Journal of Business Research 127 (2021) 35–44

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Journal of Business Research

journal homepage: www.elsevier.com/locate/jbusres

Role of customers in circular business models

Rana Mostaghel a, *, Koteshwar Chirumalla b
a
School of Business Society and Engineering, Malardalen University, Sweden
b
School of Innovation, Design and Engineering, Malardalen University, Sweden

A R T I C L E I N F O A B S T R A C T

Keywords: The retailing sector is evolving, not only as a result of technological advances, but also because of concerns about
Circular business model climate change and new demands from governments and customers for ethical and sustainable products. Cus­
Customers’ behaviour tomers’ purchase intentions are crucial for the successful implementation of circular business models. However,
Customers’ attitude
few studies focus on the role of customers in enabling circular business models. This study fills this research gap
Circular economy
Business model innovation
by identifying the critical factors that impact customers’ ethical purchase intentions for circular business models
Ethical purchase intention in the retail sector. Based on macro-theories of human behaviour, this study proposes a theoretical model that
Retail can holistically consider the critical factors and variables that determine customers’ ethical purchase intentions
towards the circular business model. The paper contributes to the body of literature on circular business models
in the retail sector by exploring the issue from the customers’ perspective.

1. Introduction circular ecosystem transcends organisational boundaries, encompassing

suppliers, customers, universities, research centres, and public author­
The rapid growth of the global population and rapid urbanisation are ities, in which each actor/stakeholder plays a specific role based on
considerably increasing consumption, while natural resources remain effective interorganisational relationships. Recently, the Swedish gov­
finite and scarce (De Angelis, 2018). One estimate is that the world ernment has decided on a national strategy for a CE, realising that the
population will reach about 9 billion by 2050, and that it will consume pace of work on the transition to a CE needs to increase to achieve
resources at more than thrice the current rate (Planing, 2015). The environmental and climate goals (Regeringskansliet, 2020).
current linear economy, characterised by ‘take-make-dispose’, acceler­ One way to explore, map, and analyse the value creation process in
ates the depletion of resources and energy (Bocken, Ritala, & Huotari, an ecosystem is by business modelling (Chesbrough, 2015), which is
2017). It has been estimated that within less than six months of being considered a key precursor to the shift from a linear economy to a CE
discarded, almost 99% of manufactured consumer goods turns into (Henry, Bauwens, Hekkert, & Kirchherr, 2020). A business model de­
waste (Planing, 2015). These facts, along with the global heat wave scribes the rationale of how an organisation creates, delivers, and cap­
faced by the northern hemisphere in the summer of 2018 that killed tures value (Osterwalder & Pigneur, 2010). The concept of business
hundreds (The Economist, 2018), have encouraged individuals, gov­ models has been applied in many different contexts, including the CE,
ernments (Taherdangkoo, Ghasemi, & Beikpour, 2017), environmental where circular business models (CBMs) are defined as the rationale of
organisations, researchers, and consumers worldwide to find alternative how an organisation creates, delivers, and captures value with and within
solutions to problems arising from the finite nature of the world’s re­ closed material loops (Mentink, 2014, p.24). Thus, the CBM is recognised
sources (Singh and Ordoñez, 2016). as a solution for the scarcity of natural resources and energy—but it can
The circular economy (CE) concept, inspired by nature and intro­ also improve a firm’s performance (Lewandowski, 2017). CBMs can be
duced in the late 1970s, is where nothing is wasted and all outputs are expected to reduce firms’ consumption of energy and resources by as
inputs for other processes (Ellen MacArthur, 2018). The CE is a strategy much as 80% by reusing, recycling, and reducing their use of materials
that emerges to oppose the traditional open-ended system, aiming to face the (Planing, 2015).
challenge of resource scarcity and waste disposal in a win–win approach with A successful CBM requires the commitment of all stakeholders in the
economic and value perspective [sic] (Homrich, Galvao, Abadia, & Car­ ecosystem (Hankammer, Brenk, Fabry, Nordemann, & Piller, 2019) and
valho, 2018, p.534). According to Zucchella and Previtali (2018), the a value network, allowing for mutual adjustment, based on a complex

* Corresponding author.
E-mail addresses: [email protected] (R. Mostaghel), [email protected] (K. Chirumalla).

https://doi.org/10.1016/j.jbusres.2020.12.053
Received 17 June 2020; Received in revised form 17 December 2020; Accepted 19 December 2020
Available online 22 January 2021
0148-2963/© 2021 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
R. Mostaghel and K. Chirumalla Journal of Business Research 127 (2021) 35–44

mixture of resources, collaboration forms, and governance mechanisms (Muranko, Andrews, Chaer, & Newton, 2019); however, customers’
(Zucchella & Previtali, 2018). doubts about firms’ reports on their activities regarding sustainability
Many researchers have emphasised, in particular, the role of cus­ constitute another challenge to firms (Berglund & Sandström, 2013;
tomers/users when moving towards a CBM (Calvo-Porral & Levy- Lewandowska, Witczak, & Kurczewski, 2017). One study finds that 77%
Mangin, 2020; Camacho-Otero, Boks, & Pettersen, 2018; Chen, Hung, of customers think that it is difficult to find reliable information about
& Ma, 2020; Frishammar & Parida, 2019; Kahraman & Kazançoglu, the circularity of firms’ activities (Insight Intelligence, 2019). Clear
2019; Wastling, Charnley, & Moreno, 2018). For example, Mentink standards for the value propositions of the CBM have not yet emerged
(2014) stressed that customers need to be interested and involved in (Stål & Corvellec, 2018); thus, customers’ expectations vary widely.
resource recirculation, and that customer attitudes are vital to the Hence, there is a need for a theoretical model to holistically understand
achievement of a CBM. Customers need to be prepared to pay more for how customers’ purchase intentions and behaviours are affected by
the environmental benefits of sustainable products, but they will expe­ various critical factors or variables. Considering such perspectives and
rience a moral satisfaction when they make their purchases (Kazeminia, measuring these inter-linking factors or variables could help the analysis
Hultman, & Mostaghel, 2016). of different customer types and their expectations, making it possible to
However, achieving a CE within a traditional business environment learn how to influence their intentions and behaviour towards CBMs.
is a complex task. The transformation from linear business models to In such a context, this study’s purpose is to identify the critical fac­
CBMs is not free from challenges; it requires the wholehearted cooper­ tors that could determine customers’ ethical purchase intentions
ation of many participants, who need to engage in a systematic value co- relating to CBMs, with a specific focus on the retail sector. A better
creation process from the outset (Parida & Wincent, 2019; Urbinati, understanding of customers’ ethical purchase intentions (e.g., Arli, Tan,
Chiaroni, & Chiesa, 2017; Zucchella & Previtali, 2018). Retailers are no Tjiptono, & Yang, 2018; Deng, 2013; Oh & Yoon, 2014; Hwang, 2016;
exception; many such as IKEA, H&M, Marks and Spencer, TheRealReal, Diddi & Niehm, 2016; Muranko et al., 2019; Lieder, Asif, Rashid,
Apple, Coca Cola, Cisco, Nike, Philips, Walmart, Unilever, Target, C&A, Mihelič, & Kotnik, 2018) could help companies to frame their business
Bridgestone, and Procter & Gamble are members of Ellen MacArthur’s models within customers’ acceptance zone and, thus, influence their
Circular Economy (MacArthur, 2019). According to Lewandowski purchasing behaviour. The retail sector was chosen for this study owing
(2016), companies need to make three main matches to enable smooth to (1) the complexity of its having to deal with several business models
transition from a linear business model to a CBM. These are matches simultaneously, which makes it particularly relevant, and (2) the fact
between 1) the value proposition and customer segments, 2) the cost that online customers have been found to consider sustainability a more
structure and revenue streams, which must be balanced, and 3) the important factor when they shop for apparel and shoes than when they
changes a company implements to realise a more circular business consider other products and services (Statista, 2020). With that focus,
model and adaptation factors. this study makes three contributions. First, the study adds the cus­
Currently, the customer acceptance and recognition of the enhanced tomers’ perspective to the body of literature examining CBMs in a re­
value of sustainable offerings are increasing annually. In 2014, only 50% tailers’ context. Until now, the major focus of the literature has been on
of customers were willing to pay more for sustainable products, whereas firms and their transition to a CBM (e.g., Oghazi & Mostaghel, 2018)
in 2015, that proportion rose to 66%, according to the Nielsen Global rather than on the critical factors that determine customers’ acceptance
Corporate Sustainability Report (2015). Companies in Europe also of the CBM and their purchase intentions. Second, this study proposes a
increased their socially responsible investments from €59.0 million in comprehensive theoretical model to consider the many aspects of cus­
2013 to €145.2 million in 2015 (Statista, 2018). In Sweden, a study of tomers’ behaviour, which is important when aiming to succeed with a
1000 customers between the ages of 17 and 70 revealed that 66% CBM. Third, this study improves the understanding of the basis of ethical
considered sustainability to be an extremely important factor, and 29% purchase intentions and customers’ attitude towards CBMs. The results
considered it to be an important factor, when purchasing services and will be valuable for both researchers and practitioners as they shed light
products (Insight Intelligence, 2019). on the customers’ perspective of the CBM through the lens of ethical
Despite increasing consumer concern and government policies sup­ purchase intentions.
porting sustainability and environmentally friendly options, some The remainder of this paper is structured as follows. Section 2 pre­
studies, along with anecdotal evidence, emphasize resistance from sents the theoretical background of key concepts, i.e., ethical offerings,
certain types of customers (Mostaghel, Oghazi, Haftor, Parida, & Vin­ CBMs, and ethical purchase intentions. Section 3 discusses the review
cent, 2017). At a deeper level, the shift from a linear business model to a process and analysis of literature review. Section 4 presents the results of
CBM still needs to satisfy the specific needs of customers, rather than the study in terms of propositions, the theoretical model, description of
merely make circular-driven products available (Hankammer et al., variables, and the operation of the model. Section 5 discusses the
2019). Such a shift requires major changes in the nature and intensity of theoretical and practical implications of the study. The final section
firms’ relationships with customers (Urbinati et al., 2017). Moreover, provides concluding remarks and discusses this study’s limitations and
several factors affect customer acceptance of CE. For instance, the pos­ opportunities for future research.
itive image of circular products and their perceived safety are the most
important drivers of consumers’ acceptance (Calvo-Porral & Levy- 2. Key concepts
Mangin, 2020). Based on a literature review, Camacho-Otero et al.
(2018) found that the main factors influencing the perception and Given that the focus of this study is on identifying the critical factors
acceptance of circular solutions fall into one of seven major themes: that could help determine customers’ ethical purchase intentions in
personal characteristics, product and service offering, knowledge and relation to CBMs, three key concepts need to be discussed: the ethical
understanding, experience and social aspects, risks and uncertainty, offerings, CBMs, and the ethical purchase intention. The theoretical
benefits, and other psychological factors. Other major issues are related background of these three concepts is briefly presented below.
to customers’ ownership concerns, specifically in the business-to-
consumer sector, and customers’ indifference when they lease, rather 2.1. Ethical offerings
than purchase, products (Tukker, 2004).
Although firms strive to meet the needs of customers, the fact is that The rise of ethical consumerism (e.g., Nicholls, 2002; Harrison,
not all customers value sustainable offerings (Oghazi & Mostaghel, Newholm, & Shaw, 2005) is obliging companies to follow ethical prin­
2018), nor are willing to pay a premium for ethical offerings (Laroche, ciples and integrate them into their products, which are then referred to
Bergeron, & Barbaro-Forleo, 2001; Zhou, 2018). Persuasive communi­ as ‘ethical products’ (Bezençon & Blili, 2010). The traditional marketing
cation does have a positive impact on customers’ behavioural attitudes strategy consists of decisions and actions focused on building a sustainable

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R. Mostaghel and K. Chirumalla Journal of Business Research 127 (2021) 35–44

differential advantage, relative to competitors, in the minds of customers, to choice.

create value for stakeholders (Palmatier & Sridhar, 2017, p.5). In the CBM, The final business model that could slow resource loops is one that
the marketing strategy is the same, except that environmental and social encourages sufficiency by actively reducing the consumption of the end
values are considered as additional stakeholders (Stubbs & Cocklin, user through upgradeability, reparability, disassembly, durability, ser­
2008). Ethical offerings are products and/or services that embody one or vice, re-use, and warrantees (Bocken et al., 2016). Two praiseworthy
several social or environmental principles that might affect consumer followers of such a CBM are Vitsoe, a furniture manufacturer, and
purchase decisions (Bezençon & Blili, 2010), or that embody a set of Patagonia, a producer of clothing and equipment for sports (Bocken
issues or considerations that might affect a purchase decision, such as et al., 2016). These firms both motivate customers not to buy new
product safety, consumer privacy, employee welfare, fair pricing, com­ products from them, but rather to repair or upgrade the ones they
munity action, and charitable donations (Crane, 2001). In this study, already own. They endeavour to reduce unnecessary consumption and
any offering that considers environmental and social values will be believe that recycling should be a last resort (Besustainable, 2014). The
termed an ethical offering (cf. Yadav & Pathak, 2016). more the value of materials can be saved, the slower will be the resource
loop. This CBM requires a huge amount of trust from customers, whose
2.2. Circular business models loyalty is key to its success (Baldassarre & Campo, 2016). Unfortunately,
the literature shows that consumers lack trust in firms’ communications
The most comprehensive definition of the CBM is given by Frish­ about their ethical offerings (Berglund & Sandström, 2013; Lew­
ammar and Parida (2019, p.8): a circular business model is one in which a andowska et al., 2017).
focal company, together with partners, uses innovation to create, capture, To illustrate the various CBMs, some examples from the fast fashion
and deliver value to improve resource efficiency by extending the lifespan of part of the retail sector, drawn from information on firms’ websites,
products and parts, thereby realising environmental, social, and economic sustainability reports, and other sources, are summarised in Table 1. Fast
benefits. fashion is a major issue for customers who have concerns about sus­
Bocken, De Pauw, Bakker, and Van Der Grinten (2016) suggested tainability when shopping for apparel (Statista, 2020). All the five ex­
three fundamental strategies for achieving CBM. First, reducing resource amples, which are Swedish fast fashion retailers, have webpages
use, or improving resource efficiency, by reducing the number of com­ describing the sustainability of their activities and future plans. How­
ponents or materials required to make each product. Second, slowing ever, the levels of their activities and achievements vary. Most have
resource consumption by improving the quality of products and already implemented (or will in the near future) the extending product
extending their life. All aspects of the product, from its design to its value and closing the loop business models, except Gina Tricot that has
repair and remanufacture, need to be considered from the perspective of introduced access and performance business model, by launching a service
a longer life and the reduced use of resources. Third, closing the loop by called rent your party outfit.
recycling. This also needs to be considered from the very beginning of a
product’s design and production. Many firms motivate customers to 2.3. Ethical purchase intention
recycle in different ways, which requires customers’ knowledge of, and
interest in, the firms’ ethical products. All the actors in the ecosystem should collaborate to create a suc­
Accordingly, Bocken et al. (2016) proposed four business models to cessful CE (Oghazi & Mostaghel, 2018), and that includes end users or
slow down the resource loop. The first is the classic long-life model used customers. Customers’ shopping behaviours are changing more rapidly
by, for instance, luxury brands that produce high quality products that than ever owing to technological advances, which have also enabled
are not subject to fashion or cannibalisation. Brands such as Rolex claim companies to provide their customers with more customised services
that their products last beyond a person’s lifetime, while Miele gua­ and products as they now have more information about their customers.
rantees that its appliances have a 20-year functional life span (Bocken This makes for a more volatile retail environment, with a range of
et al., 2016). This type of business model requires firms to invest in high business models depending on the type of product or offer. An empirical
quality materials and designs that allow for the possibility of repair and study by Diddi and Niehm (2016), of 407 consumers in the United
remanufacture. This does lead to higher product prices but, for well- States, revealed that consumers’ personal and normative behaviours
known brands with strong brand equity, this business model has positively and significantly influence their intentions to patronise those
proved consistently successful. An important question is whether cus­ retail brands of apparel that emphasise the sustainability of their supply
tomers are willing to pay premium prices for completely new brands or chain.
products that apply the same model. The literature shows that there is Table 2 illustrates some important empirical studies of customers’
some customer resistance to paying premium prices for ethical offerings ethical purchase intention. Most studies in this area have employed the
(Laroche et al., 2001; Zhou, 2018). theory of planned behaviour or the theory of reasoned action (TRA),
A second business model that could slow the resource loop is the with some adjustments to make them more compatible with ethical is­
access and performance model. This model tries to satisfy customers by sues. Their findings do not support each other, which could be because
removing the need for ownership. It applies to, for example, car or bi­ of contextual factors related to the specific industries, or because some
cycle sharing, the document management system of Xerox (Bocken important factors and moderators are neglected.
et al., 2016), and the merino wool, next-to-skin, garments intended for
use by the British Ministry of Defence (Bech et al., 2019). Customer 3. Methodology
involvement is extensive here and, while information would help cus­
tomers aware of the offerings’ reduced use of resources, their ethical This study follows a systematic method for its literature review (e.g.,
benefits do need to be emphasised to make customers fully appreciate Tranfield, Denyer, & Smart, 2003), which involves the five-step process
them (Villarino & Font, 2015). suggested by Denyer and Tranfield (2009). It comprises 1) formulating
Extending product value is the third business model that strives to the research focus and purpose, 2) locating studies, 3) study selection
exploit products’ residual value. A company that applies this business and evaluation, 4) analysis and synthesis, and 5) reporting the results.
model is H&M, which incentivises return of its clothes (Bocken et al., In the first step, we conducted an exploratory background search for
2016). Ethical offerings do not refer only to the way that a product is CBMs and purchase intention to determine the research scope and
produced but also to all the activities it embodies. For instance, the purpose (Denyer & Tranfield, 2009) and, moreover, to understand the
environmental friendliness of a supply chain should be communicated to various concepts involved and their relationships with each other. Our
customers (Smith & Brower, 2012). This CBM requires customers’ first search, using the keywords ‘purchase intention’ and ‘circular’ in
knowledge of, and concern for, the environmental impacts of their EBSCO yielded only five peer-reviewed academic journal articles. In the

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R. Mostaghel and K. Chirumalla Journal of Business Research 127 (2021) 35–44

Table 1
Examples of CBMs from retail fast fashion, adapted from Stål and Corvellec (2018).
Company Turnover/Scope/Employees Sustainability activities Type of CBM Secondary data*

H&M Turnover was SEK 233 million in Social, environmental, and economic impact spans 1. Extending • https://www2.hm.com/sv_se/hm-sustainabili
2019.About 5000 stores in 74 the entire value chain.In 2019: product value ty/lets-change.html
countries. • customers returned 29,005 tonnes of textiles for 2. Closing the loop • H&M Hennes & Mauritz Sustainability Report
re-use and recycling, 2019
• 96% renewable electricity in their own • In-store observation, two times each 25 min.
operations. • https://www.allabolag.se/
KappAhl Turnover was SEK 4.9 million in Try to impact social, environmental, and economic 1. Extending • https://www.kappahl.com/sv-SE/om-kappah
2019.There are 4000 employees in values.In 2019, 58% of their fashion is marked product value l/hallbarhet/
400 stores. ‘sustainable’. 2. Closing the loop • In-store observation, one time for 20 min
• KappAhl Annual Report 2018–2019
• https://www.allabolag.se/
Lindex Turnover was SEK 3.3 million in Several aims are set for 2020: Will implement in • https://about.lindex.com/sv/hallbarhet/ra
2019. 1) To reach sustainable products up to 10%, 2020: pporter-policyer-och-ataganden/ataganden/2
2) To install stations for gathering textiles. 1. Extending 020-circular-fashion/
product value • In store observation, two times for 25 min.
2. Closing the loop • https://www.allabolag.se/
GinaTricot Turnover was SEK 1.1 million in In 2019: 1. Extending • https://www.ginatricot.com/se
2019.About 1900 employees in 30 1. 57% of the products were manufactured from product value • In-store observation, one time for 20 min
countries. more sustainable materials 2. Access and • Sustainability report 2019
2. Launch of RENT your party outfit performance • https://www.allabolag.se/
Indiska Turnover was SEK 0.764 million in Work more towards social and environmental 1. Extending • https://www.indiska.com/se/hallbarhet/ha
2018. goals. product value llbara-material
• https://www.allabolag.se/
• In-store observation, one time for 20 min.
*
All online information was retrieved on 27 August 2020.

Table 2
Compendium list of studies of ethical purchase intention.
Study Citations Theories Variables Sample Method Major findings

Hwang, 80 Theory of planned Self-presentation, Food safety USA, 183 responses SEM The results showed a clear distinction
2016 behaviour (TPB) concerns, Environmental concerns, from the elderly and between the elderly and younger
Ethical consumer-identity. 153 from young respondents’ intention to purchase
respondents organic food.
Oh & Yoon, 53 Theory of reasoned Ethical obligation, Self-identify, South Korea, 343 PLS Neither subjective norm nor self-identify
2014 action (TRA) Altruism, Attitude, Subjective norm, responses has a direct impact on ethical
Positive affection. consumption intention.
Diddi & 26 TRA, Schwartz Universalistic values, Moral norms, USA, 407 customers of SEM All the mentioned variables have a
Niehm, value theory Expectations of ethical behaviour, apparel at retail positive and significant impact on
2016 Knowledge of environmental issues patronage intentions.
in the apparel industry, Attitude.
Deng, 2013 22 Persuasion theory, Face consciousness, Group China, 358 responses SEM Both subjective norms and perceived
Cognitive consensus Behavioural attitude, behavioural control impact ethical
dissonance theory, Control faith, Convenience purchase intention.
TPB perception
Lieder 20 CE value Attributes price, Payment scheme, Stockholm, Sweden, Choice-based Customers are more willing to pay for
et al., propositions from Environmental friendliness, Service 141 respondents conjoint analysis access instead of ownership if they know
2018 market acceptance level that choice reduces CO2 emissions.
point of view
Muranko 14 TPB Use of persuasive communication Four engineers and 22 Descriptive and ‘The Persuasive Communication had a
et al., influences behavioural attitude, academic experts in inferential positive and statistically significant
2019 product perceptions, and retail refrigeration statistical impact on the participants’ Behavioural
behavioural intentions towards the equipment analysis Intentions towards the purchase of
purchase intention remanufactured RDCs’

Note: SEM: Structural Equation Modelling and PLS: Partial Least Squares.
*: Google scholar citations retrieved on 28 August 2020.

second step, we utilised the SCOPUS database with the keywords ‘pur­ the titles of all these articles showed that fewer than ten focused on
chase intention’ and ‘circular’, which resulted in 242 documents. circularity, CE, or CBMs. Thus, following a snowballing approach, we
In the third step, our selection of suitable articles was supported by included other studies from green economy and, as a result, 14 peer-
five defined inclusion criteria (Denyer & Tranfield, 2009); namely: 1) reviewed academic articles were included in the final list of papers
the paper should be in English; 2) its full text should be available; 3) the receiving a full reading and undergoing the review process. Rest of ar­
paper should be published in an academic, peer-reviewed journal; 4) the ticles from the literature review are listed in Table 3.
paper discusses either ethical products or offerings, or ethical purchase In the fourth step, we used data extraction forms to collect targeted
intentions in the context of the CE and related business models; and 5) information relating to the study’s focus (Tranfield et al., 2003).
the paper must fall into one of these categories: social sciences; eco­ Initially, all identified variables were entered into an Excel spreadsheet,
nomics, econometrics, and finance; or business, management, or ac­ along with any relevant descriptions and definitions. Then, all identified
counting. Applying these criteria reduced the number of articles to 167. variables were clustered and combined, based on their similarities, into
To contextualise the knowledge base for our study, we added another critical factors. For instance, three variables such as environmental
keyword, ‘retail’, which reduced the number of articles to 61. Examining awareness, ethical product awareness, and brand awareness are

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Table 3 4. Results: Critical factors that could determine customers’

List of articles in the literature review. ethical purchase intention for CBMs
Study Citations Title Journal
* 4.1. Propositions and theoretical model
Kim, Borges, 315 Impacts of environmental Tourism Management
and Chon values on tourism To understand attitudes towards CBMs, it is necessary to understand
(2006) motivation: The case of FICA, the basis of the ethical purchase intention. Most studies (such as Arli
Brazil. et al., 2018) do not give a clear definition of ethical purchase intention.
Wang and 168 Consumer product International Journal of
Hazen knowledge and intention to Production Economics
This study, therefore, based on the extant literature, suggests the
(2016) purchase remanufactured following definition: Ethical purchase intention refers to the intention to
products purchase those services and/or products that cause minimal or no damage to
Mohd Suki 112 Consumer environmental Journal of Cleaner society and the environment.
(2016) concern and green product Production
The very well established TRA proposed by Ajzen and Fishbein
purchase in Malaysia:
structural effects of (1975) has been widely used in the marketing and psychology disci­
consumption values. plines. The relationship between attitude and behaviour has been
Huang, Yang, 80 Effects of green brand on Marketing Intelligence investigated in various contexts; however, every such study has focused
and Wang green purchase intention. and Planning on one specific aspect of attitude, attitude’s antecedents, and the mod­
(2014)
Wei, Chiang, 53 Toward sustainable Business Strategy and the
erators of the relationship between attitude and behaviour.
Kou, and Lee livelihoods: Investigating the Environment Chaiken and Maheswaran (1994) presents dual-processing models,
(2017) drivers of purchase behaviour which explain that rational and experiential systems are the major
for green products processing systems that shape human attitudes. In the context of circular
Kazeminia 29 Why pay more for sustainable Journal of Business
business, the rational process determines attitudes based on cognitive
et al. (2016) services? The case of Research
ecotourism evaluations of cost-benefit and ethical beliefs. These bases differ from
Diddi and 26 Corporate social Journal of Marketing experiential processes, whereby an attitude is based on previous expe­
Niehm responsibility in the retail Channels rience, which could be affective or heuristic. Thus, two major anteced­
(2016) apparel context: exploring ents of customers’ attitude are recognised, namely, customers’ perceived
consumers’ personal and
value (based on beliefs) and customers’ awareness (based on customers’
normative influences on
patronage intentions knowledge and experience).
Malik et al. 1 Antecedents of consumer International Journal of Based on the extant literature and our discussion above, Attitude is
(2017) environmental attitude and Environmental considered to have two dimensions, namely, willingness to pay a pre­
intention to purchase green Technology and
mium and attitude towards a CBM. Thus, the first proposition is
products: moderating role of Management
perceived product necessity formulated as follows:
*
: Google scholar citations retrieved on 28 August 2020. P1: Customers’ a) attitude towards CBMs and b) willingness to pay a
premium have a positive, direct effect on their ethical purchase
categorised as Awareness. intention towards CBM.
For each variable representing a combination of critical factors, the
measuring items were identified to operationalise these factors related The value that ethical products have for customers has several di­
to the ethical purchase intention and the CBM. The measuring items for mensions, such as social value, functional value, and epistemic value.
each variable are listed in Table 4. For instance, the variable ‘willingness Social value is defined as the perceived utility acquired from [a product’s]
to pay a premium’ (WPP) is defined as ‘the extent to which a customer is association with one or more specific social groups (Sheth, Newman, &
willing to pay more for an offering by a retailer with a CBM’. Moreover, Gross, 1991, p.162). A customer’s purchase of ethical products would
four items were identified for this variable, namely, 1) How willing motivate others in the same social network to buy the same product
would you be to buy a more expensive product to reduce pollution?; 2) (Mohd Suki, 2016). Research has shown that brand positioning based on
How willing would you be to buy a product if you knew the added cost values rather than attributes strengthens a firm’s competitive advan­
paid for a better environment?; 3) How willing would you be to buy a tage, because social values impact the customers’ beliefs and, conse­
‘regular’ product, at some cost to a possibly better future environment?; quently, their behaviour (Vriens & Hofstede, 2000). Thus, social value
and 4) How willing would you be to pay more for an eco-product as plays a primary role in forming the customer’s attitude (Chen & Lee,
opposed to a ‘regular’ product? After identifying the variables, their 2015). Functional value has two dimensions: quality and price. The
measuring items, and final factors, the correlations between these fac­ functional value-quality is associated with the perceived utility acquired
tors were established based on theoretical reasoning. from [a product’s] capacity for functional, utilitarian, or physical perfor­
These relationships between the five critical factors led us to mance and [is] thought to be generated by a product’s salient attributes.
formulate nine propositions and a theoretical model of ethical purchase (Sheth et al., 1991, p.162).
intention and behaviour towards retailers’ CBMs, along the timelines of Many customers nowadays not only evaluate the price, quality, and
t0 and t1, as shown in Fig. 1. The timelines emphasise the fact that the functionality of a product but also the sources of its ingredients, its
actual behaviour occurs at a time following all the other critical factors production process, and even the effectiveness of its supply chain, to
in this study. decide whether to purchase an ethical product or service (Mohd Suki,
In the fifth and final step, based on the analysis and synthesis, the 2016). Epistemic value is defined as the perceived utility acquired from [a
results are formulated and elaborated in relation to the defined scope product’s] to arouse curiosity, provide novelty, or satisfy a desire for
and purpose of the study (Denyer & Tranfield, 2009). knowledge (Sheth et al., 1991p.162). Knowledgeable and aware cus­
tomers would like to test different, new, ethical products (Mohd Suki,
2016). Therefore, the following proposition is posited:

P2: Customers’ a) social value, b) functional value quality, c) and

epistemic value have a positive direct effect on their ethical purchase
intention towards CBM.

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Table 4
Operationalisation of the critical factors and variables in the proposed theoretical model.
Critical factors Variables Items Definition Adapted from

Attitude Willingness to pay WPP1) How willing would you be to buy a more The extent to which a customer is willing to pay more for an Kazeminia
premium (WPP) expensive product to reduce pollution? offering by a retailer with a CBM. et al. (2016)
WPP2) How willing would you be to buy a product if
you knew the added cost paid for a better
environment?
WPP3) How willing would you be to buy a ‘regular’
product at some cost to a possibly better future
environment?
WPP4) How willing would you be to pay more for an
eco-product as opposed to a ‘regular’ product?
Attitude towards ATT1) I believe that my use of sustainable products The extent to which the customer considers the offerings from a Malik et al.
CBMs (ATT) will benefit society, environment, and the economy. retailer with a CBM. (2017)
ATT2) I feel good about myself when I use
sustainable products.
ATT3) I think sustainability is a meaningful exercise.
ATT4) I feel sad when I see how much the natural
environment is spoiled.
ATT5) I believe that my use of sustainable products
will help reduce pollution and improve the
environment, society, and the economy.
Perceived Value Social value (SV) SV1) Buying the sustainable product would help me ‘perceived utility acquired from [a product’s] association with Mohd Suki
to feel acceptable. one or more specific social groups’ (Sheth et al., 1991, p.162). (2016)
SV2 Buying the sustainable product would improve
the way that I am perceived.
SV3 Buying the sustainable product would make a
good impression on other people.
SV4 Buying the sustainable product would give its
owner social approval.
Functional value Functional value-quality Functional value-quality is the ‘perceived utility acquired from Mohd Suki
(FV) FVQ1) The sustainable product has consistent [a product’s] capacity for functional, utilitarian or physical (2016)
quality. performance and was thought to be generated by a product’s
FVQ2) The sustainable product is well made. salient attributes’ (Sheth et al., 1991, p.162).
FVQ3) The sustainable product has an acceptable Functional value-price is the extent to which a customer
standard of quality. considers the reasonability of the price of the sustainable
FVQ4) The sustainable product would perform offering from the retailer with a CBM.
consistently.
Functional value-price
FVP1) The sustainable product is reasonably priced.
FVP2) The sustainable product offers value for
money.
FVP3) The sustainable product is a good product for
the price.
FVP4) The sustainable product would be
economical.
Epistemic value (EV) EV1) Before buying the product, I would obtain ‘perceived utility acquired from [a product’s] capacity to arouse Mohd Suki
substantial information about the different makes curiosity, provide novelty, or satisfy a desire for knowledge’ ( (2016)
and models of products Sheth et al., 1991p.162)
EV2) I would acquire a great deal of information
about the different makes and models before buying
the product.
EV3) I am willing to seek out novel information.
EV4) I like to search for the new and different
products
Awareness Environmental EA1) Chemical pollutants are produced during The extent to which the customer is aware of the environmental Diddi and
awareness (EA) manufacturing of synthetic or manufactured fibres impacts of producing the offering by the retailer with a CBM. Niehm (2016)
such as polyester.
EA2) Air pollution can occur during some common
textile dyeing processes.
EA3) Textile dyeing and finishing processes use a lot
of water.
EA4) Phosphate-containing laundry detergents can
be a source of water pollution.
EA5) Plants and animals have as much right as
humans to exist.
EA6) We are approaching the limit of the number of
people that the Earth can support. EA7) Humankind
is severely abusing the environment.
EA8) The earth is like a spaceship with only limited
room and resources.
EA9) When humans interfere with nature, it often
produces disastrous consequences.
EA10) The balance of nature is very delicate and can
easily be upset.
(continued on next page)

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R. Mostaghel and K. Chirumalla Journal of Business Research 127 (2021) 35–44

Table 4 (continued )
Critical factors Variables Items Definition Adapted from

Ethical product EPA1) Use of child labour is practiced by The extent to which the customer is aware of the ethical impacts Diddi and
awareness (EPA) manufacturers. of producing the offering by the retailer with CBM. Niehm (2016)
EPA2) Manufacturers generally do not pay their
employees at least the local minimum wage.
EPA3) Manufacturers generally have their
employees work more than 40 h per week.
EPA4) Manufacturers generally provide hazardous
workplaces for their employees.
Brand awareness BA1) I have heard of the brand The extent to which the customer recognises a brand of a retailer Huang et al.
(BA) BA2) I know the brand’s related environmental with a CBM. (2014)
information.
BA3) The brand is the first to come to mind when
talking about sustainability.
BA4) The brand has a good reputation.
Ethical purchase EPI1) I would prefer to purchase a sustainable The extent to which customer has ethical purchase intention Malik et al.
intention product over a non-sustainable product. towards CBM (2017)
towards CBM EPI2) I am willing to purchase a sustainable product
to benefit the environment, society, and the
economy.
EPI3) I would actively seek out a sustainable product
in a store to purchase it.
Ethical purchase EPB1) I make a special effort to buy products in The extent to which the customer has made a purchase from the Wei et al.
behaviour sustainable packages; retailer with a CBM. (2017)
towards CBM EPB2) I would switch from my usual brands and buy
sustainable products, even if I had to give up some
effectiveness.
EPB3) I have switched products for sustainable
reasons.
EPB4) When I have a choice between two identical
products, I purchase the one less harmful to the
environment and society.

Customers’ awareness and knowledge determine their attitude. P6: Customers’ personal characteristics moderate the relationship
Specifically, environmental awareness, brand awareness (Chen & Lee, between customers’ attitude and ethical purchase intention towards
2015), and ethical product awareness will impact customers’ attitudes CBM.
towards sustainable offerings (Ko, Hwang, & Kim, 2013). For instance,
in Stockholm, Sweden, customers showed more interest in paying for P7: Customers’ personal characteristics moderate the relationship
access rather than ownership for washing machines with reduced CO2 between customers’ perceived value and ethical purchase intention
emissions (Lieder et al., 2018). Thus, the following proposition is towards CBM.
formulated: P8: Customers’ personal characteristics moderate the relationship
between customers’ awareness and ethical purchase intention to­
P3: Customers’ a) environmental awareness, b) ethical product wards CBM.
awareness, and c) brand awareness have positive, direct effect on
their ethical purchase intention. Finally, the aim of investigating customers’ attitudes and intentions
is to better understand their actual purchase behaviour. The time lag
Antecedents of attitude are identified as awareness and value, based between a purchase intention and the actual purchase behaviour has
on the dual-processing models (Chaiken & Maheswaran, 1994). Many made it more difficult for researchers to measure the actual purchase
customers have complained that it is difficult to find information about behaviour. However, there are different solutions for this problem. The
the sustainability aspects of a product (Statista, 2020). The type of in­ final proposition is formulated as following:
formation that communicates with customers affects their attitude
(Lieder et al., 2018). Consequently, the following propositions are P9: Customers’ ethical purchase intention towards retailers with a
presented: CBM has a significant and positive influence on customers’ purchase
behaviour towards CBM.
P4: Customers’ awareness has a positive, direct effect on their
attitude. Fig. 1 illustrates the proposed theoretical model, showing all the
P5: Customers’ perceived value of ethical offerings has a positive, critical factors, variables, moderators, and propositions.
direct effect on their attitude.
4.2. Description of critical factors, variables, and operationalisation of the
The empirical study of Hwang (2016) showed that, while income was model
not a moderator for ethical purchase intention, there was a clear
distinction between young and older participants. Customers with a Table 4 illustrates the factors and variables employed in the proposed
higher education level showed a greater inclination to make green theoretical model, each accompanied by a clear definition. In addition, it
purchases, according to a study by Chekima, Wafa, Igau, Chekima, and shows the variables and relevant items, based on previous empirical
Sondoh (2016). Personal characteristics (age, gender, and education) studies of sustainability and ethical purchase intention. Thus, the sug­
have not only been considered as moderators (Chekima et al., 2016; gested items have already met the quality criteria. This operationalisa­
Hwang, 2016), but also as control variables (Michaelidou & Christo­ tion sheds light on all details of the proposed theoretical model and
doulides, 2011). Various findings from the extant literature motivate the facilitates future empirical tests of the model.
following propositions:

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R. Mostaghel and K. Chirumalla Journal of Business Research 127 (2021) 35–44

Fig. 1. Proposed theoretical model of ethical purchase intention and behaviour towards circular business models (CBMs), including the nine propositions, and
different timelines of t0 and t1.

5. Discussion factors along with relevant variables. As there is a need to rethink the
traditional marketing strategy (e.g., Palmatier & Sridhar, 2017) in the
5.1. Theoretical implications context of the CBM, this study, by considering the perspectives of cus­
tomers, makes an important contribution.
Research into CBMs is growing, and companies are taking steps to­ Second, this study proposes a comprehensive theoretical model that
wards this transition from the linear economy; however, the critical role considers the multiple aspects of customers’ behaviour towards CBM. To
of customers or consumers in this transition process has been under­ become successful with a CBM, it is essential to consider all aspects of
estimated (e.g., Camacho-Otero et al., 2018; Wastling et al., 2018; customers’ behaviour. Previous studies focused only on specific factors
Mentink, 2014). In particular, there is a lack of a holistic understanding (e.g., as shown in Table 3, Mohd Suki (2016) focused on value-related
of various critical factors that could affect the customer’s purchase in­ factors, Kazeminia et al. (2016) and Malik, Singhal, and Tiwari (2017)
tentions and behaviour. Using the ethical purchase intention as a central focused on attitude-related factors, and Diddi and Niehm (2016) focused
focus, this study aims to identify the critical factors that could determine on awareness-related factors). Instead of looking at a single product or a
customers’ purchase intentions and behaviour towards CBMs. This has single CBM opportunity, the proposed theoretical model combines all
been done by specifically focusing on the retail sector which, because of possibilities from the company perspective and tries to connect them
its direct contact with customers, is unlike other businesses. with the customer perspective. The model’s identified critical factors,
The study makes three important contributions to the existing theory and its variables and items, could help establish and operationalise this
of CBM transformation, and the value creation process. First, the study missing link in the literature. The detailed description of dependent
adds the customers’ perspective to the body of literature about CBMs in factors that can collectively affect and influence the customers’ purchase
the retail context. The major focus of the literature has been on the firm intention for CBMs could support establishing such link. While, for
level and addressing the overall transformation to a CBM (e.g., Oghazi & example Kahraman and Kazançoglu (2019) have explored consumers’
Mostaghel, 2018; Frishammar & Parida, 2019) rather than considering purchase intentions towards personal care products, the model we
the customers’ perspective. Major studies acknowledge the critical role present will add to the research in the retail sector which, unlike other
of customers as important stakeholders in the whole system (Camacho- sectors, currently lacks such a model.
Otero et al., 2018; Chen et al., 2020; Wastling et al., 2018), but limit Third, the study improves the understanding of the basis of the
their discussion of how customers can contribute to the whole system. ethical purchase intention by seeking to understand the attitude towards
The focus of previous studies has been limited either to specific products CBMs. The results will be valuable for both researchers and practi­
(e.g., the remanufacturing of refrigerators, by Muranko et al. (2019)), or tioners, because they shed light on the customers’ perspective on the
to the customer perspective (e.g., washing machines by Lieder et al. CBM through the lens of the ethical purchase intention. The study de­
(2018)), or to the processing and institutional level (e.g., Stål & Cor­ fines the ethical purchase intention as the intention to purchase services
vellec, 2018). Additionally, the literature classified different customer and products that cause minimum or no damage to society and the
types according to their perception of, or concerns with CBM, such as environment. This understanding of the ethical purchase intention could
trust, value of the circularity, and their resistance to paying a premium extend discussion of key aspects and issues related to ethical products or
for ethical offerings (Camacho-Otero et al., 2018; Laroche et al., 2001; offerings (e.g., Crane, 2001; Bezençon & Blili, 2010). Moreover, the
Zhou, 2018). In that regard, this study extends the view of the role of detailed understanding of contextual factors that affects customers’
customers and explains how different factors can collectively affect ethical purchase intention (e.g., Deng, 2013; Oh & Yoon, 2014; Diddi &
customers’ acceptance of, and purchase intentions towards, CBMs. Niehm, 2016; Arli et al., 2018) could help companies and practitioners
Moreover, the study also extends the operationalisation of these critical to frame their business models within the acceptance zone of customers.

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R. Mostaghel and K. Chirumalla Journal of Business Research 127 (2021) 35–44

5.2. Practical implications between awareness, perceived value, and attitude with ethical purchase
intention. Finally, the paper also formulates a definition of ethical
Traditional retailers are currently trying, but finding it difficult, to purchase intention that refers to customers’ intention of purchasing
find the best ways of making a smooth transition to CBMs. In the retail those services and products that cause minimum or no damage to society
sector, brands are under constant pressure from policymakers and cus­ and the environment.
tomers to achieve sustainability goals. At an ever-increasing rate, cus­ The study has not conducted an empirical investigation. This limi­
tomers’ attitudes towards sustainability and consumption are changing, tation can be addressed by future studies in the following ways. First,
and they are demanding more information about, and actions aiming at, future studies could empirically test the proposed model in specific
sustainability and CE goals. Customers are even inquiring about issues retailing sub-sectors.
that might occur further up the supply chain, relating to, for example, Second, although the model is developed specifically for the retail
the procurement of materials, production conditions, and human rights sector, future studies could test the model in other sectors to investigate
violations. Considering such consumer concerns, companies need to find possible contextual factors and their influence on the ethical purchase
more practical ways of addressing them than simply asserting that ‘we intentions towards CBMs.
are a sustainable company and our brand supports the circular econ­ Third, future studies could consider different demographic samples,
omy.’ Without undertaking practical measures with a greater sense of with their different personal characteristics, and cross-compare the
urgency, companies are likely to lose customers and market share. outcomes of the model with respect to their ethical purchase intentions.
In that context, this study helps retailers and managers in the retail Finally, the authors of this paper encourage researchers to elaborate
sector to understand the various factors that are critical in determining on, and further improve, the theoretical understanding of ethical pur­
customers’ ethical purchase intentions and behaviour. They can use the chase intention by expanding our definitions and identifying the in­
proposed model, as a basis for re-considering and reflecting on the teractions between the model’s influencing factors and variables.
various critical factors, variables and measuring items that influence
ethical purchase intentions towards CBMs. Additionally, the model References
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for business model innovation in a circular economy. Master Thesis, TU Delft. Yadav, R., & Pathak, G. S. (2016). Young consumers’ intention towards buying green
http://resolver.tudelft.nl/uuid:c2554c91-8aaf-4fdd-91b7-4ca08e8ea621 Accesses products in a developing nation: Extending the theory of planned behavior. Journal
28 August 2020. of Cleaner Production, 135, 732–739.
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Dr. Rana Mostaghel is an Associate Professor at the Division of Marketing and Strategy,
models: What are they? In Proceedings of the 24th Nordic Academy of Management
School of Business Society and Engineering, Mälardalen University (MDH), in Sweden. Her
Conference (NFF), Bodo, Norway, 23–25, August.
research interest includes Marketing Strategy, Digitalization and Circularity. She has
Muranko, Z., Andrews, D., Chaer, I., & Newton, E. J. (2019). Circular economy and
published in peer-reviewed international high-ranking journals including Journal Business
behaviour change: Using persuasive communication to encourage pro-circular
Research and Psychology and Marketing among others. She is the Digitalization Research
behaviours towards the purchase of remanufactured refrigeration equipment.
Track Coordinator at MDH. In addition, she is director of the bachelor’s program in In­
Journal of Cleaner Production, 222, 499–510.
ternational Business Management and the master’s program in International Marketing at
Nicholls, A. J. (2002). Strategic options in fair trade retailing. International Journal of
MDH. Both programs are EPAS accredited.
Retail & Distribution Management, 30, 6–17.
Nielsen Global Corporate Sustainability Report (2015). The sustainability imperative -
New insights on consumer expectations. [ebook] Nielsen, pp. 1–19. Available at: htt Dr. Koteshwar Chirumalla is an Associate Professor in Product and Process development
ps://www.nielsen.com/content/dam/nielsenglobal/dk/docs/global-sustainability- at the Division of Product Realization, Mälardalen University (MDH), Sweden. His
report-oct-2015.pdf Accessed 24 September 2018. research interests include servitization, industrialization of new products and processes,
Oghazi, P., & Mostaghel, R. (2018). Circular business model challenges and lessons digital transformation, and knowledge management. He is currently leading a research
learned—an industrial perspective. Sustainability, 10(3), 739. project called RECREATE (Second life management of electric vehicle batteries). He is
Oh, J. C., & Yoon, S. J. (2014). Theory-based approach to factors affecting ethical subject responsible for product and n process development, program coordinator for
consumption. International Journal of Consumer Studies, 38(3), 278–288. Civilingenjörsprogrammet in production and product design, and a chair of MDH research
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A handbook for leading team in XPRES (Excellence in Production Research) a strategic research area
visionaries, game changers, and challengers. John Wiley & Sons. initiative in Sweden.
Palmatier, R. W., & Sridhar, S. (2017). Marketing strategy: Based on first principles and data
analytics. Macmillan International Higher Education.

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