LAURENT HOMEYER: Circular business model is the next big trend in fashion

“Fast fashion”, now ubiquitous, really started only in the late 1980s. It’s hard to believe, but the way mass-market retailers now respond to the latest trends by rapidly producing inexpensive clothing is a relatively recent phenomenon.

In some ways, the emergence of fast fashion feels inevitable. Fashion is, after all, about embracing the latest trends, whether they’re to be found in the pages of Vogue or in a social media influencer‘s fashion “haul”. However, the effect this has had on consumer habits, the retail industry and the planet has been profound.

According to the Ellen MacArthur Foundation, globally customers miss out on $460bn of value each year by throwing away clothes they could continue to wear, with some garments estimated to be discarded after just seven to 10 wears.

Even more shockingly, the World Bank estimates that 40% of clothing purchased in some countries is never used. The impact this waste is having on the planet is huge, and the ways in which it is harming the environment are varied.

The same World Bank report reveals that the fashion industry is responsible for 10% of annual global carbon emissions, more than all international flights and maritime shipping combined. If it keeps going in the same way the fashion industry’s greenhouse gas emissions will surge more than 50% by 2030. Something needs to change. Fortunately, consumers and the retail industry are both up for the challenge.

It is not only environmental concerns that are creating the conditions for change. Supply chain issues, rising inflation and shortages in skilled retail staff are driving up costs in the industry at the same time as customers are becoming increasingly price sensitive. Against this backdrop we also see vintage clothing being worn proudly by celebrities, which is taking away any stigma there may have been in the past about wearing second-hand clothes.

With the stage set for some radical disruption, how should the retail industry respond? Is a more ethical business model for fashion truly possible? And what tools and technology are needed to facilitate these new ways of doing business?

Technology is sometimes blamed for the rise of fast fashion. It is technology, after all, that has enabled retailers to streamline their supply chains to the extent that they could design, ship and sell a new line of clothing in just a few weeks. Perhaps paradoxically, however, it is technology that is making more ethical shopping possible.

If we look specifically at buying preloved clothing, just a few years ago this generally entailed hours or even days of searching for a particular item. Now, online resale sites including Vinted, Depop and Vestiaire Collective have made the process swift and simple.

These sites are certainly seeing impressive growth. Vinted, which now operates in 16 countries, is now Europe’s largest platform for second-hand fashion. In the first nine months of 2022 it saw a 37% increase in sales, despite the adverse economic headwinds the retail industry faced at the time.

Traditional online and brick and mortar retailers are now, understandably, looking to diversify their own models to leverage this increased consumer interest in second-hand goods. Carrefour in France has expanded its online offer and now resells preloved items from consumers, Ikea now has a second-hand section and luxury retailer Mulberry sells refurbished bags via Vestiaire Collective. Change is happening and retailers need to be prepared if this transformation is going to be positive.

From an all-important people perspective, shifting a business model to incorporate preloved items takes real thought. The skill set required to sell second-hand inventory is different from that needed to sell new items, for example. Moreover, getting the inventory onto the shop floor or into a warehouse in the right condition, in the right place and at the right price will also require a different set of skills from those required in a more traditional retail supply chain. In line with these differences, job descriptions may need to be rethought and remuneration packages will probably need to change.

Training is likely to be needed for new and existing staff to ensure customers are still able to shop with confidence and feel inclined to embrace, rather than distrust, change. This training will be an ongoing process as lessons from new business models are factored into training manuals and job descriptions.

When it comes to budgeting and forecasts, nothing can be assumed or taken for granted. With newly emerging retail models there are, by definition, no existing data points to help steer the strategic direction of the business. Therefore, real-time information on areas including supply chains and sales volumes will become critical in helping a retailer formulate a robust market forecast for the short and longer term.

Finally, retailers need to start thinking more holistically about all their inventory (not just the preloved items) if they are to successfully align with these reinvigorated business models. Some retailers are starting to encourage their customers to recycle goods through their stores; others may look at incorporating recycling, repairing or upcycling to their own offer.

Whether retailers are simply testing the waters, devising new strategies or attempting to appear relevant is a matter of opinion, but we do know that successfully integrating a second-hand component into an existing retail business takes a different set of skills, processes and tools. Innovative retailers are already creating solutions that will enable them to capitalise on circular business models, dramatically increasing their chance of success in future.

• Homeyer is strategic industry adviser: retail & hospitality at Workday.