If we are to achieve full circularity by a certain period, there should be a plan towards it. There should be more awareness about it. There should be more visibility,” he continues.
“An initiative or open ground that connects diverse existing and potential players within this field should also exist. This would make more people aware of the circularity model and how they can take advantage of it. The government should encourage communication and awareness of the circular economy through discussions, conferences, etc. They should support startups with a focus on a circular economy and encourage established companies to improve their business model and shift towards circularity,” he adds. “Meanwhile, the awareness should start from the grassroots – schools! The educational curriculum should include topics and lectures about the circular economy and practical ways to tend it. It is such a burning issue that doesn’t go away,” Hendrik concludes.
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Co-author and postgraduate student