Description

Running a Product-as-a-Service Business includes refurbishing products. It is not only a process in itself. It can also be another business model in itself.

Philips created a symbiotic relationship between PaaS and Refurbishment. PaaS returns are refurbished and sold as refurbished products. And many more products that are not available as subscriptions can be bought as refurbished.

In this episode, Boris Romero and Vincent van Lamoen from Philips give us insights into the refurbishment process, customer communication and the differences between the subscription and refurbishment propositions.

This episode is the fourth in the series PaaS Decoded, 16 conversations about the fine details of product-as-a-service.

Video Impression

People

Boris Romero, New Business Venture Lead, Personal Health, Philips

Vincent van Lamoen, Finance Director Personal Care, Philips

Patrick Hypscher, Co-Founder of Green PO, Expert in Sustainable Business Models

Chapters

00:00 Intro
03:39 The overview of Philips products offered as refurbished and as-a-service
08:44 Offering new or refurbished products as subscription
10:32 Giving information about the quality of refurbished products
13:00 Changing product design based on refurbishment requirements
13:37 Replacing hygienic components
14:06 Consumer research predicted different results than actual customer behavior
14:59 The refurbishment process in detail
19:00 Always meeting the legal requirements
21:30 Communicating about Refurbishment to Customers
28:44 Refurbishment is contributing to the triple bottom line
30:23 Refurbishment sells on its own, Subscriptions not necessarily
31:44 Reducing decision time with subscription options
32:33 Refurbishment and subscriptions require endurance and an end-to-end view
34:41 Customers and regulators will create more demand
37:15 Invitation to share and learn with others

About Philips (from website):

Royal Philips of the Netherlands is a leading health technology company focused on improving people’s health and enabling better outcomes across the health continuum from healthy living and prevention, to diagnosis, treatment and home care. Philips leverages advanced technology and deep clinical and consumer insights to deliver integrated solutions. The company is a leader in diagnostic imaging, image-guided therapy, patient monitoring and health informatics, as well as in consumer health and home care.

Further Links

Breast Pump Rental Shop (The Netherlands): https://www.philips.nl/c-e/mo/rental-breast-pump.html

Refurbished Shop (The Netherlands): https://www.philips.nl/c-e/shop/ho/household-refurbished-shop.html#

Refurbished Shop (Germany): https://www.philips.de/c-e/shop/de-generalueberholt.html

Refurbished Shop (UK): https://www.philips.co.uk/c-e/shop/ho/household-refurbished-shop.html

Press Release: Philips takes home Cannes Lions Creative Business Transformation – Sustainable Commerce – Grand Prix award for Better than New campaign https://www.philips.com/a-w/about/news/archive/standard/news/articles/2024/philips-takes-home-cannes-lions-creative-business-transformation-sustainable-commerce-frand-prix-award-for-better-than-new-campaign.html

Philips Better Than New Full Campaign Video https://www.youtube.com/watch?v=M8h_Op0qCw0

Transcript

Boris Romero: When we were doing the initial consumer research, we found through research and surveys that consumers were probably not too keen on the idea of buying a refurbished personal care product.

However, when we went to actually do the first live test and offer these refurbished devices, we saw the opposite. We saw a demand for those devices. And in this case there is a strong demand for this type of devices against the advice of the surveys and the theoretical research.

Patrick Hypscher: Welcome to the fourth episode of PaaS Decoded, 16 conversations about the fine details of product as a service. In the last episode, Anna Balez illustrated why subscriptions should not be the only circular approach. In today’s episode, we look at an essential process step of every subscription, the refurbishment.

We don’t use an easy case, but review the refurbishment of personal care products with skin contact.

Patrick Hypscher: He has degrees in industrial design and an MBA. He developed new products throughout his whole career. First, he worked as a rapid prototyping engineer in London before moving to France as manager of new business development and innovation at Rehau.

More than 10 years ago, he changed to Philips, where he launched new product innovations and ventures and is developing and scaling the first ever portfolio of subscriptions in the company. Welcome Boris. Thanks

Boris Romero: Thank you, Patrick. Happy to be here with you.

Patrick Hypscher: And we have a second guest. He has business and financial management degrees and has worked in multiple controlling and finance roles. He started his career at Ahold, controlling Albert Hein’s complete business in Belgium. For eight years, he is working for Philips as finance director of personal care. He oversees the global business activities related to grooming and beauty. He’s also responsible for the financial side of global subscriptions and refurbishment activities. Welcome, Vincent.

Vincent van Lamoen: Thank you, Patrick. And thank you for the very nice and extensive introduction.

Patrick Hypscher: It’s great to have both of you here talking about your activities at Philips. But before we start, I have one personal questions. What is the last refurbished product you personally used?

Boris Romero: It was a mobile phone for my daughter.

So we have this conscious discussion with her. Shall we go with the new, shall we go with the refurbished? She consciously went for the latter. So it shows that new generations have a different mindset.

Patrick Hypscher: Okay, cool. Nice. And how was it for you, Vincent?

Vincent van Lamoen: Not sure if it, if it qualifies in the, the, the product that you are referring to, but I pretty recently bought a secondhand mountain bike. So it’s, it’s a more second life and of course it needs maintenance, but I I’m a big fan of websites like eBay and in the Netherlands, we have Markplaats. So buying and selling secondhand stuff to give it a second and third and fourth life, I highly promote. And it cycles, well, it’s not to blame for the bike at least.

Patrick Hypscher: Great. So, and, and actually you’re the one who’s refurbishing it then.

Vincent van Lamoen: Exactly.

[00:03:39] The overview of Philips products offered as refurbished and as-a-service

Patrick Hypscher: All right, cool. Let’s switch to Philips. What kind of. products do you offer as a service?

Vincent van Lamoen: Yes. So actually Philips did quite some some lift and shift from a strategic perspective with our company in the past years, I think that was not unnoticed.

For example, we started our, yeah, organization with light bulbs. And we don’t have those anymore. Long story short, we currently are active, let’s say in two big domains, which is the healthcare organization or health systems is what Philips is referring to. So let’s call that everything related to hospital and also in home monitoring and we have the consumer goods, which we refer to with personal health.

So in health systems we are over 30 years already active in collecting, repairing parts, spare parts refurbishing, maintenance in machines. In the meanwhile, there are like 10K machines active with a second or third live currently. That’s a very nice achievement already within Philips.

However, Boris and I are active in the consumer goods or personal health business. And there we are active in three businesses.

So, Boris and myself are responsible for the grooming and beauty part. That consists of hair removal products, shavers, we have the famous OneBlade. Also with blade replenishment.

Next to that, we have our healthcare. So everything with power toothbrushes also with, with a brush head replacements or replenishment.

And we have the modern childcare business where we for example, also offer in refurbishment now and subscriptions as well, breast pumps and video monitors.

Patrick Hypscher: So, and in all, so all the examples you mentioned at the end, they, these products are offered as a service.

Vincent van Lamoen: That’s a fair remark. So there, the answer should be no. Although we are still learning, we started with some products. The majority is in the female hair removal or female depilation devices. And our biggest, yeah, product active there is the IPL or intense pulsating light. That is a machine that works with, with heat or with light to yeah, remove or at least temporary reduce the hairs on the body.

And next to that, we offer the one blade, so both the handle and then also the, the blade replacement. In oral healthcare, we have the power toothbrushes with the brush head replacements. And in modern childcare, what I mentioned, the breast pumps and the video monitors that we offer currently as as refurbished products.

And we are extending actually in hair care. We have now also some start as a, like, like a a styler hair dryers, we also start to offer now, but it’s also still a learning journey to see where we can further extend our portfolio into the refurbishment domain.

Patrick Hypscher: And just that we have it clear. So you have all these products, you just mentioned, as refurbished. And all of them are also available as a service as a subscription or only a fraction of these products as subscription.

Vincent van Lamoen: Yeah. So subscription is a fraction of that indeed. So we have a return flow coming from our subscriptions and naturally because people churn also naturally at some point in time, but also from our retail business, we get returns back.

So that’s what I mentioned was all related to refurbished products, so the second life.

On the subscriptions, we offer mainly the IPL. So the what I mentioned the hair removal, our depilation device. We also have in subscriptions the one blade. So that’s a combi deal of a handle with the shaving blades and you get the replenishment on the blades.

And next to that, we have also the power toothbrushes and the brush heads with replenishment.

And we are now piloting in the Mother and Child Care with again, the same products, the breast pump and the electric breast pump and the video monitors as well.

Patrick Hypscher: So to me, that sounds like that you naturally started with refurbishment and, and then you extended to subscriptions because you also already have the products know a bit, the processes probably exceptions apply, but that seems to be a bit the overall journey.

Vincent van Lamoen: Yeah, to be honest, it went a bit simultaneously, I would say. Also because we saw from applying market and customer and consumer feedback, we saw there was a big, big need and also to, to, to capture a price barrier on some products for subscriptions and to have more pay per month use of device.

And that we started I think six, six, six to seven years ago, we started really literally a pilot with 30 IPL devices in the Netherlands. And we did it from our actually Boris and I were in the same team back then. Literally from our yeah laptop, we started to do show and that developed until the level we are now.

So that’s simultaneously actually went, yeah, based on what we found from market research and consumer insights.

Boris Romero: Okay. And I will add for us, the, the ability to refurbish was a pre requirement for the new business model. And the business model is creating a new inflow of returning devices, building upon that. But the business model itself is coming from a consumer need new trends on the market, very clear attitudes towards less consumption and circular economy trends. So it was an adaptation to those needs.

[00:08:44] Offering new or refurbished products as subscription

Patrick Hypscher: When we look at the subscription propositions, let’s take the IPL. Am I, as a customer, am I able to choose between a new product and a refurbished one, or do I just sign up and get sometimes a refurbished one or sometimes a new one?

Vincent van Lamoen: Yeah, that’s a valid question. So we did do a pilot on also on the refurbished devices to bring them also again back in subscriptions.

But we noticed that the attention was too limited. The price barrier is at least lowered in that sense. And then we found that the interest is more on new devices. So currently we are only offering new devices in our subscription offerings or as a service offerings.

Patrick Hypscher: Okay. And then when someone churns and you get the devices back, you refurbish them and then you sell them as secondhand, as refurbished.

Vincent van Lamoen: Yeah, that’s correct. And for that we use our online web shop. So our me or we call Phillips and my shop. So people can buy them online the refurbished products.

Patrick Hypscher: Okay. And this is based on the customer feedback that the interest in refurbished products as a service, is lower than the new ones, right?

Vincent van Lamoen: Correct. Yeah.

Patrick Hypscher: Okay. Interesting. Interesting. On the other hand, also nice and kind of a highlights the importance that you have another channel which you can use to sell refurbished products.

Yeah. Because if you don’t have that one, then you have to find another way.

Vincent van Lamoen: Yeah. I mean, maybe to add one sentence to that one, Patrick, is that we are also investing in actually startups to co operate also with customers that also offer one off sales or one off transactions, how we call it, versus subscription offerings. So that is what we are also investigating. And actually we have started that already. And further, yeah, defining what model works best for all parties included in full. .

[00:10:32] Giving information about the quality of refurbished products

Patrick Hypscher: Okay. If we look at the products you offer for refurbished sales, do you describe them in a specific way, what’s the condition how did you refurbish them, or is it just saying this is refurbished you can buy it?

Boris Romero: There we have learned through the, through the time by testing. So basically we, at the beginning, had the idea of having different classifications, Grade A, B, C, D. But in reality once we apply very strict quality criteria for hit the market again, we realized that it is only good and no good.

So at the moment we’re only offering new and refurbished and all those elements or those components that are not meeting the requirements -either cosmetic or charging, discharging times of batteries or functionality of the hardware or software – they get disposed of responsibly or disassembled in some cases, only one level of refurbished.

Patrick Hypscher: Okay. Okay. And is like the appearance also a criteria for you? So, do I see as a customer, do I see that this is a refurbished device?

Boris Romero: You have to, but normally if you’ve chosen for that route, you have lower expectations when it comes to cosmetics. The feedback that we get from our refurbished products is positive.

So generally, it’s in line and it’s meeting the expectation of our consumers, which is great news. The reality is when we start this model, we, we work with an existing product, a product that was not originally fully conceived to be recycled two, three, four times. So when you look at, for instance, the outer design, the appearance of the design of the product, it can be prone to some cosmetic markings and that means that we have to come keep the highest standards and for future product releases, we are taking all these requirements, learning from them into consideration to make sure that these components have a better wear and tear and they can be refurbished to a higher rate.

We’re already good when it comes to yield rates. But by doing these tweaks, we can even increase it. And cosmetic is very important for us. Of course, if a consumer is subscribing or buying a secondhand device, still upwards of 400 euros, they are expecting very good quality.

[00:13:00] Changing product design based on refurbishment requirements

Patrick Hypscher: Yeah. Yeah, definitely. And is it then correct to say that for some of the products you’re already transferring the learnings from the refurbishment process to the product design for the next generations of these products.

Boris Romero: We’re starting to collect all those requirements and feeding them into the overall funnel of requirements to make sure that, yeah, we can optimize and we can even have a higher and pre processing rates, either full products or individual components.

Patrick Hypscher: All the circular economy experts and academics love to hear that. Yeah.

[00:13:37] Replacing hygienic components

Vincent van Lamoen: Yeah. Maybe, maybe one thing to add from a consumer perspective, because we, we also sell hygienic related products. So it touches the skin and some consumers have the, the fear in, in, in, yeah, going for such a, such a product secondhand, in that sense, we always replace all the parts.

So in the IPL, the caps that touches the skin, for example, the one blade, we always and next to the, the extensive hygienic cleaning. We also put a new blade on it, of course. So if it touches the skin is for sure replaced.

[00:14:06] Consumer research predicted different results than actual customer behavior

Boris Romero: When we were doing the initial consumer research, we found through research and surveys that consumers were probably not too keen on the idea of buying a refurbished personal care product, precisely because of the reasons that Vincent explained.

However, when we went to actually do the first live test and offer these refurbished devices, we saw the opposite. We saw a demand for those devices. And that was good learning for us. When you do these theoretical exercises, you get some inputs. When you compare it with real life experiments and testing, sometimes they’re contradictory.

And in this case, we realized, and actually there is a strong demand for this type of preprocessed devices against the advice of the surveys and the research, theoretical research.

Patrick Hypscher: Yeah, never ask a customer or always look what they’re actually doing and deciding.

[00:14:59] The refurbishment process in detail

Patrick Hypscher: But then let’s, let’s look further at the refurbishment process itself. How does it look like?

Boris Romero: So first we have the inflow, influx of devices that have been used previously. And there are two main tracks. One is the ones coming from the subscription program. And the other one is the returns that are coming from normal customers, so all the retailers. These two, actually, because we use the same product, the same SKU, they get mixed, doesn’t matter for that process.

And it goes into a selection process. First part is to recognize what product is, of course, for logistics. And then it goes into a classification of cosmetic. First, it starts with the outer box, if the boxing is in good condition or not. Then it moves to the device itself. The first step is to clean them completely.

And for that, we use both antibacterial and antiviral cleaning agents to make sure that the process from that moment on is safe also for the operators. And we start comparing against the set criteria, not only on cosmetics, but on functionality. When it comes to cosmetics, we have these golden samples, which are physical examples that show how the product should look like, maximum size of the scratches. What is permitted, what is not, and then the operator can control if it meets the criteria or not.

And for the technical side, we need to match the original manufacturer specifications. When it comes to functionality, to charging, discharging times. It is exactly the same functionality and performance as a new device.

After that, devices are then repacked, so all the components in the packaging that are missing, so user manuals or accessories, they get replaced with new accessories, particularly in the case that they are in direct contact with the skin. We proceed to the last sterilization of the product. And after that, it goes back to the stock as a sellable product.

That is pretty much the story.

Patrick Hypscher: It sounds fun. If we look at the sorting and also you mentioned the matching the functional requirements. Another, idea is that we use data like device data about the condition. Do you already have some usage data? So also when it comes to, let’s say battery capacity, for example, or some other data about the product. Can you leverage data here already, or is it more or less a physical and mechanical inspection?

Boris Romero: Well, first of all, we don’t collect any consumer data and have private data. When it comes to the device itself, what we compare is versus the original technical specification. So there is no, at the moment, way to read, for instance how much use has been this device put through. What we calculate is the average time in the market and because it’s a single person device, we know what would be the case for standard meet use, heavy use, low use, and then apply some safety buffers, calculate, estimate what would be the maximum amount of time that a device has been out.

And we also have a time limit. So we check this too, and in some cases of course, if the device has been already in the market for too long, or the number of implied usage cycles has been below X level, then the device is no longer eligible for a new cycle. But these are not directly, this is not data that we download directly from the device, but it’s more that we look at the production times and so on.

Patrick Hypscher: Okay. Yeah. Makes sense. And you talked about hygiene. Hygiene is basically ensured by replacing the parts that have direct skin contact.

Boris Romero: That and also when it comes to general housing, that’s when we have these special cleaning agents with antibacterial and antiviral properties.

Patrick Hypscher: Sure.

Boris Romero: Because they are also part of the device and in contact with a new user.

[00:19:00] Always meeting the legal requirements

Patrick Hypscher: Are there any legal requirements you have to take care of during that process.

Boris Romero: So first of all, product safety is never compromised and and in that sense, there is no difference if it’s a new product or refurbished product. We have the same responsibility towards the markets. These sets of legal requirements they will apply in any case. Then when it comes to the specific components, like for instance battery operated devices, they have a different framework.

Then of course we need to operate within the framework of those requirements. So when you look at it from that perspective, the responsibility of placing products into the market is very similar, whether they’re new or refurbished. So from that sense, there are no, no significant differences on one or the other.

But of course, we need to observe all the local regulations. No, no big difference in that sense.

Vincent van Lamoen: Hey, maybe one thing to add to that is that of course it’s talk of the town, right? Circularity, energy neutral production, et cetera, et cetera. So I think everybody should, if they have not done so, start focusing on sustainability.

That’s also why every business case, we not only review financially, but also of course with a sustainability mindset.

Having said that, indeed, regulation is also coming in more and more with, with the restrictions and demands. So with that, you’re also more and more pushed towards transparency in the sense of how you do your sustainable operation. And I think that’s, that’s a good and a needed move in that sense.

Patrick Hypscher: Yeah, definitely. Definitely.

So you’re doing quite a lot during that refurbishment process.

Is there anything missing, anything you would recommend to someone who’s setting that up?

Boris Romero: No, just, just come on good business practice. And also next to the technical challenges and to the operational is make sure that you have very clear financial flows because when you get devices back, that creates another layer of complexity that people need to be aware of what are those requirements, right?

Especially, you know, if there are changing of ownership in the devices, like can happen in some models. Those are details that Vincent and myself have firsthand learned that they cannot be overlooked and if you’re aware of that, the better is the right.

[00:21:30] Communicating about Refurbishment to Customers

Patrick Hypscher: Yeah. Okay. Let’s come back to the customer perception. You already stressed that hygiene is of highest importance and of course, product safety for customers.

How much of what you’re doing, during the refurbishment process, how much of that do you communicate and make it transparent to customers?

Boris Romero: Good point. Also, a bit of a learning.

We research our consumers. What do you want to know from us? And high level, when we aggregate all the answers, What we got is that they say, Hey, give me the information I need to make better choices. At the end is up to them, but we need to make sure that the information that we’re presenting to them is very easy to understand, no jargon, no difficult terms is they can relate to it. It’s very tangible and very measurable.

So with that, we over the time and not just for subscriptions, but for the full refurbishment program, we developed a series of communication that they always aim to quantify the benefits, right?

For instance, in the case of IPL, we have worked in line with the regulation, a way of working rather, which is called the RECIPE, R E C I P E, from 2016. And by calculating according to that model, we know that by using a refurbished IPL LUMEA instead of a new one, The carbon footprint is reduced by approximately 75%. This is the type of information that it has to be very tangible, very explicit easy to understand for our consumers.

And then we go into different channels.

Of course, number one is our own Philips. com. Within our com environment, we have dedicated landing pages for the refurbished devices, and there we show not only the benefits towards the environment, but the benefits for the consumer in terms of pricing, but also in terms of warranty, right? For us, it’s still two years warranty.

They’re not getting any less by buying a refurbished device. And that is the sort of information that they need to know in order to make those choices.

So far it’s working well. We’re also, of course, making use to extensive communication techniques. So for instance, we have campaigns dedicated exclusively to showcase the refurbished devices. Recently, actually last week, we were awarded with a, a very prestigious award. The Cannes Lion Award on the campaign for refurbishing of the Lubea product. That was a very good achievement and the campaign was very relatable for consumers. And we tried to put it in very simple terms. So far, it seems to be working.

Patrick Hypscher: Nice. Congratulations. So if if it’s available, I’ll add a link to that campaign in the show notes.

Boris Romero: It’s called the better than new campaign.

Patrick Hypscher: Lovely, lovely. Coming back to the Philips. com environment and the refurbished pages. Do you provide specific information about your refurbishment process to gain trust with customers or is it not necessary?

Boris Romero: In general, with consumers, it’s benefit driven, right? We don’t talk in terms of technical specifications, especially within the beauty environment where not everybody is necessarily interested in knowing is that a 2, 000 watts or dryer or is that a laser or is it a light? There are details that are not necessarily relevant for the objective.

Same method, methodology we apply. We talk about what is the benefit, right? Like, you find the carbon footprint. Print. No compromise on warranty and no compromise in hygiene lower price barrier. And that’s the type of language that immediately resonates.

We try to stay away from explaining things like, okay, this is a solution of alcohol with this, this and that. The percentage of no, that’s not the direction we’re going.

Patrick Hypscher: And if we stick to hygiene. So do you, for example, mention that you replace all the components with skin contact

Boris Romero: it when it comes to the accessories that are direct clean contact?

Yes. They get replaced. And of course the larger components like the handle themselves, the, the housing itself. In that case we clean a completely from the outside, but with under replace.

Patrick Hypscher: Yeah. And, and, and you, do you communicate the fact that you Yeah. Do it Correct. Yeah. Yeah, for what? Yeah.

Based on the research you’ve, you’ve done, are there any other, let’s say refurbishment specific requirements customers have when it comes to making an informed decision?

Vincent van Lamoen: I think in general, if you compare our IPL device, which is at a quite serious price level versus the OneBlade, which is more and more affordable price level. It will make the distinction between both to add to purchase it at once or to go for a subscription or to buy it from a second life perspective.

But I think also more and more the demand for second life is growing, right? It’s not per se, only the youngsters that do that, it’s becoming more, more common to do so. I think that’s a very positive trend actually in the market we see. And with that, we serve also this big need that is only growing, I think, in the coming coming years and onwards.

Boris Romero: And it’s about perceived risk. If a consumer has been through the decision journey, they investigated what sort of device, what sort of technology, price point. But they’re still facing a significant decision, right? If you look at the open device, it’s now close to 600 euros. They are cheaper, but they can go as high as that.

That’s a serious investment for something that is part of the beauty routine on top of the existing beauty routines. So, any efforts that help to reduce that risk are very, very well received by the markets. One effort is, of course, the business model itself. So, breaking that huge price tag. into monthly payments that helps a lot, but alternatively that refurbish because of course it comes at a lower price.

So less risk for similar comparable benefits. That is definitely the sort of information that the market wants.

Vincent van Lamoen: Yeah, maybe to add to that still is that we also see also material actually a third party step into this domain. And that is why we also proactively communicate with our customers to ship back the goods to us so that we can take care of the refurbishment cycle.

And with that, we can put our quality stamp on it because only we know how end to end we do that process, let’s say on the, on the highest standards. And that’s also why we add again add a two year warranty to also refurbish products. So that’s, we say it’s the same quality level in that sense. To also again be offered with, with our standard guarantee.

Patrick Hypscher: And it’s even sometimes, or in many cases, better than new, as I learned.

Boris Romero: That’s what the campaign says.

That is true.

[00:28:44] Refurbishment is contributing to the triple bottom line

Patrick Hypscher: Nice. So Like all in all, is there anything you, you want to share about your refurbishment experiences we didn’t touch upon yet.

Vincent van Lamoen: Yeah, I think it’s it’s, it’s a happy space to work in, right? Because you serve planet’s, but also consumer demands in that sense.

It’s, it’s a multiple win, win, win area to play in, but of course, we only now tell the story where we are currently at and we are growing. So not only volume, but also bringing more offerings to the table from a secondhand perspective. But it’s not coming just in a day. You have also this offering because you need to look from a production and innovation, actually, and innovation teams we are also having the discussions. Have to be ready that we produce new goods as our new offerings within one, two, three years already enabled for refurbishment and that’s, that’s where it starts of course. And then also trigger and the alignment with our customers. And if consumers bring back the goods that also they’re not scrapped or thrown away in the sense.

But they, yeah put on a return to us. At least give, give the option to do the second hand option. And that is going to all kinds of disciplines within Philips, but also outside of Philips, but that is that’s, that’s quite an operation to, to to be able before you can kick it off and start. Right. That you can imagine it’s warehousing, it’s manufacturing, it’s innovation the customer relation, consumer relation also commercially you need to to be aligned internally within the company. So it’s quite an quite an achievement to get there, but it’s, it’s for the, for the greater good on all, on all, yeah, to be honest, on all areas.

[00:30:23] Refurbishment sells on its own, Subscriptions not necessarily

Boris Romero: I would probably add a distinction between the refurbishing and the product as a service. They’re linked, but refurbishing, which is what Vincent just explained, it kind of sells on its own. It’s a win win win. There’s not much need to persuade people why. However, for the product as a service, that’s probably not for everybody and it’s not for every proposition. There are products that naturally, they don’t seem to fit in with the model.

However, those products that are by nature new to the market, they have some degree of complexity, technical complexity. In our case, our target market mostly is coming from disposable razor blades. There’s not a lot of science there. They know how it works, they know very well The sequence.

Suddenly when we introduce a different technology that like, why is it too complex to use? Is it for me? Do I meet the eligibility requirements? Is it safe? There’s so many questions. And there, the products as a service model just fits in naturally.

There are other propositions that we came to learn that, no, there is not a good fit. So, whereas refurbishing, sustainability, 100 percent coverage. Products as a service is a different story. It’s not for every proposition.

Patrick Hypscher: It’s a more exclusive, happy space.

[00:31:44] Reducing decision time with subscription options

Boris Romero: Exactly. But when there is a good fit, it is great. It just goes on its own.

Patrick Hypscher: Yeah.

Boris Romero: To give you an example, for instance, it, thanks to the model, we call it try and buy, we managed to reduce the decision time. Normally, if they’re going to buy it, it’s anything between four to six months. But now, because it’s a lot easier to make that decision, we’re reducing it to four weeks.

So it is great also in terms of penetration and it comes naturally just because the design of the model. This is, this is an example of how the model can naturally fit very good propositions. We are also aware other industries doing similar initiatives.

Now you have Mobility, you have white goods and there is already established trend in the market.

Patrick Hypscher: Nice. Thanks. Thanks for adding these perspectives.

[00:32:33] Refurbishment and subscriptions require endurance and an end-to-end view

Patrick Hypscher: We are reaching the end and I have three generic questions for you. And the first one is about, let’s say I like the term if someone else wants to enter that happy space of a circular product as a service what’s the main thing they need to ensure?

Boris Romero: You want to kick it off, Vincent?

Vincent van Lamoen: Yeah, I think it’s what I already referred to is it’s, it’s not coming in a day. Right. And yeah .

We started from scratch, for example, the subscription business what I also mentioned early in the interview, we started with 30 products just to see how it works, what kind of powers play, right. How, how is the end to end value chain including shipments, logistics Et cetera. How’s that? How’s that flowing? How is a price perceived in a market, et cetera? But that’s only at a very low scale, right? And then you get what Boris was referring to, you have different geographic aspects. So one country, a model can perfectly suit well in a different market perhaps not.

And there you also have some learning and you also lose some in that sense. You pay some learning money for it to see in which geographic area specific product work and, and, and all the products may be in different areas. Yeah. So I think what we in corporate life often referred to as end to end processes, I think that’s, that’s quite a, um, yeah, quite a hassle to get all the noses in the same direction. Let’s say, including the external world with customers, consumers. And marketing, you need to reach them. What you mentioned logically, Patrick, you need to be transparent on what you’re offering and how we do them for probably refurbishment activities. Yeah, so I think that’s, that’s That’s quite an effort.

So that should be, that should be first aligned before you you kick it off.

Boris Romero: Agreed. End to end. That is key, right from the consumer tension all the way through to even when the consumer, consumer churns and says, no, I don’t want to follow up with this. Fine. That needs to be a happy experience. And to orchestrate all these is really the biggest effort to have that common vision that is shared and understood by all the individual members and then skills that are required. I mean, that is the, that is the challenge.

[00:34:41] Customers and regulators will create more demand

Patrick Hypscher: Thanks. Now let’s look ahead. What are the significant trends you see in the next five years?

Boris Romero: Well, maybe as, as I explained with the example of the, the refurbished mobile phone for my daughter, new generations have a completely different attitude towards ownership. It is clear, first usability , right to use before ownership, that will become more accentuated, more present. Uh, Manufacturers, we have to be aware of that and develop the solutions that fit that mentality that is here to stay as the first one,

maybe on terms of regulatory frameworks, things will evolve . We see sometimes that regulation is catching up behind the events are happening.

But I think in here, it will be more common to having to start thinking from that angle. For instance, the right to repair, that is an excellent initiative that is having lots of implications for manufacturers. And eventually that just will become the standard, not just in European countries, but all over the world.

And we also foresee a shift in terms of regulatory frameworks, which will definitely help standardize and ensure safety. To me, at least those two are very clear trends that are here to stay.

Vincent van Lamoen: Nice. Yeah. No, I w I would fully agree. And, and for, In the beginning Six, seven years ago, I was also quite hesitant in that sense. And I had to be convinced also partly, although I was in the first

Patrick Hypscher: Boris agrees

Vincent van Lamoen: No, I was challenging it heavily because I’m also, from a finance background, I need to be mindful of the profits at the end as well.

So I had to be convinced also by the proof points that came in. As we see now, for example, the IPL subscription activities, we see the incrementality of that is very high. So there is a huge demand in the market. So we need to serve the demands, or at least we try to serve the demand to the best extent.

That’s maybe better to state it like that. So that’s one thing. And, and these days I’m also sometimes surprised what you can find as a rental or pay per use or pay per month, like headphones. You can name it, right. Almost every product is out there. There seems to be a demand for all those products being offered. It’s not if, it’s more how and how much.

Patrick Hypscher: Okay, thank you.

[00:37:15] Invitation to share and learn with others

Patrick Hypscher: My last question is about the people. So Circularity FM is about sharing knowledge and connecting people. And I guess you’re constantly working on new challenges. Want to reach a certain milestones. Who should reach out to you to connect with you?

Boris Romero: Fair question. I think in this journey, sometimes you feel a bit isolated, a bit alone.

Like if it’s only us, that’s quite true.

Vincent van Lamoen: So in general, everyone can call you Boris, right?

Boris Romero: Oh no, we’re not the only ones. We’re happy already that we’re in contact with some very, very insightful learnings of, of companies that are going through similar journeys.

And they’re also very willing to share, to exchange what has worked better, what needs still to be improved. I think in general, regardless of the industry, but of course better within the framework of consumer goods, companies that are in the journey of transitioning from normal model, selling boxes, one off payment, towards products as a service, we’re interested in understanding how was that transition? Did you keep the same? product and just move the business model or did you bundle product with services? That seems to be the next trend. How was that transformation within the organization? Because it is a shift in mentality completely moving from one model to the other, how were, how were the processes that led to, to that transformation? Did you try to integrate everything or did you separate and build it as a separate entity?

These are learnings that we’re definitely happy to, to learn and also to share. So, yeah, I don’t know what else I think on the financial, financial side. There are also many things that we’ve been learning over the time and we would like to have references of how it’s being done in other companies.

Vincent van Lamoen: Yeah, you can, you can imagine and originally business to business. Build up organization to switch into a business, to a consumer or a business, to business consumer orientation is not always easy. So that’s sometimes close with, with quite some some heavy weather, but at the end, the aim and the entrepreneurial focus has led to the fact that we are where we are standing right now and we are expanding it further.

And for the rest, I can repeat what Boris said, but that, that fully resonates with me. Yeah, let’s, let’s also team up right to to bring even better offerings and perhaps corporations to to our consumers because the need is only and the demand is only growing. That’s, that’s what we believe in.

Patrick Hypscher: Vincent, Boris, thanks a lot for your passion and your openness. So it was really an insightful conversation. Thank you.

Vincent van Lamoen: Thank you, Patrick

Boris Romero: Thank you, Patrick. I’m happy to continue the conversation.

Patrick Hypscher: This was the fourth episode of PaaS decoded, 16 conversations about the fine details of product as a service. If you liked it, share this episode with colleagues or on social media. If you missed a question or a topic, please send me an email so I can improve the conversations for you. If you learn something from this episode, please provide a review via Spotify or apple podcasts. That helps others to discover the podcast. And don’t forget the most abundant renewable resource is your imagination.