The changing face of fashion retail

Fashion retailers were dealing with these issues pre-Covid-19 but in its wake, savvy players are investing in circular business models and working to maximise profits with direct-to-consumer (DTC) sales.

"The global pandemic has had such an impact on people's lifestyles, making them re-evaluate their shopping habits, accelerating existing trends of digitisation, environmental awareness, and re-emergence of the local," explains Marilyn Martinez, project manager of the Ellen MacArthur Foundation's Make Fashion Circular initiative. She adds: "The question now is not if new business models will take off, but how fast."

Emily Salter, senior apparel analyst at GlobalData, notes new retail models are important because they are starting to disrupt consumer purchasing habits as they are tailored to how consumers want to shop.

Fashion heavyweights such as Lindex, H&M Group, Ralph Lauren Corporation, and G-Star Raw are already investing in circular business models such as resale, rental and repair.

"It is both a necessity and a matter of urgency that we change the ways in which we design, produce and consume fashion," points out Ellen Svanström, head of H&M Group's Business Ventures unit. She explains putting sustainability at the core of the business is a big opportunity to accelerate the pace of change.

DTC is also growing in popularity with the shift to online and has been boosted by the impacts of Covid-19 alongside social commerce.

GlobalData recently revealed the four key DTC apparel trends, which includes social commerce.

Fashion retailer Express Inc is one player tapping into this trend. The company recently announced Express Community Commerce as part of its goal to achieve US$1bn in e-commerce sales by 2024.

Since the Covid-19 outbreak, 42% of global consumers are spending slightly or significantly more time browsing social media than before, according to GlobalData.

It’s not surprising global brands such as Gap Inc are working with social media platforms like Instagram.

For Salter, the main challenge related to DTC is it requires more investment in terms of building brand awareness and a customer base as opposed to relying on an already established platform.

Georgia Parker, innovation manager at Fashion for Good explains circular models are "undoubtedly" one way of driving a more sustainable future for fashion.

She says: "They enable us to extend the use of products for longer, which in principle means a need to produce fewer products."

Make Fashion Circular’s Martinez agrees that such retail models can be part of a circular economy if designed with the necessary incentives to displace the traditional sale of new products.

She adds that wider implications need to be considered such as the impact of transport and creating a durable product to avoid unintended negative consequences, such as greater greenhouse gas emissions overall.

Meanwhile, Gwen Cunningham, Circle Textiles Program lead at Circle Economy, says brands exploring rental or resale do so because of the multiple opportunities available.

"From a financial perspective, the basic logic is the longer an item can be in circulation, the more revenue it can generate...more bang for your buck."

However, while many brands see the potential of these models, they are often overwhelmed by the operational undertaking that is needed to establish one.

Circle Economy has developed the Circular Toolbox, a free step-by-step guide to help companies launch a rental or resale business model pilot in ten months.

For these models to foster a green future, Cunningham points out we must consider if the rented/resold item is being used more than a new item and if it is displacing the production and consumption of a new item.

She says: "We should remain critical and estimate and assess the true impact that each of these models actually delivers, to make sure they uphold their circular promise."

Looking to the future, Martinez notes the emergence of business models that generate revenue without creating or using any physical products.

"Digital-only products are emerging and they could potentially provide a good alternative to replace those items that get produced and are only used a couple of times. For example, people can now apply 'virtual' dresses to pictures of themselves and be seen wearing and sharing them on social media."

Parker also points to digitisation as a way of reducing excess inventory while enhancing the customer experience. She says Fashion for Good sees the future of retail as being one that has circularity at its core - where products are designed to last, but can be reused and recycled into new products at the end of their life.

Meanwhile, Scot Case, vice president of corporate social responsibility and sustainability at the National Retail Federation, notes the pandemic accelerated the merger of three trends – e-commerce, sustainability and resale.

"All three trends are likely to remain permanent fixtures for the retail industry because they make it easier and more convenient for consumers to get what they want and when they want it," he says.

GlobalData’s Salter supports this idea and says there will be a continued shift towards sustainability and ethics, but mainstream retailers will continue to focus on "more minor changes" such as clothing being made from recycled materials.

She concludes: "Smaller sustainable brands and circular platforms will grow in popularity, but even in five years' time, they are unlikely to change the main method of purchasing away from fast fashion. There will continue to be consolidation in the apparel market with smaller players being bought by larger retailers, leading to greater dominance of retailers and groups such as Asos and Boohoo."