We’ve spent decades perfecting one thing: getting products into customers’ hands. 

From ultra-efficient warehousing to same-day delivery and real-time tracking—logistics in linear commerce has been refined to a science. 

But as eCommerce volume has soared, so has eCommerce waste. This has pushed governments, industries, and consumers to rethink what happens after the first sale. Think: recover, repair, refurbish, reuse.

That shift has put a spotlight on something the industry was never truly built for: Reverse logistics at scale for circular business models. 

We're no longer talking about a return here and there. We’re talking about structured flows of products going back, being inspected, repaired, refurbished, stored—and sent out again, possibly multiple times.

It’s considered complex. It can be costly (when dealt with unstructured). And it’s absolutely essential for circular business models to work.

Yet while forward logistics has been optimised to the edge, circular logistics is still playing catch-up. Most companies are still operating with linear assumptions in a world that’s becoming circular.

In fact, in our conversation with Bugaboo, a manufacturer of premium kids’ and baby products, the same finding emerged: many companies launch circular models while still operating on linear infrastructures.

Bugaboo piloted a rental program back in 2015, only to discontinue it shortly after. When asked why, they were clear:

“We stopped the first rental pilot because we tried to incorporate the rental business into our existing process of sales, finance and logistic which was a huge mess and didn't work out.” - Rolf Smeding, Director of business development @ bugaboo.

Their experience is a common one. Circular models require more than a new business concept, they require rethinking operational systems from the ground up.

Read the full case study on Bugaboo’s relaunch of their second rental pilot and the lessons they applied from the first attempt: Bugaboo case study.

With models like second-hand resale, product-as-a-service, rentals, subscriptions, and take-back programs becoming mainstream, the demand for a logistics infrastructure that can handle product returns, refurbishment, and redistribution at scale has never been higher.

We spoke with the experts

To better understand the role of logistics in circular business models and to unpack this challenge, we sat down with Ilari Puputti from Posti—Finland’s largest logistics company, with operations across the Nordics and Baltics.

In fact they are also witnessing the shift to circular business models first hand: 

“Every fourth product that we ship is a second-hand product. That’s 25% of all products we deliver,” shared Ilari Puputti from Posti.

And as a result have been developing a solution to tackle the challenge of logistics in circular business models. 

In this article, we share the key takeaways from our conversation with Ilari:

• What is reverse logistics?
• Why reverse logistics is important for circular business models?
• Where reverse logistics show up in circular business models. 
• The four pillars of reverse logistics
• The challenge in reverse logistics

Continue reading this guide or watch the full discussion between Ilari from Posti & Michael from circuly

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What is reverse logistics?

Reverse logistics refers to the flow of goods from the customer back to the business. It includes any process that takes place after the point of sale—returns, repairs, refurbishment, recycling, or disassembly.

“In linear logistics, it’s like shooting a shotgun: products go from one central location—like a factory or warehouse—and spread out across many different destinations.

But reverse logistics works in the opposite direction. You have to collect individual items from many scattered locations and bring them back to one centralised point. Only then can you inspect, repair, refurbish, or store them—and finally, reintroduce them into the regular distribution flow for the next customer.” — Ilari Puputt , Posti

Two types of reverse logistics in circular models

1. Material recovery and reintegration

This model focuses on disassembling returned products and recovering usable materials that can go back into production—like metals, plastics, or electronics.

Common drivers:

• Resource scarcity
• Regulatory requirements (e.g. EPR, Right to Repair)
  

2. Product Re-circulation

Here, the goal is to return the entire product for reuse—not just parts. After return, the product is:

• Inspected
• Repaired or refurbished
• Cleaned
• Stored and re-distributed

Used in:

• Subscriptions and rentals
• Buy-back and second-hand sales

The importance of reverse logistics in circular business models

Reverse logistics isn’t just a backend operation—it’s one of the most cost-intensive and strategically critical parts of any circular business model.

Whether you're building a:

• Buy-back or trade-in program
• Subscription or rental service
• Preloved or second-hand resale model
  
  

…they all rely on logistics, especially reverse logistics, to function. That includes retrieving the product, inspecting it, refurbishing it, warehousing it, and shipping it out again. Every one of those steps costs money and affects your margins.

And because circular business models rely on products moving through multiple customer lifecycles, those logistics processes must be designed intentionally from day one. If they’re treated as an afterthought, the entire model struggles to scale.

It’s not just good business, it’s the law

In the EU and many other regions, companies are legally required to manage product take-backs under Extended Producer Responsibility (EPR) laws and product-specific regulations. For example:

• Electronics fall under the WEEE Directive (mandatory collection and recycling)
• Batteries must be collected and recycled under EU battery laws
• Vehicles require free take-back at end-of-life under the ELV Directive
• Packaging (especially in Germany) must be collected and managed via formal return systems
  
  

In short: if you’re building a circular model, you’re likely obligated to build the logistics for it, too.

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Where reverse logistics shows up in circular business models

Circular business models come in many shapes—each with different touchpoints that require a reverse logistics setup. Here are a few common models where reverse logistics plays a central role:

• Trade-ins and Take-Backs: Products are returned at end-of-life or when customers upgrade. These need to be inspected, sorted, and processed—often to be reused, recycled, or resold.
  
• Second-Hand Resale Programs: Whether peer-to-peer or managed by the company, resale requires retrieving products, verifying quality, cleaning or refurbishing, and restocking.
  
• Rental and Subscription Models: Products are meant to come back—sometimes repeatedly. That means handling logistics for swaps, size changes, upgrades, repairs, and long-term reuse.
  
• Leasing or Pay-Per-Use Models: Common in B2B and high-value consumer goods. Products may require servicing during use and full recovery after the contract ends

Each of these models demands a structured, reliable way to get products back—and put them into circulation again. 

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The four pillars of reverse logistics in circular models

As Ilari from Posti explained during our conversation, reverse logistics isn’t a black box—it can be broken down into four core operational modules. These form the foundation for any company looking to build or scale a circular business model.

“We always try to explain reverse logistics through four modules. First is the return or pickup. Second is the inspection and possible refurbishment. Third is storage and warehousing. And the fourth one is the re-distribution or the delivery again.” Ilari from Posti

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Let’s take a closer look at each one:

1. Product retrieval

This is the first and often most visible step: getting the product back from the customer.

• In e-commerce, this might be a parcel drop-off or pickup.
• In a subscription model, it’s often a scheduled collection (pick up or return) at the end of a rental period.
• For furniture or large electronics, it could mean home pickups involving logistics partners or in-house fleets.
  

The challenge here is coordination—especially when customers don’t have the original packaging or live in areas with limited service access.

2. Inspection and refurbishment

Once the product returns, it needs to be checked. Depending on the business model, this step may include:

• Functional testing (Does it still work?)
• Cleaning and sanitising
• Minor repairs or full refurbishment
• Resetting or reconditioning (especially for electronics or connected devices)
  

This stage is resource-intensive and requires trained staff, repair capabilities, and a clear process for deciding what gets fixed, what gets written off, and what gets resold.

3. Storage and warehousing

Refurbished items aren’t always shipped back out immediately. Many models—especially those based on demand, seasonality, or subscription—require temporary storage.

This means:

• Having a clean, organised warehouse setup
• Tracking inventory condition and readiness
• Ensuring FIFO (first in, first out) or lifecycle-based tracking
• Planning for re-bundling or kitting, especially if products are returned in parts
  

It’s not just about having space—it’s about managing the flow of reusable goods efficiently.

4. Redistribution and delivery

The final step: getting the product back into the hands of a new customer.

This could mean:

• Shipping a refurbished item to a second-hand buyer
• Sending a reconditioned product to a new subscriber
• Delivering seasonal products for the next cycle
  
  

Each of these delivery actions carries cost, timing requirements, and customer experience implications. And because this is the second or third time the product is being used, everything from condition to packaging needs to be spot-on.

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The logistics challenge in circular business models

One of the biggest hurdles in circular business models is managing the reverse flow of products—handling returns not as exceptions, but as part of the core business.

We explored this topic with Ilari from Posti, who shared insights from helping companies design logistics systems for reuse, refurbishment, and redeployment.

Reverse logistics introduces a second layer most companies aren't used to:

• Products come back at unpredictable times
• They need to be cleaned, repaired, stored, and reshipped
• And each step impacts margins, customer experience, and scalability

Plus, there’s the key decision every company faces: Do we manage this in-house—or partner with someone who specialises in circular logistics?

The answer depends on your business model, product complexity, internal expertise, and operational scale.

For a deeper dive into this topic, including real-world examples and Ilari’s full perspective, continue reading the in-depth article on The Logistics Challenge in Circular Business models.

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How do you know if it's working? KPIs to track

You can’t improve what you don’t measure and in circular logistics, tracking the right KPIs is essential for making the model profitable and scalable.

In our conversation with Ilari from Posti, he emphasised that circular logistics requires a slightly different lens when it comes to performance metrics. It’s not just about how fast you deliver—but also about how efficiently you recover, process, and redeploy products.

Here are some of the KPIs and operational questions worth tracking:

• Product Turnaround Time
  How quickly can you move a product from return to redeployment? The shorter the cycle, the better the asset utilisation.
• Product Condition on Return
  What percentage of products are returned in good, repairable, or unusable condition? This impacts your refurbishment and replacement strategy.
• Refurbishment Throughput
  How many products can be refurbished within a given time frame? This helps forecast operational capacity and plan resources.
• Storage Duration and Inventory Status
  How long do products sit idle before being reused? Are items in ready-to-ship condition or stuck mid-process?
• Cost per Return Cycle
  What’s the end-to-end cost of handling a return, including transport, repair, and restocking? It’s a critical figure for profitability.
• Return Trigger Frequency
  How often are customers initiating returns—because they’re upgrading, canceling, or something else? This helps you refine your product lifecycle and swap strategies.

Ultimately, tracking KPIs like these helps you identify bottlenecks, reduce operational drag, and improve customer satisfaction—all while protecting your margins.

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A ready-made solution: What Posti has built for circular business models

Once companies understand the complexity of reverse logistics, the next question is often: How much of this should we build ourselves?

Some businesses choose to handle repairs and refurbishment in-house—like Bike Club and Strollme. Others, especially larger or more traditional retailers, turn to partners to manage the operational backbone of circularity. That’s where Posti comes in. Posti has developed a modular solution called Posti Circularity—a service layer designed specifically for companies running circular business models.

As Ilari from Posti explained:

“We had customers reaching out to us saying they needed to do something around circularity and sustainability. Some were launching second-hand offerings, others were experimenting with take-backs, or renting their products through subscriptions. But when it came to actually operating these models—taking back products, refurbishing them, storing them until they’re needed again—that’s where things broke down.”

Posti quickly realised that the existing logistics infrastructure wasn’t designed for this. The traditional supply chain was built for one-way movement—from manufacturer to customer—not for retrieving, inspecting, refurbishing, and redistributing products in a continuous loop.

“We came to the conclusion that this needed a dedicated logistics solution of its own. More and more companies started reaching out to us with similar needs. That’s when we started building the operational side of circularity.”

What followed was the development of Posti’s circular logistics services—a modular, closed-loop logistics framework that includes pickup, inspection, refurbishment, warehousing, and delivery. Today, this system powers circular operations for leading Nordic brands across retail, electronics, furniture, and more.

“We saw that many of our customers didn’t want to reinvent the wheel,” said Illari Puputti from Posti. “They didn’t want to manage their own refurbishment centers or reverse logistics flows. They just wanted to focus on their core offering—product design, branding, customer experience—and outsource the rest.”

Here’s what Posti Circularity includes:

• Customer Returns and Pickups: Coordinated collection from consumers, even without original packaging.
  
• Product Inspection & Sorting: Evaluation of returned items, categorising them for reuse, repair, or recycling.
  
• Refurbishment & Repair: Refurbishment services either through Posti or third-party partners.
  
• Warehousing: Temporary storage for products not immediately sent back out.
  
• Redistribution: Reshipping products once they’re ready for a second (or third) life.
  
  

It’s not a one-size-fits-all solution. Posti’s model is designed to be flexible and modular, depending on how much the company wants to own—or delegate—within its reverse logistics flow.

Posti has already helped power circular operations for:

• Houdini (technical outdoor apparel)
  
• Nanso (clothing)
  
• Telia (electronics trade-in and resale)
  
  

And now, through a collaboration with circuly, Posti is also supporting circular operations for Club Espresso, a UK-based coffee machine subscription brand.

As circular business models continue to scale, solutions like Posti’s can fill the gap for companies that want to move fast—without building everything from scratch.

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Conclusion: Logistics is the backbone of a circular business model, not an afterthought

If there’s one takeaway from everything we’ve explored, it’s this: logistics is an most important, and often most overlooked, part of building a circular business model.

When logistics is underestimated, returns pile up, customer experience suffers, refurbishment becomes chaotic, and costs spiral out of control. The result? A model that looked good on paper becomes hard to scale (or even sustain).

But when logistics is done right, it enables everything else: smooth product cycles, predictable operations, healthier margins, and a better customer journey. It turns complexity into competitive advantage.

A great example of this in action is Bike Club, a kids’ bike subscription company operating in the UK and Germany.

As of 2024, Bike Club runs the largest subscription bike fleet in Europe. To deliver on their promise—right-size bikes for growing kids—they rely heavily on a logistics system that can handle constant returns, inspections, repairs, and re-distribution at scale.

“We don’t want to overload our refurbishment team with a bunch of different models — we need to make sure that if we add a new bike, we can support it over several years. Families often stay subscribed through multiple sizes as their child grows.”
— Franz Niebler, Bike Club

In other words, logistics doesn’t just support their business—it actively shapes their product strategy, operations, and customer experience.

Getting logistics right won’t guarantee success. But getting it wrong can guarantee failure. Plan for it early, design for circularity, and treat logistics as a strategic enabler—not just a necessary cost.