Focus areas Circular Fashion/Circular Economy

Based on an internal evaluation of the endeavors on changing the Fashion industry towards circular business models, in this blog, I will enlighten some trends that can be seen. 

Systems change

Circular economy has a clear perspective for fashion: create an industry that can be identified as a ‘force for good’. From a circular perspective this implies fundamental changes in the industry as well B2C as B2B. This brings two basic needs: ‘optimization’ is the first relevant need. The fashion/apparel industry has an enormous negative impact (externalities) on people’s lives (inequality) and climate, ‘plastic oceans’, water quality, biodiversity, resource depletion and pressure on waste systems. Addressing these issues has a short -term perspective, this is why we should choose to create a balance in ‘optimization’ and ‘systems change’. Optimization/efficiency is aimed at actual problem solving. Examples are ZDHC (Zero Discharge of Hazardous Chemicals) and Canopy (saving forests). Where systems change/effectiveness is key, we see projects like Fashion for Good, the ‘Bridging the Gap’ initiatives on implementation of circular business models and all kinds of advocacy initiatives. See the differences depicted in the schedule below.

Service-based

In Circular Economy the key element of new business models is the focus on ‘performance-based contracting’. This has been translated by businesses into service-based contracting as the core of the CBM’s in fashion. This is not with a focus on individual products but on the customers’ needs and hidden-needs: service them in their lifestyles. There are two reasons for this development:

  1. Individual products in the fashion industry have a reasonable ‘low’ value, which means that leasing-contracts are inconvenient and mainly to expensive in their management. Inconvenient because the consumer has 50+ products in their closets and have a lease-contract for each item would create ‘chaos’ in their financial administration. To expensive is mainly a worry on the side of the companies: managing each of these contracts would take too much time (and money) in their management and
  2. Consumers are looking for exploration of their individual lifestyles, which means that standardization is not really an option. Fashion as a service is an option, because then the focus is on facilitating lifestyles and not on individual products.

So, what are the characteristics of such services? Here we see three elements that are the basics of services:

  1. Ownership of the products stays with the professionals, whether it is the producer or the retail or a styling-specialist, the consumer becomes the user. Ownership implies responsibility and professionals are far better equipped to understand the consequences of this responsibility. This is why ICE does not pledge for ‘extended producer responsibility’ as policy development but sees the need for ‘full producer responsibility’;
  2. Usership of fashion means that the professionals provide the customer/user with the right fit to their lifestyle, in practice it is often described as professional management of the closet. The products in this service approach become ‘assets’ in the business case of the professionals and as well known in business rationales: asset management is key for economic value and
  3. Longer lasting relations between the service provider and the customers are elementary for a good service contracting: the service provider needs to know the customer and helps the customer to develop his/her style over time. Longer lasting connections are a strong basis for business continuity.

Many examples of circular fashion, in the B2C-domain, at the moment, are not fundamentally circular mainly because the changes to services and usership/ownership are not part of the deal flows:

  • Sharing: is a strong development in the market, though mainly unseen and part of the informal market. Millennials use each other’s closets as a source for clothing. One example of a serious business case is the development in social entrepreneurship, like ‘Lena, the Clothing Library’. This can be seen as an experiment for the industry, where quite some knowledge can be harvested on users/members behaviors and choices;
  • Re-use: the growth of vintage fashion, trade on Vinted and other sites, small shops, thrift stores and even in retail brands (Burberry e.g.) is a good extension of product-life but mainly attracts new customers to brands, the existing customer will not change;
  • Repair: many pieces of apparel go into the waste-system because of technical issues (small: missing buttons, big: change of style or change of body/fit) which could be repaired, that market seems to be growing also. It brings a better longevity for garments and
  • Recycling: collect for recycling is initiated by many brands now a days. It helps to get garments in the right part of the recycling industry. Recycling brings normally an enormous decrease in value and should be the last step. The focus on recycling is more or less ‘waste-policy’ instead of being elementary in the circular economy. Of course, at the end of the product life recycling of materials is needed, but that needs a strong focus on ‘design for use, re-use and recycling’ in the industry: a responsibility that is not yet taken overall.

The other phenomena in the market is “Rental”: known as a good business model for party gowns and suits/tuxedo’s already since a long time. This is quite a good model as a CBM. Now this is a niche-market and normally very specialized. Longevity is key for the business case as well as design and ‘uniqueness’. The element of service is not really around in this retail domain, the customers find their way to the rental shop incidentally (which means incident by incident) and there is no long-term commitment or contractual relation between the rental-provider and the user(s).

Fashion as a Service (FAAS) is the generic terminology for new business models, based on performance (support the customer’s lifestyle), responsibility (professional has responsibility), products as assets and value creation and value maintenance. Practically: the retail becomes service-provider!

Plotted, this would mean:

Service-based

In Circular Economy the key element of new business models is the focus on ‘performance-based contracting’. This has been translated by businesses into service-based contracting as the core of the CBM’s in fashion. This is not with a focus on individual products but on the customers’ needs and hidden-needs: service them in their lifestyles. There are two reasons for this development:

  1. Individual products in the fashion industry have a reasonable ‘low’ value, which means that leasing-contracts are inconvenient and mainly to expensive in their management. Inconvenient because the consumer has 50+ products in their closets and have a lease-contract for each item would create ‘chaos’ in their financial administration. To expensive is mainly a worry on the side of the companies: managing each of these contracts would take too much time (and money) in their management and
  2. Consumers are looking for exploration of their individual lifestyles, which means that standardization is not really an option. Fashion as a service is an option, because then the focus is on facilitating lifestyles and not on individual products.

So, what are the characteristics of such services? Here we see three elements that are the basics of services:

  1. Ownership of the products stays with the professionals, whether it is the producer or the retail or a styling-specialist, the consumer becomes the user. Ownership implies responsibility and professionals are far better equipped to understand the consequences of this responsibility. This is why ICE does not pledge for ‘extended producer responsibility’ as policy development but sees the need for ‘full producer responsibility’;
  2. Usership of fashion means that the professionals provide the customer/user with the right fit to their lifestyle, in practice it is often described as professional management of the closet. The products in this service approach become ‘assets’ in the business case of the professionals and as well known in business rationales: asset management is key for economic value and
  3. Longer lasting relations between the service provider and the customers are elementary for a good service contracting: the service provider needs to know the customer and helps the customer to develop his/her style over time. Longer lasting connections are a strong basis for business continuity.

Many examples of circular fashion, in the B2C-domain, at the moment, are not fundamentally circular mainly because the changes to services and usership/ownership are not part of the deal flows:

  • Sharing: is a strong development in the market, though mainly unseen and part of the informal market. Millennials use each other’s closets as a source for clothing. One example of a serious business case is the development in social entrepreneurship, like ‘Lena, the Clothing Library’. This can be seen as an experiment for the industry, where quite some knowledge can be harvested on users/members behaviors and choices;
  • Re-use: the growth of vintage fashion, trade on Vinted and other sites, small shops, thrift stores and even in retail brands (Burberry e.g.) is a good extension of product-life but mainly attracts new customers to brands, the existing customer will not change;
  • Repair: many pieces of apparel go into the waste-system because of technical issues (small: missing buttons, big: change of style or change of body/fit) which could be repaired, that market seems to be growing also. It brings a better longevity for garments and
  • Recycling: collect for recycling is initiated by many brands now a days. It helps to get garments in the right part of the recycling industry. Recycling brings normally an enormous decrease in value and should be the last step. The focus on recycling is more or less ‘waste-policy’ instead of being elementary in the circular economy. Of course, at the end of the product life recycling of materials is needed, but that needs a strong focus on ‘design for use, re-use and recycling’ in the industry: a responsibility that is not yet taken overall.

The other phenomena in the market is “Rental”: known as a good business model for party gowns and suits/tuxedo’s already since a long time. This is quite a good model as a CBM. Now this is a niche-market and normally very specialized. Longevity is key for the business case as well as design and ‘uniqueness’. The element of service is not really around in this retail domain, the customers find their way to the rental shop incidentally (which means incident by incident) and there is no long-term commitment or contractual relation between the rental-provider and the user(s).

Fashion as a Service (FAAS) is the generic terminology for new business models, based on performance (support the customer’s lifestyle), responsibility (professional has responsibility), products as assets and value creation and value maintenance. Practically: the retail becomes service-provider!

Plotted, this would mean: