by Anna Salewski, Founder & CEO at SCROBLE
We all know that the fashion industry involves highly sensitive consumer behaviour with a lot of implications, as demonstrated in my previous articles. There are so many consumer journeys shared through different channels, and a lot of aspects influence the decision-making process, including the constantly evolving trends and styles. Running behind this ever-changing game is the reality of the fashion business. Now, the implications of COVID-19 have made the process even more difficult, and brands need to constantly reflect and adjust their offerings to produce products having a chance to be sold.
It is logical to assume that the role of consumer data for building the right perceptions and making predictions is quintessential for any brand. In my article on data, I stated that there is not enough special data available on the fashion industry from both offline and online sources. There is also the presented problem of brands’ accessibility to the existing data. Also, the process of transforming the existing raw data into valuable analytics is an expensive one, making it inaccessible to small- and mid-size brands that lack the relevant technologies and the know-how.
In this article, I would like to focus on the costs that the fashion industry and, in fact, all of us pay for wrong predictions resulting from the outlined factors. I would like to estimate the quantitative role of data in influencing overproduction. I also intend to compare the existing sustainable concepts and their overall capacity to influence sustainability in fashion. Is any other sustainable initiative able to change a significant part of fashion for the better? The huge need for change in fashion has been long debated, but what really needs to be changed to make our industry more sustainable? Is it circularity? Is it sustainable production? Or do we need to bring digital fashion into the context of user expression to reduce real consumption? What will we achieve if we do all that to a 100% capacity? Do you think fashion would be sustainable then? What would be the outcome of such change? Is it naive to believe that we can ever achieve it? Further, what else can we do to speed up the overall change? The well known, still shocking fact upfront: fashion was and still is responsible for 10% of all CO2 emissions without any evidence of this amount being lowered. It makes fashion one of the most polluting industries in the world.
I would like to start by clarifying exactly which business model is responsible for this overall situation. Many would expect “fast fashion” to be the answer here—I have a different opinion—and it is the problem of entire pre-produced fashion in which we can find examples for overproduction at any brand’s level, from small to big, from affordable to luxury. All pre-producing brands are involved here. Therefore, I prefer to address and refer to this widely used and global business model where fashion products are produced in advance for future sales. Indeed, with an estimated amount of 100 billion items— according to Vogue Business—we can attribute 95% of all fashion to this particular business model of advanced production.
Here is an overview of how the system works: All brands having the same structure of processes follow three stages (the speed, however, among the processes and the frequency of cycles may vary significantly). At the very beginning of the fashion value chain, there is a decision taken regarding what needs to be produced and where it needs to be distributed. Let’s call it the pre-production stage.
The next stages would be the production and the third one the sales process. Generally, the term sustainability can be found within all three stages but with quite different concepts and approaches. Let’s start with circularity. Circularity within this existing and widely used business model of a pre-produced fashion is a part of the after-sales product lifecycle. That means, that the core circular part begins when the garment is sold to a consumer. We need to distinguish this circularity from other business models, such as on-demand production. In the world of produced fashion, circularity happens only if and when the garment is sold. The question is, which part of the total amount of garments produced is getting sold to a final consumer?
According to the Australian Circular Textile Association (ACTA), the excess inventory is estimated at €210 billion each year which is about 30% of the overall global production. McKinsey reported this year that the value of excess inventory from the spring/summer 2020 collections alone is estimated (can be much higher, in fact) at €140 billion to €160 billion worldwide. This catapults the amount of excess inventory to almost 50%. We’re talking about over 30% of the unsold fashion products that are going regularly into the land fields, which is a “normal” situation for the fashion industry even without a crisis like we have now—this can go up to 50% in exceptional crisis situations like COVID-19. Knowing that fashion produces over 10% of the world’s CO2 emission would mean that 30–50% of the production is just to fill the garbage! Wonderful.
Consequently—and going back to the point of circularity within the existing business model—only 50 to 70% of all produced fashion products are getting in hands of buyers and can potentially come into the circular traction model. I found it really interesting to read the circular fashion report 2020 made by Circular Fashion Summit in partnership with PWC.
It was very clearly stated that there is no certainty about what circular economy really is—every expert has their own opinion about the topic. Not even industry leaders are able to clearly understand and articulate all these terms with a single voice and bring them into the structure of existing processes. Therefore, I am feeling confident with expressing my thoughts willing to apply here my way of thinking and logic, use the existing facts to understand everything I have learned by diving into the literature and combining information in my way.
Going further and taking into account the business model of pre-produced fashion, the circular economy is about different, specific concepts and ideas which are, ultimately, happening after the sales process. Some are connected to the traction of the product information, its resale, second-hand renting, and even renewing, reshaping – many concepts using new technologies, peer-to-peer connection or blockchain. From the number of clothes that can circulate, with a prolonged life cycle and trackable future usage, we need to deduct the garments that are being wrongly washed or damaged sooner than expected because of their low quality; these garments would not be part of the circular economy either. No concrete figures exist about how many clothes, that are bought by consumers are being processed through the circular economy afterwards, but it is certain that, for the moment, we cannot talk about more than 5–10%; this is an overoptimistic range and would make up about 3–5% of the overall produced fashion. There are amazing ventures in this field that involves business ideas and technologies allowing the prolongation of the life cycle of a garment.
All these processes of a circular model strongly depend on the digital capabilities of different products to establish peer-to-peer connections and build digital environments enabling users to find and utilize this idea in the most efficient way. We need to bear in mind that the time consumed by less efficient solutions will always prevent them from scaling and making progress in circularity. Technology is crucial for finding a novel way to connect similar minded people and enabling communications and circular interactions.
Now, let’s come back to the current business model in fashion. If we say that circularity can happen only after the sale, then what is the role of this sustainable concept in the production cycle? Simply put, we have sustainability in producing a particular item, considering the quality of garments, working conditions, remuneration of workers, chemical substances used to produce clothes, and the different materials and fabrics, some of which can be, for instance, degradable and compostable. These and many other concepts are all the factors influencing sustainability while producing fashion. According to the Business Research Company, the value of the global ethical fashion market size riches almost $6,35 billion in 2019 and was predicted to grow up to $8,25 billion by 2023. Considering the entire volume of the fashion market with $1.8 trillion – the overall amounts of ethically and sustainably produced fashion remaining very little. Of course, thinking rationally and economically in producing more expensive garments would cost fashion brands more, and they already have more than enough troubles at the moment to figure out how to settle the dust with the overall situation and changes around COVID19.
And still – being produced sustainably, there is no guarantee for a garment to be sold to a final consumer. So, there is still an open question to answer, that I have raised in my previous articles: Can we consider sustainably produced but unsold garments sustainable? I am not sure; in my personal opinion, such products have a lower environmental impact but do not completely fulfil the purpose of sustainability. By increasing costs for sustainable production, it is a big question of economic rationale (where up to 50% of products are not getting sold) and one of the main reasons, in my view, for the slow speed of change towards sustainability in fashion.
Now, we are coming to the last part of sustainability within the widely used fashion business model mentioned in the beginning. This part, actually, comes first in the value chain; decisions are taken on what will be produced and where it will be distributed. The decisions taken here, including the distribution politics, are tremendously influencing sustainability in fashion, more so, than any other decisions taken in the production cycle or circular economy. But how are these decisions made, and why is there still so much overproduction? How is data influencing these processes, and why? Again, how is it possible that we have so much data but there is still limited improvement toward reducing the unsold stock? How can we fill the data gap and make it more accessible and affordable? Why do we still need to produce four t-shirts to sell two? I have already published an article with the very clear conclusion that, despite its overall availability, we don’t have enough relevant data in fashion due to many factors—this is a result of both the technological inability to capture the user journey at every step of the purchase and deliver this data to brands as well as the absence of data from offline retail (where most of the sales still happen). Another burden of accessibility of online data is the presence of diversified distribution strategies with varied online sales channels. The new e-commerce distribution channels are increasing sales and are executing their own power by leveraging customer connection and technology to gain unique data from the source under the surface.
Even if brands were able to access all the existing data, would this really help fashion? What data is actually needed? How should we get it and make it directly accessible to brands to influence sustainability more efficiently within the existing business model?
I am sure that we can significantly reduce the level of dead stock at this stage by predicting the demand and building trends that correspond to the needs and desires of the consumers. For the moment, sustainability within the existing business model doesn’t yield fruit quickly and there is no real evidence of achieving sustainable goals within the industry according to the very recent report from BoF. There should be a way for every brand to reach the sale target without producing excess inventory. At least, this should be considered as the most important sustainable goal to achieve, which is also the greatest challenge according to the BoF report mentioned previously. Do we need to change the entire business model to make it possible? If yes, would it be realistic? I don’t think that the fashion business model can be changed so quickly. But I truly believe that we can make powerful adjustments to the existing model to allow businesses to improve at a faster pace.
One of the most important things to be achieved here is to let brands get precise and relevant data through direct access, thereby obtaining all the required details to improve the processes. In my view, this data must reflect the concrete interactions between products and users, giving the users the space to express themselves through a product and interact with it as a digital asset that can conduct different user journeys. There should also be sufficient space to understand the multiple decisions made by a consumer during the discovery and purchase process.
This is also about answering the question: why somebody who was initially interested in a product did not purchase it? This is a great source of information and data to improve fashion brands’ understanding of consumer behaviour. It is not only about delivering the knowledge of who was purchasing a product but also about the concrete decision-making process and the many aspects involved, such as interruptions in a sale driving the customer away from a purchase despite having an initial interest. Segmenting and capturing consumer behaviours is crucial, and product-related data about user journeys through a direct-to-customer approach would be a game-changer; this format should also be available directly to brands in a live-time sequence so that they understand the consumer behaviours and current trends by connecting this data to the production forecasts. Capturing this data should also be an integrated part of the retailing process both online and in stores. Also, there must be room for digital product distribution and peer-to-peer communication so that community effects can be observed and included in the analytics. This is, however, compared to the existing data, an absolutely different dimension of analytics.
To successfully do this, we would need to satisfy several inter-dependent factors, starting with technology that will enable the digital capturing of all processes related to the product–user interactions with the possibility of observing the data in-store as well; further, it would require an instant understanding, agreement, and consent from consumers to provide such systematic feedback. With all the bad reputation around the word “data,” I see it as a challenge to let users consent to and willingly participate in co-creating such data and information. This should be the ultimate goal. And who should finance it? This is an additional work that relies on technology to explain the importance of and involve users in such processes. It should be constructed in a transparent way and with an understanding of what exactly needs to be collected—i.e., less personalized (facial recognition, emotional reactions etc) and more consumer-related product interaction data.
The ultimate goal of sustainability in fashion should be the reduction or even complete elimination of unnecessary production and excess inventory next to the improvement of production and circular usage.
As a matter of fact, this will influence sustainability in a fashion faster and easier than any other existing initiative. Considering the outcome of sustainable production and circular economy together, both would need to grow to 90% for all sold garments in order to bet this outcome. However, it is quite unrealistic to believe in and almost impossible to achieve on the scale, especially with the current state of technological development and a high diversification in fashion. This is also why there is still no objective positive change in reducing the CO2 emissions despite all the available products and suggested sustainable concepts. I wonder when we will apply real calculations and the right sense of logic and attributing facts to the real sources of problems instead of drawing unrealistic expectations with terms such as sustainability and circularity, but without having a global overview and true positioning of these solutions based on their calculated impact within the overall system.
Admittedly, for the moment, it is not even possible to attribute new consumer data concepts to sustainable ones, which makes me think in the context of what been said previously about the “very deep waters” we are all in concerning the actual influencing factors of sustainability in fashion, but also how the entire concept of sustainability is constructed. With all the sustainable goals, but without a way on how to reshape the industry considering also the economic rationale, there is a big uncertainty in achieving them. In my view, we have a wrong focus within the industry on what can make this change possible and we need new creative and disruptive approaches. I see a pressing need to go beyond the usual concepts and also experiment with new global concepts and technologies, but also to involve the out-of-the-box thinkers and consumers to validate and implement the needed effective solution on a scale.
First published on www.SCROBLE.com
Photos by John Towner