Refashioning clothing’s environmental impact, and the end of the Brand Ownership?

Today’s TextileFuture Newsletter is focussing on the drastic changes that do take rapid speed in fashion and clothing, leading to new designs and material of fashion items. Also, the ownership of brands is at stake, this is the theme of the second item.

The next TextileFuture Newsletter will give you not academic views, but very pracitcal information from the viewpoint of an active entrepreneur and independent textile spirit on his personal experience.

The first part is starting here:

Today’s clothing industry leaves behind a heavy environmental footprint. Circular design can lighten it.

Saskia Hedrich
Clarisse Magnin

By guest author Clarisse Magnin, she leads the Consumer Packaged Goods and Retail Practices in EMEA, coleads the Private Equity & Principal Investors Practice in these industries at the European level, and heads both the Agriculture Practice in France and McKinsey’s circular-economy initiative globally. Co-guest author is Saskia Hedrich, a senior expert in McKinsey’s Apparel, Fashion and Luxury Group, Saskia works with fashion companies on strategy, sourcing optimization, merchandising transformation, and sustainability topics.

Our clothes provide comfort, protection, an expression of individuality, and jobs, with more than 300 million people working along the clothing industry value chain. But for all the growth it generates, the industry also encourages considerable waste: More than half of fast fashion is disposed of in under a year, according to estimates.

This ‘take, make, and dispose’ business model has outsize costs to the environment, society, and the industry itself. Total greenhouse gas emissions from textiles production clock in at 1.2 billion tons a year, more than those emitted by all international flights and maritime ships combined.

Replacing this linear business model with a circular design one would help recapture more than USD 500 billion in industry losses every year and still mitigate negative environmental impacts. Major brands, including H&M and Nike, are already taking notice. Nike instituted a Sustainable Manufacturing and Sourcing Index, which works to incentivize and reward improved environmental, health, safety, and labour practices at the factories along its supply chain. H&M has committed to using 100 percent recycled or sustainably sourced materials by 2030. Other companies have embraced circular concepts by disrupting the traditional clothing market and establishing various clothing rental services. China’s YCloset, for example, serves customers with monthly rental subscriptions in more than 100 Chinese cities since launching an app in 2015.

A report by the Ellen MacArthur Foundation, with research and analytical support by McKinsey, outlines how we might build a new textiles economy based on the principles of a circular economy. Below are some highlights:

Design out waste and pollution

The fashion industry’s design and manufacturing innovations have led to substantial advantages, including water and stain repellence, as well as increased durability. Yet a number of the chemicals behind these innovations raise concerns due to their potential adverse effects during clothing production, use, and after-use phases.

Many of these potentially harmful substances can be designed out by creating new fibers that fill vital functions—versatility, lightness, ease of care—but come with a much lower production footprint. One way to do this is waterless dyeing, an innovation that helps mitigate the industry’s toxic wastewater discharge from clothes dyeing, which accounts for 20 percent of industrial water pollution globally.

There’s even room to innovate with ‘moonshot’ solutions in areas where progress is scarce—for example, in fabric design. Existing programs that bring together stakeholders to spark innovation include Ashoka’s partnership with the C&A Foundation’s global Fabric for Change initiative, and Fashion for Good, which supports innovation throughout clothing’s production stages.

Keep materials in use

On average consumers wear clothes 36 % fewer times than they did 15 years ago. If the number of times a garment is worn were doubled on average, greenhouse gas emissions would be 44 % lower. Globally, customers miss out on up to USD 460 billion each year by throwing away clothes, that they could continue to wear. Tastes, trends, and styles change, but new business models could satisfy the complex human needs filled by fashion without having customers buy, and then throw out, new clothes so frequently.

The new textiles economy will offer a number of attractive options to increase the lifespan of clothes for consumers:

  • Fashion subscription models, where customers pay a monthly fee to have a fixed number of garments on loan at any one time, offer a compelling advantage for some customers. Curated short-term rentals allow access to evolving trends while solving for excessive waste, clutter, and the guilt associated with throwing clothes out.
  • Repair options, baked into the sale of the garment through warranties, will encourage customers to buy fewer articles of clothing, invest in ones that they truly need, and consider holding onto the ones they have for longer. Patagonia’s ‘IronClad Guarantee’, for example, offers returns, replacements, or mending if a product gets damaged or does not perform to satisfaction. To maximize the value of these offerings, returning items should be made as easy as possible through free shipment and transparent guidelines.
  • Enhanced resale models offer an attractive opportunity for unwanted clothes durable enough to be used again. One option is to sell used clothing alongside new clothing, which may reposition resale from a fringe to a mainstream activity. This could be low-risk and high-reward for brands because it would create additional profits while feeding into the perception of quality and promoting a brand’s interest in increased use of its clothing.

Improving recycling would allow the industry to capture the material value of clothes that reached the end of their life. Currently, less than 1 % of textiles produced for clothing is recycled into new clothes, representing a missed revenue opportunity of more than USD 100 billion a year, not including the additional high costs for landfilling and incineration. To allow for recycling at scale, clothing design and recycling processes would have to be better aligned.

The industry would also need to stimulate demand for recycled materials, by cementing brand commitments to recycled fabric use in clothing. To this end, increasing the share of recycled materials in garments is one of four actions in the Global Fashion Agenda, a call to action onto which 64 fashion companies, representing 143 brands, have already signed.

Regenerate natural systems

Virgin materials will likely always be required for some textiles, particularly when no recycled materials are available. Textile production can become more renewable and regenerative by transitioning to more effective and efficient production processes that generate less waste, need fewer resources, reduce water use in water-scarce regions, are energy efficient, and run on renewable energy.

Renewable solutions can also be cost effective by reducing exposure to cost volatility of some resources. The price of oil, for example, has been historically volatile, exposing businesses to unexpected input cost spikes for polyester and other plastic-based fibers. Additionally, many of the key cotton-producing countries are under high water stress, including China, India, the U.S., Pakistan, Turkey, and Brazil. Water management and other environmental conditions have significant impacts on the availability of cotton, and therefore lead to price fluctuations.

Instead of cotton, the clothing industry make clothes from recycled plastics, or plastics made from biomass sources including crops, algae, or waste materials such as old vegetable oil. Other natural resources could include fast-growing plants that need low amounts of treatment and water, combined with processes that need fewer resources.

While there are ongoing efforts to minimize the negative impacts of clothing production, creating a wholesale circular economy in clothing requires system-level change. Stakeholders need to rally behind the objectives of a new textile economy, setting ambitious joint commitments, reinforcing voluntary initiatives and jump-starting innovation in all stages of clothing production. The drawbacks in the way we design, produce, and use clothes are clear. With circular design, fashion does not have to cost the earth.

www.mckinsey.com

The end of ownership for fashion products?

By guest authors Imran Amed, Anita Balchandani, Marco Beltrami, Achim Berg, Saskia Hedrich, and Felix Rölkens. Anita Balchandani is a partner in McKinsey’s London office, where Marco Beltrami is a consultant; Achim Berg is a senior partner in the Frankfurt office, Saskia Hedrich is a senior expert in the Munich office, and Felix Rölkens is an associate partner in the Berlin office. Imran Amed is the founder, editor-in-chief, and CEO of the Business of Fashion.

Business models capitalizing on preowned, refurbished, or rented products have hit the fashion market. The industry needs to pay attention as these models continue to evolve.

The life span of fashion products is being stretched as preowned, refurbished, repaired, and rental business models continue to evolve. Across many categories consumers have demonstrated an appetite to shift away from traditional ownership to newer ways in which to access products.

In fashion, the shift to new ownership models is driven by growing consumer desire for variety, sustainability, and affordability, and sources suggest that the resale market, for instance, could be bigger than fast fashion within ten years. In recognition of this consumer shift, start-ups will not be the only players making their mark in these segments—established fashion brands will also accelerate the pace with which they embrace new ownership models to further their relevance to consumers.

In more and more categories, consumers are choosing to rent rather than own goods outright. Think of Spotify supplanting compact-disc sales and downloads, Netflix replacing video stores, and Zipcar standing in for car ownership among many young urbanites. This is a fundamental evolution in consumer behavior, and we expect it will have an impact in the fashion business in the years ahead—as we outline in our latest State of Fashion report, written in partnership with the Business of Fashion (BoF).

A Video can be had here

This trend is partly driven by the young generation’s hunger for newness, while embracing sustainability. Research shows that average consumers today buy 60 percent more items of clothing than they did 15 years ago. But consumers keep that clothing for only half as long as they used to. For example, a survey done in Britain found that one in three young women consider clothes “old” after wearing them once or twice. One in seven consider it a fashion faux pas to be photographed in an outfit twice. Simply put, young people today crave newness, and these cohorts are much more likely to embrace churn in their wardrobes. At the same time, younger generations are more interested in sustainable clothing than older consumers. Rental, resale, and refurbishment models lengthen the product life cycle while offering the newness consumers desire.

Meanwhile, luxury brands are raising prices, significantly. Prices of fine watches and jewellery have nearly doubled since 2005. Tracking global prices of Louis Vuitton’s Speedy 30 handbag suggests an increase of approximately 19 percent per year since 2016. So, even consumers with six-figure incomes are looking to discounts and alternative models of acquisition for relief.

These demands are catalysing the successes of rental and preowned models. We expect that the ability of these players to satisfy a heightened desire for newness and an increased unattainability will bring them into the spotlight in 2019. That’s reflected in survey data from our State of Fashion research (exhibit).

Luxury consumers can circumvent the price increases of the Speedy 30 bag, for example, through The RealReal, which was founded in 2011 and, as of May 2018, enjoys a USD 450 million valuation. It sells luxury brands, in gently used form, via a consignment model. The RealReal’s hook: top fashion brands, up to 90 percent off. It recently raised USD 115 million in a Series G funding round and plans to expand its brick-and-mortar presence in the United States.

China’s YCloset takes a different approach, using a subscription rental model to grant customers access to an array of clothing and accessories free of additional charges. Customers that like a particular piece have the option to buy it outright.

Although established brands have traditionally turned a blind or scorning eye toward secondhand retail, they are now wading into the preowned and rental markets. For example, Stella McCartney launched a partnership with The RealReal in 2017, offering a USD 100 credit to consumers consigning her products on the platform. This can create a circular flow that encourages footfall in Stella McCartney stores, while building confidence in the quality and longevity of Stella McCartney products. Additionally, because of the circular nature of this partnership, it bolsters the corporate and social responsibility of the fashion brand.

Other luxury players, such as Richemont, have purchased resale or rental businesses outright, to take control of how their products and brands are marketed on the secondary market.

Some players have ventured into refurbishment, taking advantage of its sustainability benefits. Eileen Fisher, through its program “Renew,” takes back gently worn products and either refurbishes them or uses the materials to create new products all together. Patagonia pioneered an in-house repair and resale model by buying back their own products and selling those used items at a discount price. On its website, Patagonia asserts, “The single best thing we can do for the planet is keep our gear in use longer and cut down on consumption.”

The company Express is betting on the rental market, launching “Express Style Trial,” which allows consumers to rent up to three items at any given time for a monthly fee. In an interview with CNBC, Express’s chief customer-experience officer, Jim Hilt, states, “The consumer who is more interested in access versus ownership is happening across many industries. We looked at this evolution and asked, ‘How do we participate?’” In New York, French label Ba&sh is offering free rentals over a weekend period as part of its North America expansion strategy.

Turning to the months ahead, we expect 2019 will be known for three developments in particular. First, the number of brands getting into the rental, resale, and refurbishment business will increase markedly; established players will progressively regard alternative ownership as a force they need to embrace, or at least test, through new collaboration models with retailers or start-ups in the sector. This will require careful business-model considerations and a clear choice between partnerships, in-house development, or M&A. Second, we predict a notable increase in the number of “rental native” brands born exclusively for rental or subscription models. We would also not be surprised to see a unicorn in this space soon. Finally, more consumers will see a growing proportion of their wardrobes made up of preowned or rented products, especially for high-value items and accessories. While traditional players need not yet be alarmed, it will be essential to fully understand the emerging signals of what consumers prefer to own versus rent.

For more on all ten trends that will define the fashion agenda in 2019, see The State of Fashion 2019: A year of awakening.

www.mckinsey.com

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