CHANGING OUR CLOTHES

Why the sector should adopt new business models

JUNE 2020*

*Please note: this report was written prior to the COVID-19 pandemic. Preface

Economic development and ’fast ‘ trends, along with new technologies “Clothing production PR EFACE that are accelerating e-commerce, are has approximately changing the pace and scale of clothing production and consumption. Many doubled worldwide WHY WE NEED people want – and can increasingly between 2000 afford – new options after wearing TO CHANGE clothes only a few times. and 2015, outpacing Clothing production has approximately GDP growth during OUR CLOTHES doubled worldwide between 2000 and 2015, outpacing GDP growth during that period.” The touches every person on that period. Meanwhile, the number of times a garment is worn before it is These trends are already unsustainable. the planet. It provides people in all countries thrown away declined by 36 percent Consider this, in 2015 global production with necessities and luxuries, garments for during that time2. of reached 1,715 million tonnes function and self-expression. 3 The increasing pace of consumption and of CO2e . The waste from discarded clothes (pre and post-consumer) can This includes a wide variety of categories production, in turn, puts more pressure on the people in supply chains who sit in landfills for 200 years if made including and business wear, as well are making the clothes, as well as the from non-biodegradable fabrics – which as and . It is a communities impacted by the waste and most clothes are4. water and air pollution. massive industry that is expected to eclipse The industry needs to change, business US$3 trillion globally by 20301. models need to innovate, and clothing companies in 2030 will have to look very different if sustainability and equity are to become the new normal. For clothing companies to be US$3 competitive in 2030 they will have to adapt. They must prioritize business models that can meet demands TRILLION of customers without damaging communities and the environment. The clothing industry is expected to eclipse US$3 trillion by 2030 (GFA 2019)

WRAP Changing our clothes: Why the clothing sector should adopt new business models 2 Preface

For the industry to be circular and Our hope is that the outputs of the sustainable, companies will need a project will help innovators in business, better understanding of three things. government, and civil society find c.US$500 The World Resources Institute (WRI) and inspiration and opportunities to WRAP’s collaborative ‘Clothing Reuse advance models that meet clothing Market Makers’ project addresses each demand sustainably. BILLION of these topics: Models that dominate the clothing The estimated annual value of clothes industry tomorrow should have 1 Evidence of consumer demand discarded prematurely positive impacts on the environment (Ellen MacArthur Foundation 2017) This report, ‘Changing our clothes: (helping reduce climate change, water Why the clothing sector should adopt stress, and pollution) and society new business models,’ demonstrates (helping address gender injustices and potential mass market appeal for reuse dangerous working conditions). business models. Signed, 2 Understanding impacts of new business models on people Circular business models, however, are and planet From linear to circular only a sustainable solution if they can Two guidebooks to help companies Elizabeth Cook One recent adaptation is a move to help keep clothing consumption within ‘Square Your Circle’ and assess the Vice President of make the industry more ‘circular.’ the planet’s limits. If circular innovations social and environmental impacts of Institutional Strategy focus on incremental efficiency gains & Development, World The traditional ’linear’ model takes raw clothing reuse business models. while ignoring core system changes, Resources Institute; materials, making them into clothes, the scale of production, raw material Board Member, which are used and then discarded 3 Enabling policies extraction, and pollution will continue Sustainable as waste. The shorthand for the linear to grow. Companies will remain reliant An inventory of policies and government Apparel Coalition process is ‘take-make-waste’. on a model that assumes it can extract actions that are enabling or blocking, A circular model attempts to interrupt more raw materials, to make and sell the advancement of clothing reuse the linear process by reusing or more new clothes, to more people, around the globe. recycling clothes before they become more often, forever. Physically, infinite Marcus Gover waste. It is a much needed and growth is an impossibility and the Chief Executive, WRAP potentially valuable innovation, as apparel industry must accept and the annual value of clothes discarded adapt to that fact. prematurely worldwide is estimated to be nearly US$500 billion5.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 3 Summary

For the most part, the type of brands that citizens shop at does SUMMARY not greatly affect their interest in 90% either recommerce or rental models. New business models are appealing A GLOBAL FORCE 90% of citizens we surveyed in India are to shoppers at all ends of the market. interested in trying at least one There is however more interest in rental WITH A new business model among those who currently shop at higher end brands in the USA and India. GLOBAL IMPACT The larger markets of India 68% of social media comments and the US surveyed showed Consumption of clothing is outpacing utilisation; surveyed for this study conveyed an particularly high interest in new models. Italian citizens, a smaller we are buying more clothes and wearing them less. obvious positive sentiment toward reuse of clothing, indicating demand market, showed similar interests to for reuse fashion. Propositions tested Americans suggesting there is more in our research showed 61% to 90% of demand for rental in Italy than other citizens across India, the UK and the European countries. USA are interested in trying at least one new business model. For four other European countries the range was 51% to 76%.

Business models that focus on The new research presented here from increasing utilisation of clothing can WRAP and WRI clearly demonstrates “Citizens ahead of the curve are demanding reduce the overall need for more the potential mass market demand production while driving revenue for these new business models. We new models, and opportunities exist for growth – part of a circular economy. will put forward evidence in this disruptor companies in this space to report that citizens ahead of the Companies in the traditional linear curve are demanding new models, substantially grow their customer base.” economy of ‘take, make, waste’ are and opportunities exist for disruptor locked into this model, and unpicking companies in this space to substantially this in transition to a circular economy grow their customer base. is slow. One of the reasons for a lack of urgency in the establishment is perceived lack of consumer demand for new business models in clothing retail.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 4 Contents This is an interactive document. The toolbar and contents buttons allows you to navigate through the different sections of the guide.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 5 Background

“Brands and retailers need evidence that BACKGROUND citizens are interested in new ways of CHANGING OUR consuming fashion.” Clothing sales have grown rapidly this The economic ‘size of the prize’ is CLOTHES century. Estimates for the increase in clear, and disruptor companies are consumption globally vary between looking to capitalise. Examples from Consumption of clothing has seen rapid growth 60 percent over 14 years6 to 100 other industries and sectors of such 7 this century. Billions more people are percent over 15 years . companies are familiar. Uber went from a niche way for Silicon Valley entering the middle class globally and During this time, utilisation – essentially employees to join a modern chauffeur the number of times an item of clothing are spending more on clothes. service to a common transportation is worn – has decreased8. Clothes are option for millions of riders around used for a shorter period, or being used the world. Netflix, Spotify and Audible less frequently, or both. have revolutionised the way television, music and books are consumed. Opportunities for innovation Rather than offer products as services, corresponding companies such as Many stakeholders, including clothing WeBuyAnyCar and Ziffit instead resell brands and retailers, recognise an underutilised assets. opportunity here. They see potential economic, environmental, social benefits in increasing the utilisation of clothes. Evidence to inform action There are common approaches to So why is fashion so slow to change? estimate financial benefits, such as Some new companies like Rent the well-established financial accounting Runway and Depop are inspiring existing models, that help companies evaluate brands such as Urban Outfitters or the economics of clothing reuse models. American Eagle to pilot new models, They can assess options for capturing but these are the exceptions rather a portion of an estimated US$500 billion than the rule. Brands and retailers need wasted when clothes are disposed of evidence that citizens are interested before the end of their useful life9. in new ways of consuming fashion. This report provides it.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 6 Background

BACKGROUND DEFINITIONS

Disruptor – a company changing the Linear (business model) – a business Rental – a customer paying the owner Subscription – a commitment by a ‘business-as-usual’, similar to how model designed to generate profit of something, in this case garment(s), consumer to pay a regular fixed amount the car disrupted personal travel by via a straight process from resource to borrow it (or them). The owner of money in return for a set amount of coach and horse. extraction to disposal over a product’s maintains their ownership during this product (e.g. number of garments) or a lifetime. For a clothing brand or process as opposed to leasing where service (e.g. provision of a clothing style). Fast fashion – quickly-changing low- retailer, this means commissioning the the customer takes on ownership for cost fashion where garments are Voucher – a commitment to provide production of a garment using virgin the duration of the lease. purchased and rapidly discarded. currency. Traditionally this has been resources and giving up responsibility Reuse – when a garment is used again a physical paper-based offer for money Incentivised take-back – a process (and opportunity to generate more when it might have been disposed of. off an item or group of purchases. whereby a brand or retailer offers revenue) once the garment has been This may be by the same person who More recently, these are often virtual an incentive to their customers to sold to a customer. has repaired their garment (or had it e.g. in an email. return clothing to them, via their Recommerce – sometimes referred to repaired) or a different person. stores or otherwise. as ‘resale’, this involves selling an item Social listening – a research technique (garment) to a customer after the first analysing social media comments. time it has been sold. While technically This is often inductive (seeing what returned clothing could fall into this the comments say before drawing definition, it is not the spirit of the term. conclusions) but can be deductive (testing a hypothesis by seeing how many people provide evidence to confirm or deny that hypothesis).

WRAP Changing our clothes: Why the clothing sector should adopt new business models 7 Background

For two of the three models, Online surveys respondents were given a variation to BACKGROUND The main evidence source in this report see if it changed the likelihood of trying is a series of online panel surveys the model. For India, small changes in India, the UK and the USA. These were made to the propositions to better RESEARCH took place in April and May 2019 the local context. and consisted of over 2,000 people We have assumed that likelihood to sampled per geography. METHODS try a model means that a citizen is Each sample was representative of interested in it. We have taken interest To investigate the size and type of demand the national population except India in the models tested to be indicative of for new business models, we undertook where there was a skew toward urban, interest in similar models. 10 primary and secondary research wealthier citizens . Percentages stated in the report are against a base sample through a variety of channels. of people in that country who shop for clothing unless otherwise stated. In these surveys, among questions designed to understand the purchasing attitudes and habits of citizens, we asked how likely the respondent was to try different clothing business models11. In the UK and the USA, these business models included a recommerce model, an incentivised clothing take-back with vouchers model, and a subscription outfit rental service model.

“In these surveys, among questions designed to understand the purchasing attitudes and habits of citizens, we asked how likely the respondent was to try different clothing business models.”

WRAP Changing our clothes: Why the clothing sector should adopt new business models 8 Background

We tested the attitudes of the segment to clothing across all three countries “I shop online for my , BACKGROUND and validated that it was fair to broadly apply the segment to the USA and India. it’s quite spontaneous, sort Out of 15 attitudes tested, only three of out of the blue. In general, KEY CONSUMER showed large differences to the UK: I do look quite frequently, – Citizens in India who ‘Love Shopping’ probably every week.” GROUP: are more likely to want something new after wearing an item a few times. ‘LOVE SHOPPING’ – Citizens who ‘Love Shopping’ in the Research participant USA and India are more likely to buy clothes they like without caring about the quality. Throughout the report, we refer to a highly – Citizens who ‘Love Shopping’ in the The proportion of citizens influential group of consumers, ‘Love Shopping’, USA and India are more likely to who ‘Love Shopping’ in each think higher quality clothing is easier country are as follows: from WRAP’s UK clothing consumer segmentation. to take care of. This has been applied to all three countries surveyed in the main source of evidence.

UK USA “My work life encourages 4% 14% WRAP conducted a clothing consumer Fashion-obsessed, clothes are central to me to look unnoticeable. My segmentation of UK citizens in their identity. A younger group, they are personality isn’t unnoticeable 201612. The study consisted of in- near constant shoppers from virtually however, so when I go out, depth qualitative and quantitative every source. This also translates to I’ll wear loads of colours research, producing six overarching spending a lot of money on clothing India segments. The most influential of per month; they frequently purchase and fitted clothes.” 32% these, in terms of purchase behaviour, something when they go shopping. and therefore potential impact of People in this segment are values driven their behaviour on greatest volume but they don’t think they can make a Research participant of clothing, is ‘Love Shopping’. difference. Their busy and chaotic lives mean the easiest option is taken. ’Love Shopping’ segment Other segments

WRAP Changing our clothes: Why the clothing sector should adopt new business models 9 Background

Additional evidence The view from India To supplement the surveys, students As a growing market, India represents a at the University of Bristol, UK, substantial opportunity in clothing retail undertook some primary and for new business models. The Indian secondary research as part of their market is understandably different Environmental Policy and Management from the other countries we highlight Master’s degree. This took the form in this report, both in size but also of a literature review of academic and attitude. The skew in the sample of our non-academic literature to identify citizen survey may account for some current and new trends in reuse. differences found later in this report. However, there are other potential The students also conducted a ‘social reasons for these differences and more listening’ exercise, analysing 3,460 information can be found in Appendix B. comments on clothing reuse and new business models across social media Comparisons between India and other platforms for the three focus countries. countries should be made with these considerations in mind. We were able to gain additional support from the EU LIFE-funded European Clothing Action Plan (ECAP) to insert the business model interest questions in a survey the project ran across Denmark, Germany, the Netherlands and Italy in June 2019.

“As a growing market, India represents a substantial opportunity in clothing retail for new business models.”

WRAP Changing our clothes: Why the clothing sector should adopt new business models 10 Background

Figure 1: Prevalence of frequent shoppers by country (India, UK, USA)

BACKGROUND HOW WE India SHOP NOW USA Current shopping habits provide a useful context for the marketplace that reuse businesses are aiming to break into. UK Our survey therefore asked questions on

shopping frequency and spending as well as some other behaviours such as browsing

and following trends online. e re e ar re

The Indian citizens we surveyed shop Online shopping is less frequent much more frequently than US citizens, across the board, but interestingly who in turn shop much more than UK over a quarter of US citizens never buy citizens. Our research looked at citizens clothing online in comparison to 5% in India, the UK and the USA who of Indian citizens surveyed and 13% bought or browsed in store and bought of UK citizens. online (Figure 1).

US$118

US citizens spend roughly US$118 per month on clothing

WRAP Changing our clothes: Why the clothing sector should adopt new business models 11 Background

Figure 2: Prevalence of frequent shoppers by country (Europe) Table 1: Citizen clothing ownership by perception of brand cost/type*

Italy

Germany

Denmark INDIA UK USA

Netherlands

European countries surveyed for Brands Brands Brands the ECAP project were asked similar Our shopping channels questions. Respondents in this survey Table 1, above right, shows the average 20% Supermarket 20% Supermarket 33% Low cost were asked how often they purchased proportions of clothes bought from Fashion at Big Bazaar/ Tesco, Asda, Sainsbury’s Walmart, Ross, Marshall’s Future Group, Dmart clothing in store and online (Figure 2). different brand levels in each of our 23% Low cost 23% Medium-low focus countries. The brand examples 15% Low cost Primark, Matalan Target, Old Navy, TJ Maxx The picture changes when looking at Reliance in the table for each category were 14% Medium-low 13% Medium cost monthly spending on clothing. When the Trends, 109F, Madame identified by the authors and tested in New Look, Zara, H&M H&M, GAP, Nordstrom Rack exchange rate is taken into account, US 15% Medium-low country before being used in the survey. 22% Medium cost 8% Medium-high citizens spend as much per month on Pantaloons, Tata Note that the examples are based on M&S, Next, GAP Banana Republic, Ann Westside, Jashn clothing as the Indian citizens surveyed: Taylor, Patagonia brand perception rather than price 7% Medium-high US$118 and US$123 respectively. 16% Medium cost and are therefore subjective. We asked The North Face, Levi’s, Joules 6% High Britons spend less than half that at Shoppers Stop, Nordstrom, Eileen citizens what proportion their clothing Lifestyle, Allen Solly 3% High US$56 per month on average. Fisher, Ralph Lauren came from which retail channel. They Ted Baker, Burberry 12% Medium-high A surprisingly large 48% of Indian then assigned a percentage to each 4% Designer H&M, Promod, Van Heusen 1% Designer Stella citizens surveyed say they follow fashion relevant channel, adding up to 100. Gucci, Louis Vuitton, 13% High McCartney, Versace, Prada trends online (e.g. Pinterest boards, Stella McCartney Second-hand stores were deemed as Fab India, Levi’s, Arvind Instagram, blogs, etc.) at least once 13% Second-hand stores irrelevant in India and supermarkets (e.g. Calvin Klein) 9% Second-hand stores per week. This compares to 27% of likewise in the USA with Walmart classed US citizens and just 11% of UK citizens. 8% Designer as ‘Low cost’ instead. House of Anita Dongre, Rohit Bal, Ritu Kumar * Totals may not add up to 100% due to rounding.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 12 Rental

Westfield Shopping Centre in the UK found 25% of Londoners would Rental right now RENTAL MODELS prefer hiring clothes; of this group this New entrants to the market have preference was most prominent in the capitalised on this trend. Rent the 25-34 age bracket13. Furthermore, 50% Runway has been developing its ‘DON’ T OWN? of respondents indicated they would be customer base a little longer than some willing to pay £200 or more each month others, since 2009. Our social listening NO PROBLEM!’ for such a service14. research had the retailer appearing most frequently on Instagram for our Financial incentives are a primary rental search terms, indicating a strong The fashion industry has been built on driver for this change. Clothing rentals presence in that social medium. It offer access to designer brands – the assumption of ownership of clothing. also had the most tags of ‘friends’ in previously regarded as the exclusive It is less usual to wear clothing owned by comments. Just under a quarter of all territory of celebrities – at affordable posts sampled on rental were those someone else. Recent research shows prices. Also, citizens who do not want tagging another person, indicating a this may be beginning to change. to buy expensive for one- trend through social referral. time events such as parties, weddings and photo shoots have a premium Social media sentiment appears mainly option available15. positive toward rental with negative posts in our sample mostly complaints Figure 3: Citizen sentiment toward about service and quality in India clothing rental (Figure 3). Interestingly, around one in twelve posts sampled commented on the sustainability of clothing rental, Negative 7% implying a significant awareness of the potential environmental and social

benefits of these models. Positive 50% Neutral 37%

Sentiment analysis of social media comments on clothing rental

Size of circle denotes relative proportion of comments showing that sentiment, i.e. positive, neutral or negative. Totals do not add up to 100% due to excluded data, e.g. off-topic or trolling.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 13 Rental

Despite the research showing young Citizens in Northern Europe show a Table 2: Effect of option to buy Rental in the future Londoners are interested in rental, similarly low level of interest, suggesting on clothing subscription rental The positivity toward existing rental depending on how it is designed and rental may be most appropriate for models does not just rest with those Would the option to buy make citizens marketed, the majority of UK citizens a smaller portion of the market in who already use them. Our research more interested in subscription rental? may not be ready for this type of these countries like WRAP’s ‘Love found large interest for an outfit business model. Only 13% said they Shopping’ segment. subscription service, particularly in were likely to try an outfit subscription

India. Almost three quarters of Indian service (Figure 4). Of the additional citizens surveyed said they would be India 67% 21% 12% one in five citizens who were possibly likely to try such a service (Figure 4). UK 32% 53% 15% interested in the service, around half would be more interested if there were The USA appears to be a less ready USA 50% 37% 14% an option to buy. market than India for rental but there Overall averages. Percentages rounded to the is still a sizeable opportunity for those nearest integer and therefore may not total 100. business models to thrive. Just over one in three US citizens said they Of the one in four (23%) US citizens were likely to try an outfit subscription who answered ‘positively but less service if it were available for a brand likely’ to trying the outfit subscription, Figure 4: Citizen interest in subscription rental they liked (Figure 4). Interestingly, a over half of them suggested an option Likelihood to try subscription outfit rental in seven countries separate survey showed a very similar to buy the items at the end of the level of interest between US and subscription period would make them Italian citizens. more interested16. This was the same proportion for the 16% of Indian citizens Ownership can still play a part in the surveyed and 19% of UK citizens, both take-up of rental. The option to buy of whom suggested they would possibly makes a large positive difference to try the service. the interest of Indian and American citizens (Table 2); those citizens are more interested in rental if they can buy the garment(s) during/after the rental period. This option has much less of an impact on the interest of UK citizens India USA UK Denmark Germany The Italy toward the rental model we tested. Netherlands eree eree arket akers Survey ECAP Survey

Data presented separately for mainland Europe. This is to highlight the difference between the two surveys regarding their other questions and different fieldwork time.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 14 Rental

Table 3: Top three citizen concerns about outfit subscription rental What we think about rental Top barriers to uptake of outfit rental The perception of the clothing may change citizens’ interest levels in UK USA India subscription rental. In a separate survey 1 Sounds like too The size might It would only be that WRAP was able to run as part of LOVE SHOPPING much work not fit me interesting for the ECAP project in the UK in June 2019, Our trendsetting segment is more special occasions citizens stated a 26% interest in the interested in rental across the outfit subscription service17. 2 The size might Sounds like too Sounds like too board with 60% interest in the UK, not fit me much work much work Although unlikely to have changed 82% interest in the USA largely in a short time frame, media and 91% interest in India. 3 I wouldn’t I wouldn’t The size might have reported growing interest over like what was like what was not fit me 2019. Another explanation for changing available available interest levels between different *All barriers presented in the India survey were concerns of over 25% of the sample. surveys is that the seasonal effect on The main concerns of citizens regarding clothing choice (outfit and garment outfit rental are the effort involved, the types suited to different temperatures fit of items they cannot try on first and and weather patterns) can affect the the choice of items/what was available interest in rental of specific outfit styles. (Table 3). In India, the most reported While perception may have an concern was that the service would only important role to play in normalising be useful for special occasions and not rental, our research suggests that fit into general consumption behaviour customers of all brands are ready although all the concerns we tested for it. There was little difference in were applicable for at least one in four interest for shoppers at predominantly Indian respondents to our survey. lower-end brands than the average. Shoppers at higher-end brands were more interested, especially in India and the USA.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 15 Recommerce

Online thrift store ThredUp’s projections show the global recommerce sector is Recommerce today RECOMMERCE MODELS due to more than triple in the next five Citizens are responding as well. Social years18. The second-hand market overall listening showed responses to posts has already doubled since 2011. about resale of used clothing were 60% positive and provided evidence ‘OLD CAN BE The clothing sector is responding to for trend of ‘thrifting’ where citizens this opportunity in the form of newer are looking for alternatives to linear MORE VALUABLE players such as Poshmark, Elanic and fast fashion. This is in parallel to a Depop. These disruptors are seizing trend in consumption of quality rather the opportunity of the lower barriers THAN NEW.’ than quantity where second-hand to entry in e-commerce to establish brand > brand new19. Deriving value from ‘old’ clothing is not new a market presence. The positivity can translate into profit. but is becoming more prevalent. For example, Depop, a youth-targeted internet recommerce platform has more than 13 million users including designers, stylists, vintage sellers, collectors and influencers20. Its major customer segment is a new generation Figure 5: Citizen sentiment toward of young people who enjoy discovering clothing recommerce garment fashions/designs. Most Sentiment analysis of social media shoppers are UK based, 80% of whom comments on clothing resale are aged 13-24 years. Hundreds of its top sellers earn more than £150,000 per year through the digital market21.

Negative 5%

Positive

60% Neutral 26%

Size of circle denotes relative proportion of comments showing that sentiment, i.e. positive, neutral or negative. Totals do not add up to 100% due to excluded data, e.g. off-topic or trolling.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 16 Recommerce

Figure 6: Citizen interest in recommerce Recommerce in the future Table 4: Influence of a quality label on citizen interest in recommerce Likelihood to try retailer/brand used clothing line/range in seven countries At the national level, there is clear interest in trying a recommerce model Would a quality label/tag make from established brands. Our research citizens more interested in buying a showed that interest in our three focus preloved garment? countries for a ‘preloved’ range from existing brand ranged between 41%

and 64% of those surveyed (Figure 6). UK 41% 47% 12% Our research suggests there is USA 49% 39% 12% more interest in the USA and India in recommerce than in the UK and Indian citizens surveyed were given the European countries surveyed. For option to buy the ‘preloved’ garment the USA, this could be because more from its own brand’s stores rather than India* USA UK Denmark Germany The Italy people there shop second-hand than in Netherlands another outlet. 60% of them said they Europe. Just over a third of UK citizens eree eree were more likely to try purchasing from say they buy clothing from second- a reuse line in a brand’s own store than *Indian citizens were told the recommerce model was only available at non-brand stores. hand stores compared to just over half a reseller’s outlet. Data presented separately for mainland Europe. This is to highlight the difference between the of US citizens. two surveys regarding their other questions and different fieldwork time. This interest increases when a quality label is involved. A branded quality label appears to increase consumer trust in the resold product, consequently increasing the likelihood that citizens would try more mainstream recommerce models in traditional retail outlets. In the UK and the USA, respectively 41% and 49% of citizens “Our research suggests there is more say they would be more likely to try interest in the USA and India in purchasing a ‘preloved’ garment with 60% a brand quality label (Table 4). 60% of Indian citizens surveyed said recommerce than in the UK and they were more likely to try purchasing European countries surveyed.” from a reuse line in a brand’s own store than a reseller’s outlet.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 17 Recommerce

What we think about Table 5: Top three citizens concerns about a preloved clothing range recommerce Top barriers to uptake of recommerce Recommerce models are appealing UK USA India* to shoppers at all levels of the market. When we compared shopper interest LOVE SHOPPING 1 Items might be Items might be Items might be in recommerce with what type of brand damaged, faded, damaged, faded, damaged, faded, Indian citizens who love shopping they shop at, we found interest among stretched stretched stretched also love preloved clothing: 91% of shoppers of all brand types. 2 The items might The size might The items might those we surveyed said they would NEW not look like new not fit me NEW not look like new Considering only citizens who buy more be interested in trying this business of their clothing from lower-end brands model from a brand they like. In the than average, 56% of Indian citizens USA it’s 85% and the UK, 70%. 3 It sounds The items might It sounds surveyed, 48% of US citizens and 39% unhygienic NEW not look like new unhygienic of UK citizens say they would try the recommerce model at a brand they like. *All barriers surveyed were concerns of over 25% of the sample. These are similar levels of interest to the Considering all the evidence in our population average in the recommerce research, in Europe, recommerce model we tested. models look the most promising new There are common barriers across business models to expand for the India, the UK and the USA to uptake of mass market. However, in India and recommerce models (Table 5). For the the USA, there is even more potential model we tested, India and the UK had for recommerce to be a viable model, the same top three barriers to uptake if concerns about item quality can be related to damaged items, newness and overcome, e.g. through a quality label hygiene in descending order. For the or association with a trusted brand. USA, size worries were more pressing as the second most concerning element of the recommerce model tested. “When we compared shopper interest in recommerce with what type of brand they shop at, we found interest among shoppers of all brand types.”

WRAP Changing our clothes: Why the clothing sector should adopt new business models 18 Other models

Aside from recommerce and rental models, the Indian businesses we ‘Money for nothing something.’ consulted with were more intent on Vouchers OTHER MODELS testing interest in repair services Survey respondents in Denmark, with citizens than the other business Germany, the Netherlands, Italy, the UK model options. The surveys in all other and the USA received a question testing Our research also covered other countries included a business model their interest in trying an incentivised business models. These differed for India proposition on incentivised take-back takeback system. The proposition and the other countries surveyed. via a voucher system. outlined the opportunity to give clothing to brands in return for vouchers to spend in their stores or online. The more in-demand the item exchanged, the greater the value of the voucher. The take-back proposition presented LOVE SHOPPING in our survey is different to the one that is already established. The UK in That vanguard shopping obsessed particular has many retailers which group are even more keen to trade offer clothing collection ‘bins’ and in their assets than their some have done so for many years. fellow citizens. In the UK, 70% of Some retailers, including H&M and M&S those who love shopping are offer an incentive for this ‘takeback’ interested in trying the voucher and consequently collect millions of scheme we proposed, as are 88% garments per year. The key difference those who love shopping in the USA. is that these current offerings are closer to the mentality of citizen donations targeting collections of post-consumer textiles of any brand in any condition, rather than value exchange where own-brand garments are assets, explicitly part of a revenue generating business model.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 19 Other models

We also tested an alternative service Figure 7: Citizen interest in larger vouchers for better clothing ‘Let me fix that for you.’ Repair that was a more comprehensive care Likelihood to try exchanging clothing for vouchers in seven countries* The repair service proposition we package including stain removal and tested with Indian citizens presented colour refresh. Three quarters of them with a contract offer at point of citizens said they would be more likely garment purchase. For an up-front fee, to try the service with these additions. the contract would allow the citizen to return the garment for ‘brand expert’ repairs during a period of 12, 18 or 24 months. Like the other models tested in India, interest in a repair service was high among citizens surveyed. 72% of clothing buyers responding to our study USA UK Denmark Germany The Italy LOVE SHOPPING Netherlands there said they were likely to try a repair eree eree service offered at point of sale. The interest in repair services rose to 90% of Indian citizens who love *The Indian survey did not include a question about vouchers at the request of Indian businesses, shopping among our survey group. preferring repair (see right).

Data presented separately for mainland Europe. This is to highlight the difference between the two surveys regarding their other questions and different fieldwork time.

Our research shows a significant “Some retailers, interest in a value-oriented voucher including H&M and system in all countries, particularly M&S offer an in Italy and the USA (Figure 7). While the takeback of a garment is not incentive for this a business model in and of itself, it ‘takeback’ and can facilitate the reuse of high-quality clothing. The results from our research consequently collect show the potential of vouchers to enable recommerce models, taking high-quality millions of garments under-used garments out of citizens’ per year.” homes and back into stores.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 20 Outcome

This revolution must be better than Square Your Circle: How to evaluate the current system, not only in simply environmental impacts of reuse OUTCOME generating revenue for the industry business models in apparel provides but in how it generates that revenue. guidance to help companies measure It is imperative for the sustainability their environmental impact from ‘VIRTUOUS CIRCLE and circular economy agenda that a reuse business model relative to clothing reuse business models have the traditional linear one. There is a OR DOWNWARD a net positive impact on people, responsibility on brands and retailers planet and profit. to market reuse business models to their customers accordingly. SPIRAL?’ It is important to retain a focus on ‘net positive’ because reuse business models are not inherently better Reuse for the people REUSE FOR GOOD than the current system, despite the Truly successful clothing reuse business potential of them to be so. A rental models must be part of a just transition It is exciting to see the potential for reuse business model with high costs on low to a circular economy. Square Your Circle: business models and the possible start of value items might not generate enough How to Ensure a Just Transition to Reuse profit. Likewise, a business that does not a revolution in how we consume fashion. Business Models in Apparel provides improve conditions for garment workers guidance on just transitions to a reuse does not generate enough social benefit business model by taking a ‘people-first’ for the social cost it imposes. The approach, focusing on opportunities to same goes for environmental cost and engage stakeholders in supply chains. benefit of new models. The impacts of reuse at a system-wide level are difficult to anticipate but this Reuse for the planet does not mean companies should A push to generate more short-term not try. What will the impact be on profit without lowering the resource suppliers and their workers if order consumption of the fashion industry is volumes are reduced in response to doomed to fail as our resources become reselling garments in end markets? more stretched. A reuse business Will pressure to keep costs down drive model will only have a lower impact unsustainable working conditions for on the environment if it displaces new garment quality checkers or cleaners items sold in a linear model. Renting an in reuse models that require them? An outfit for a party will only have a lower enquiring and action-oriented mindset environmental impact if the alternative is needed from companies in order to was buying a new outfit. mitigate these risks.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 21 Conclusion

CONCLUSION “The signals are clear. As this report shows, a change in consumption of There is significant interest in new clothing clothing is possible at scale, especially business models. in larger markets like the USA and India.”

Citizens are demonstrating a desire for It’s not just for haute-couture, reuse alternative consumption to the linear business models are appealing to norm and trendsetters are leading shoppers at all levels of the market. the way. Those higher-spending, Brand level did not make as much of younger, frequent shoppers are most an impact on citizens’ interest in new interested in new models. Where they business models as might be expected. are also early adopters of the disruptor However, there was slightly more companies, they mostly feel positively interest in rental from those shoppers about their experiences. who already shop at high-end/ designer brands. Reuse models, especially rental models, are better suited to the American, The signals are clear. As this report Indian and Italian markets over the shows, a change in consumption of UK and Northern Europe. While those clothing is possible at scale, especially citizens who love shopping are more in larger markets like the USA and interested in new business models India. The opportunity is apparent and across the world, Northern Europeans the question regarding new business are overall less interested. models becomes ‘how do we do it?’ rather than ‘why should we?’

WRAP Changing our clothes: Why the clothing sector should adopt new business models 22 Appendices

c. Vouchers: A clothing brand is considering b. Pre-loved 2: Staying with the idea of offering vouchers to use in their stores or pre-loved clothing – now consider that the online in exchange for clothing you no longer pre-loved ranges are available only at that APPENDIX A wear and they can sell it to a new person. brand’s stores. The pre-loved garments are Only clothing from that brand is eligible for still at a lower price than new items. If this vouchers but you don’t need the original range is available for a brand you like, how BUSINESS MODEL receipt. The more in-demand the item you likely are you to try purchasing an item? exchange, the greater value of voucher you c. Subscription: A clothing brand is considering receive. If this is available at a retailer you like, launching a new service where you pick a style PROPOSITIONS how likely are you to try exchanging some of (e.g. ‘on-trend’, ‘classic’, ‘smart’, etc.) and they your clothing? send you an outfit (e.g. t-, jeans, , d. Subscription: A clothing brand is considering ) in that style every month for a fee. launching a new service where you pick a style At the end of the month, you have to return (e.g. ‘on-trend’, ‘classic’, ‘smart’, etc.) and they the items to a specified location like their retail Answers for 1st option and UK and US (Europe a, c, d only) send you an outfit (e.g. t-shirt, jeans, belt, outlets before you can be sent new ones. voucher scenarios: jumper) in that style every month for a fee. If this service is available for a brand you like, a. Pre-loved: A clothing retailer is considering At the end of the month, you have to return how likely are you to try it? – Very likely the items to a specified location like their retail launching pre-loved clothing ranges. These d. Subscription 2: And now consider that this outlets before you can be sent new ones. ranges would consist of stylish and on-trend subscription service allows you to either – Fairly likely If this service is available for a brand you like, items that have been worn before (bought purchase some or all of the items in the outfit, how likely are you to try it? – Possibly, but less likely back or collected from customers) but sold or return them before you can be sent new for a lower price than if new. If this range is e. Subscription 2: And now consider that the ones. If this service is available for a brand – Not at all likely available for a brand you like, how likely are subscription service has an option to buy any you like, how likely are you to try it? you to try purchasing an item? item in the outfit instead of returning it. The – Don’t know e. Repair service: A clothing brand is price would be lower than if you bought it new b. Pre-loved 2 – with a quality assurance considering offering a care service for and would depend on how old the item was: Answers for 2nd option scenarios: label: Staying with the idea of pre-loved garments you buy at their retail outlets for a older is cheaper. If this service is available for clothing – now consider that clothing like this fixed up-front fee. For the fee, you would get – No change a brand you like, how likely are you to try it? is assessed for quality by the original brand. brand-expert repairs to your garments if Clothing that is certified by the brand as high you bring them in to brand outlets/stores. The – More likely quality and ‘like new’ would receive a quality India service could be purchased for 12, 18 or 24 – Less likely label/tag. These certified items would still be months. If this service is available for a brand sold at a lower price than a new item; but a. Pre-loved: A clothing brand is considering you like, how likely are you to try it? they would be sold at a higher price than an launching pre-loved clothing ranges. These uncertified item. If this range is available for f. Repair service 2: Staying with the idea of a ranges would consist of stylish and on-trend a brand you like, how likely are you to try repair service – now consider that this service items that have been worn before and purchasing an item? also includes maintenance options like colour returned but sold for a lower price than if new. refresh or stain removal. If this service is If this range is available for a brand you like available for a brand you like, how likely are at a different retailer (e.g. an outlet store), you to try it? how likely are you to try purchasing an item?

WRAP Changing our clothes: Why the clothing sector should adopt new business models 23 Appendices

Of the Indians surveyed who didn’t In addition, some research that make an effort to buy longer lasting suggests cultural differences APPENDIX B clothing, higher numbers were doing so in responding to surveys due to boredom resulting from wearing make comparisons between the same clothing, or only want to wear countries difficult. garments a few times before trying THE VIEW FROM INDIA When responding to surveys, Indians something new. are roughly 32% more likely than As a growing market, India represents a substantial the global average to say ‘yes’ to a opportunity in clothing retail for new business models. Comparing Indian respondents question and roughly 40% more than to other countries the other countries surveyed in our primary research. Yes index Japan/Korea 85% The ‘Yes’ Index is not directly The Indian market is understandably North America 88% comparable to our primary research The ‘Yes’ Index different from the other countries we have Northern Europe & UK 90% questions but when it is applied to the highlighted in this report, both in size but Our research shows a variety of Australia 93% results, the interest shown by the Indian also attitude. While these differences have attitudinal differences toward clothing Southern Europe 101% respondents is more muted (Table 6). been touched on previously in the report, between India and the other two focus Eastern Europe 101% South America 113% this appendix provides more guidance for countries. We investigated attitudes Table 6: normalising citizen interest China 113% readers less familiar with the market than toward making effort to buy clothing survey results by the ‘Yes’ Index Asia (exc Japan/Korea/Chine) 111% the United States and Europe. It also that lasts a long time. At a population Africa 115% Survey results, rental allows readers who are more familiar level, there wasn’t much difference in India 132% with India to better interpret the findings the proportion of Indians we surveyed Source Eggers and Puleston 2012: India UK USA of our research. that made some or a great deal of https://www.researchworld.com/ Survey results, rental effort in this regard as opposed to five-dimensions-of-survey-quality/ (% interested in trying) 74% 13% 35% Beyond its geographical size, India’s Americans or Brits. When looking at ‘Yes’ Index applied 56% 14% 40% population at last census was over the reasons for this, the differences It is important that readers of this Survey results, recommerce 1.2 billion22, the country represents a are more apparent. research do not overvalue the positive (% interested in trying) 64% 41% 56% large and growing group of citizens with results by assuming they apply to the ‘Yes’ Index applied 48% 46% 64% disposable income. Various studies Indians in our research said they are whole of India. Already mentioned put the middle class at 3%23 to 40%24 less likely to buy longer lasting clothing in the background section, there We advise readers that all the results, of all households. Potentially even because it saves them money or is a skew in the sample of Indians especially for Indian citizens, are more important is that almost half of because they don’t have to go shopping we surveyed toward wealthier indicative of attitude and potential the country identifies as middle class25, as often. On the other hand, they are urban citizens. behaviour rather than precise market pointing to a strong aspirational culture. more likely to buy longer lasting clothing size estimates. Aspiration can be a powerful driver because they like higher quality or they of consumption. think the clothing looks better.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 24 Endnotes

1 Global Fashion Agenda. (2019). “Pulse of the 7 Ellen MacArthur Foundation. (2017). ”A New 16 This likely would have a negative impact on the 24 Desai, S., Vanneman, R. and National Council Fashion Industry 2019 Update.” Global Fashion Textiles Economy: Redesigning Fashion’s environmental footprint of the model, of Applied Economic Research, New Delhi. Agenda, Boston Consulting Group, and Future.” [online] available at: https://www. encouraging further production to replace the (2015). India Human Development Survey-II Sustainable Apparel Coalition. [online] ellenmacarthurfoundation.org/assets/ garment sold off to a customer before the end (IHDS-II), 2011-12. Ann Arbor, MI: Inter- available at: https://globalfashionagenda.com/ downloads/publications/ of its useful life. university Consortium for Political and Social pulse-2019-update/. A-New-Textiles-Economy_Full-Report_ Research [distributor]. 17 In this survey, there were fewer questions Updated_1-12-17.pdf. 2 Ellen MacArthur Foundation. (2017). ”A New before these model propositions about reuse 25 Kapur, D., Sircar, N. and M. Vaishnav. (2017). Textiles Economy: Redesigning Fashion’s 8 Ibid. of clothing and therefore it is likely that some The New Middle Class – Data and Perceptions. Future.” [online] available at: https://www. respondents were thinking the outfits were Available at: https://vaishnavmilan.files. 9 Ibid. ellenmacarthurfoundation.org/assets/ new garments each time. wordpress.com/2017/11/being-middle-class- downloads/publications/ 10 Likely correlated with better access to the in-india-proofs.pdf. 18 ThredUp. (2019). Fashion Resale Market and A-New-Textiles-Economy_Full-Report_ internet. This was tolerated due to relative lack Trend Report. [online] available at: https:// Updated_1-12-17.pdf. of clothing retailer and brand presence in cf-assets-tup.thredup.com/resale_ rural, less affluent areas of India. Language 3 Global Fashion Agenda. (2017). “Pulse of the report/2019/thredUP-resaleReport2019.pdf. used in this report is careful therefore to say Fashion Industry.” Global Fashion Agenda and “Indians surveyed” when referring to results 19 Certain branded garments are worth more to Boston Consulting Group. [online] available at: from the main source study. citizens than an equivalent new garment, https://www.globalfashionagenda.com/ unbranded or from a ‘lower value’ brand. wp-content/uploads/2017/05/Pulse-of-the- 11 See Appendix for full description of each Fashion-Industry_2017.pdf. business model we tested. 20 Depop. (2019). About. [online] available at: https://www.depop.com/about/. 4 Close the Loop. (2020). “Introduction.” [online] 12 The study is unpublished but summary details available at: https://www.close-the-loop.be/ can be provided on request. 21 Butler, B. (2019). Everyone I know buys vintage: en/phase/3/end-of-life. the Depop seller shaking up fashion. [online] 13 Pinnock, O. (2019). “A hire purpose: the available at: https://www.theguardian.com/ 5 Ellen MacArthur Foundation. (2017). ”A New opportunities in rental fashion.” Drapers business/2018/oct/20/everyone-i-know-buys- Textiles Economy: Redesigning Fashion’s Online. [online] available at: https://www. vintage-the-depop-sellers-shaking-up-fashion. Future.” [online] available at: https://www. drapersonline.com/business-operations/ ellenmacarthurfoundation.org/assets/ a-hire-purpose-the-opportunities-in-rental- 22 Government of India. (2011). Census of India downloads/publications/ fashion/7033812.article. 2011. [online] available at: http://censusindia. A-New-Textiles-Economy_Full-Report_ gov.in/. 14 Ibid. Updated_1-12-17.pdf. 23 Pew Research Center. (2015). A Global Middle 15 Iqbal, S. (2017). “Online Clothing Rental Market 6 Remy, N., Speelman, E. and S. Swartz. (2016). Class Is More Promise than Reality. [online] by End-Users (women, men and kids) and “Style That’s Sustainable: A New Fast-Fashion available at: https://www.pewresearch.org/ Clothing Style (ethic, western and others) – Formula”. McKinsey. [online] available at: global/2015/07/08/a-global-middle-class-is- Global Opportunity Analysis and Industry https://www.mckinsey.com/business- more-promise-than-reality/. Forecast, 2017-2023. Allied Market Research. functions/sustainability-and-resource- Available at: https://www.alliedmarketresearch. productivity/our-insights/style-thats- com/online-clothing-rental-market. sustainable-a-new-fast-fashion-formula.

WRAP Changing our clothes: Why the clothing sector should adopt new business models 25 Author Acknowledgements UK Working Group Participants Supported by Sam Gillick-Daniels, This report is an output of the ‘Clothing Arcadia Senior Analyst (WRAP) Reuse Market Makers’ project and has ASOS been made possible by funding from Farfetch Contributors the Laudes Foundation as part of the Stella McCartney Bridging the Gap initiative. Abigail Skyrme-Jones, Emma India Working Group Participants How, Gvantsa Sivsivadze and So Additional financial and/or in- Young Park, graduate students kind support has been provided Arvind Ltd. (School of Geographical Science, by our working group of apparel Pratibha Syntex University of Bristol) brands and retailers. H&M Mahindra Retail Deborah Drew, Social Impact Lead; US Working Group Participants Puma Eliot Metzger, Director, Sustainable Saahas Zero Waste Business & Innovation; Vivek Adhia, Bank & Vogue Shahi Exports Head of Business Engagement – India; eBay Tata Trent Ltd. Priyal Shah, Consultant and Austin Eileen Fisher Kiabza Dickerson, Research Analyst (World Goodwill Marks & Resources Institute) Nike Birla Cellulose P&G Sarah Gray, Senior Analyst; Rebecca Bombay Hemp Company (BoHeCo) REI Tay, Project Manager; and David Renewal Workshop Rogers, Head of International Resource The RealReal Management (WRAP) 2019 survey fieldwork and initial ThredUp analysis was conducted by Icaro VF Corp Consulting Ltd on behalf of WRAP. Yerdle

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