The next big trend in the fashion industry: a circular business model

What is currently known as “fast fashion” It didn’t start until the late 1980s. Although it may be hard to believe, the way in which consumer brands produce garments today—at low cost and on a large scale—is a relatively recent phenomenon.

With this, the irruption of fast fashion seems an inevitable fact. Especially if we take into account that fashion consists of the constant adoption of the latest trends. This brings as a consequence a profound impact on consumer habits and on the planet.

The big problem of the fashion industry

According to the Foundation ellen macarthur, consumers around the world lose $460 billion a year throwing away clothes they could still wear, and it is estimated that some clothes are discarded after only seven to ten uses. Even more surprising, he world Bank estimates that 40% of the clothes bought in some countries are never worn. The impact that this waste has on the planet is enormous and the environment is harmed in various ways. The same World Bank report also reveals that the fashion industry is responsible for 10% of the world’s annual carbon emissions, more than all international flights and shipping combined. Continuing on this path will see industry’s greenhouse gas emissions increase by more than 50% by 2030. Clearly something has to change, and thankfully both consumers and retailers are ready to rise to the challenge. .

drivers of change

Environmental concerns are not the only reasons driving the change. Supply chain problems, inflation and a shortage of qualified personnel in the retail sector are increasing costs, while customers are increasingly sensitive to price increases. In the midst of this context, we see that more and more celebrities are proudly wearing vintage clothing, which is ending the stigmas that may have existed in the past about reused clothing.

So, with the stage set for radical disruption, how should the retail sector respond? Is a more ethical business model possible for the fashion industry? And what kind of tools and technology is needed to facilitate this new way of doing business?

A movement powered by technology

Technology is sometimes blamed for the rise of fast fashion. After all, it’s what has allowed retailers to modernize their supply chains to the point where they can design, ship and sell a new clothing line in just a few weeks. However, paradoxically, it is also technology that makes purchasing more ethical.

Until just a few years ago it could take hours or even days to search for a specific second-hand item. Now companies like Vinted, Depop, and Vestiaire Collective have streamlined and simplified this process. There is no doubt that these companies are experiencing impressive growth. Vinted, which already operates in sixteen countries, is now the largest European platform for vintage fashion. In the first nine months of 2022, their sales increased by 37%despite the economic uncertainties facing the retail sector at the time.

Seeing these figures, it is understandable that traditional stores seek to diversify their business model and take advantage of the growing interest of consumers for used products. For example, Carrefour, in France, has expanded its offer and now resells second-hand items. Ikea also now has a section for such items, and luxury brand Mulberry sells refurbished bags through Vestiaire Collective. Change is taking place and merchants need to be ready to make this transformation a positive one.

A catalyst for transformation

From the point of view of the people, the change towards a business model of used articles requires a great reflection. In this sense, selling second-hand items requires different skills than those needed when selling new products. Getting inventory to the store or warehouse in good condition, to the right place, and at the right price requires a different combination of skills than those needed in a traditional supply chain.

Both new and existing employees are likely to need training to ensure that customers continue to buy with confidence and are likely to accept change rather than mistrust it.

When it comes to budgeting and forecasting, nothing can be taken for granted with this new business model. There are no data that help guide the strategic direction of the company. Therefore, real-time information on the areas of the supply chain and sales volumes are key to making a solid market forecast both in the short and long term.

If merchants are to successfully adapt to this new model, they will need to start applying more holistic thinking. We can already see that some companies are encouraging their customers to recycle products through their stores, while others are giving the option to repair, modify or give new functionality to their offer.

prepare for the future

Regardless of whether businesses are exploring new terrain, trying new strategies, or wanting to become relevant, the reality is that adding second-hand items to a business requires a combination of skills, processes, and tools. For this reason, innovative businesses are already developing solutions to make the most of the new circular business model, increasing the possibility of future success. Now is the time for companies to jump on the bandwagon through concrete and measurable actions. Being “up to date” with the trend is no longer enough.

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