Service-based business models and circular strategies for Textiles Sustainable business opportunities for Fashion and Textile companies



Similar documents
WELCOME Conscious Actions Highlights 2013

Address by CEO Karl-Johan Persson at H&M s AGM 2015

Building a leading e-commerce business: The 3 Pillars

SOURCING TEXTILE WASTE

INTERNATIONAL SUPPLY CHAIN MANAGEMENT BSB Written Examination Stimulus Material Case Study - Hennes & Mauritz (H&M)

Food & Coffee Offers New Ideas to Drive Non Fuel Income

It s not just about the environment

Primary Logistics Activities

Swimming upstream: navigating the world of reverse logistics

Are Closed Loop Textiles the Future of Fashion?

Valuing our clothes is a summary of the key findings of a major technical report published by WRAP. It presents estimates of the carbon, water and

Building Integrity. Textile Exchange. a case study

Five Ways Retailers Can Profit from Customer Intelligence

The business value of changing consumer behaviors

UNDERSTANDING YOUR TARGET AUDIENCE AND DEFINING YOUR VALUE PROPOSITION

BUSINESS INTELLIGENCE

Leading Wholesalers of Fabric with LYCRA Fiber Catering for

Tesco Business Transformation Case Study

This annual benefit report for Outlier s 2012 fiscal year contains:

Retail Analytics The perfect business enhancement. Gain profit, control margin abrasion & grow customer loyalty

TAILOR-MADE FROM HEAD TO TOE

E-waste Challenges & Solutions

Why outsourcing is the dependable option for independent hotels. A white paper from Berendsen

Turkey: Retail & Consumer Update

Class Activity Cards

Anna Campbell BRAND MANAGER

CONSUMER ENGAGEMENT IN THE CURRENT ACCOUNT MARKET

Ethical Fashion: Designing the Future with Supply Chain Transparency

Corporate Social Opportunity! 7 Steps to Make Corporate Social Responsibility Work for Your Business Theme of the Book

A Report On. A Strategic Marketing Plan for. Lane Bryant. Researched by: Tina Teige. Marketing Principles Northcentral Technical College

ORGANISING A FASHION SHOW: some hints & tips.

Agricultural Marketing. Direct Marketing Strategies and Opportunities. Commodity or Niche? MARKETS DEFINED

A guide to help you make the most of Your Choice. Employee Guide

Leading U.K. Retailer, John Lewis, Pilots Unique Cisco StyleMe Fashion Mirror To Help Capture More Cross-Channel Shoppers

Types of Job in Retail

Barco Marketing Case Analysis

Ethical and environmental policy. Union of Brunel Students

RISK BASED INTERNAL AUDIT

THE ROLE OF MARKET RESEARCH IN THE MODERN SHOPPING CENTRE

TELECOM PERFORMANCE NETWORK

Executive Summary. Executive Summary. Executive Summary of the KPMG Study Trends in Retail 2020 CONSUMER MARKETS MARKETS

ALL-ELECTRIC CAR SUBSCRIPTION

Consolidation Centres. Logistics evolved

MASTER S COURSES FASHION RETAIL MANAGEMENT

Depot Manager, Retail Company

The 2011 Global Supply Chain Agenda Market and demand volatility drives the need for supply chain visibility

Pantene myshampoo Marketing Management Project

THE DESIGNER S CHOICE TO BE MORE SUSTAINABLE. Charlotte Turner The Sustainable Angle

Indicators. Salesforce SUCCESS Partners

Manifesto for the sustainability in Italian Fashion. Promoted by Camera Nazionale della Moda Italiana

Balancing Multi-Generational Retail Strategies. Millennials, Boomers and the changing retail landscape. August 2015

Growth of E-commerce in Fashion Businesses

Aecus European Innovation Awards 2015

see, say, feel, do Social Media Metrics that Matter

Truck aftersales: Roadmap to excellence. Roland Berger Strategy Consultants GmbH Automotive Competence Center July. 2014

Infor M3 Assortment Replenishment Planner

240 for an annual licence includes:

Mothercare Group Modern Slavery Act Transparency Statement FY15/16

Asset Management. Enabling effective estates strategies >

OUR VISION OUR MISSION. Radley aspires to be the leading premium British accessories brand at home and abroad.

OAKLIN INSIGHTS. Successful Omni-Channel Retail

Drop Shipping ebook. What s the Deal with Drop Shipping?

CREATIVE SOLUTIONS FOR REVERSE LOGISTICS NON-PROFIT ORGANIZATIONS AND RETURNS MANAGEMENT UTILIZING

Optimizing Rewards and Employee Engagement

Reverse Logistics From Black Hole to Untapped Revenue Stream. A White Paper Prepared by Ryder Supply Chain Solutions

Chesterfield Borough Council. Internal Communications Strategy. April April 2017.

The Circular Economy: A New Means of Production

Trackunit Telematics Solution. for OEM

Presentation from the 2013 World Water Week in Stockholm

SMS Guide For Fashion & Retail

The Psychology of Travel Consumer Behavior

Case Study / A consistent approach to transforming mindset that changes the face of retail one smile at a time

THE SUPPLY CHAIN MANAGEMENT AND OPERATIONS AS KEY TO FUTURE COMPETITIVENESS FOR RESEARCH, DEVELOPMENT AND MANUFACTURE OF NEW VEHICLES

HUGO BOSS ENVIRONMENTAL COMMITMENT. Our claim. Our approach

What it examines. Business Working Responsibly CR/Sustainability Governance Section

How to Measure a Loyalty Programme s Return on Investment. Managing information and transactions securely

Increase Revenues with Channel Sales Management

Words That Work Playbook

Reduce your markdowns. 7 ways to maintain your margins by aligning supply and demand

MEASURING THE SUCCESS

Sustainability Policy and Targets to 2015

Develop the first portfolio of 1000 circular retail products

Whitney Young High School 12 th Grade Age: 17

Product-centric to Customer-centric: Why CRM is the Business Strategy for School Market Success

2015 Sustainability Report Key Data

EXECUTIVE SUMMARY. Warehouse Management Systems. Technology for Global Supply Chain Performance. Authored By: Carla Reed. ChainLink Technology Series

Outsourcing Manufacturing: A 20/20 view

Mobile call recording: are you complying or compromising?

Smart marketing for small businesses»

TRADITIONAL ERP ERP FOR ECOMMERCE?

Check-in Deals A new way to connect with customers

CRM & FAN LOYALTY CASE STUDY AT SASKATCHEWAN ROUGHRIDERS (ONE OF CANADA S TOP PROFESSIONAL SPORTS BRANDS)

Join the Coffee Revolution


Getting the most out of your gift card program A white paper published by National Gift Card Corp.

meet and exceed customer expectation not just on price Read the example of McDonald s outlined on Jobber, pages

Self-directed learning: managing yourself and your working relationships

Skanska Residential UK

Capturing the full potential of design to value

Transcription:

MECHANICAL VS. CHEMICAL RECYCLING Service-based business models and circular strategies for Textiles Sustainable business opportunities for Fashion and Textile companies Hélène Smits OCTOBER 8, 2015

The Circular Textiles Program

WE LIVE ON A SPACESHIP THERE ARE LIMITS TO GROWTH

FASHION IS THE SECOND MOST POLLUTING INDUSTRY IN THE WORLD Upstream impacts: Fibre production Downstream impacts: Textile waste

Development of the sustainability movement. From THEN to NOW. More than 50 large companies believe the riskbased business case for sustainable behaviour change will be replaced by innovation and market share drivers within five years.

M&S Plan A for sustainable business

CLOSING THE LOOP IS ABOUT MORE THAN ONLY RECYCLING IT REQUIRES NEW WAYS OF DESIGNING, PRODUCING, CONSUMING IT REQUIRES NEW BUSINESS MODELS

What are service based business models & circular strategies? Service-based business models & circular strategies are part of this broader group of sustainable business models and can be described as models applying one or more out of three main approaches: Circular (creating value from waste); Servitization (functionality over ownership) or; Sufficiency (encouraging effective use of resources). Key drivers Reduce environmental impact and create broader societal benefits. Support new sales and generate additional income Increase competitiveness Strengthen company identity Create long term loyalty Protect brand image Address customer demand Create long-term strategic partnerships Address sourcing concerns

GLOBAL TREND: VALUE BASED BUSINESS CONSUMERS EXPECT BRANDS TO ADD VALUE TO THEIR LIVES

Studies confirm growing consumer support for value based business Young optimists ages of 18-34 are the most engaged on sustainability. 2/3 actively buy sustainable brands and 1/4 always consider the social and environmental ethics of brands when making purchasing decisions. 64% of mothers actively buy sustainable brands and the same percentage recommend those brands that behave responsibly. 26% are willing to pay more for clothes labeled as sustainable or environmentally friendly.

Brands increasingly recognize the importance of value based business "There are very informed consumers out there, who are highly motivated and have really thought through their choices about what they buy and what brands they choose. They base those choices on the kinds of actions those brands take." Kristine Lebow Senior Director of merchandising and design at Speedo

Focus on product and material reuse Generate new revenue streams based on turning waste into useful and valuable new resources Take back management is an essential element in the business model. Other strategies like C2C and remanufacturing can also be considered part of circular Provide access to services that satisfy users needs without users having to own physical products Disconnection of profit and production volume Not inherently more eco-efficient Actively promote reduced production and consumption: make only what you need and use what you have in a smart way The business rationale is typically derived from premium pricing, consumer loyalty, and gaining market share 1. Sufficiency models are important to make sure society can do more with less. 2. Circular models are needed to make sure we can effectively and sustainably circulate the resources society does still need to fulfill people's needs. 3. Servitization models are important because they provide a financial context for the shift from ownership models to access models.

OPPORTUNITIES RE-USE AND RECYCLING Reuse models allow brands to monetize on growing second hand markets now dominated by peer-to-peer or third party trade. This is especially promising in luxury goods market and kidswear. Suitability to adopt this model is very much dependent on the brand style and product line. Timeless, minimalist or classic brands/product lines naturally allow for multiple use cycles, over time. Re-use - Can allow consumers with a lower budget, to buy high quality apparel/expensive goods and access a brand for the first time. Marginal cost savings/revenues are possible by replacing textile waste management strategies with high value recycling strategies. Recycling strategies provide opportunities for new companies that base their brand core on recycled. Recycled can be successfully translated to PR, brand value and increased consumer engagement.

Filippa K Secondhand store in Stockholm (2007): Only gently used, seasonal clothing is accepted. If the garment sells, the owner receives a 40% commission. Secondhand clothing is usually 50% of original price. Submissions hang in the shop for a month, after which they are returned to the owner. Collect Concept (2015) in Sweden and Denmark: Consumers return used Filippa K clothing to any Filippa K store, and receive 15% discount on their next purchase. Clothing in good condition will be used in the Secondhand store in Stockholm or in other retail outlets Clothing in poor condition is sent to a local charity organisation. To be expanded across all markets from October 2015 on.

KEY STRENGTHS Resell garments 2 or 3 times, for little added cost. Since 2007, the Secondhand Store has recirculated ±5,500 pieces per year. Extending the lifecycle of a garment by just 9 months reduces related carbon, waste and water footprints by 20-30%. Technically very scalable because of their pre-existing supply chain partners The brand s minimalist designs and neutral colours make products timeless and well suited for re-sale. The high production quality of Filippa K clothing lends itself to second life. 95% of collected items are in mint condition. Take back scheme is built in collaboration with Swedish service app Cirqle. Cirqle locates stores that have a take back system and saves rewards digitally. KEY CHALLENGES Consumers are the suppliers, therefore success is dependent on mobilizing continual high-volume, highquality take back. Store currently selling more then they get in. When they run low on supplies FK push through their channels to generate more stock or contribute old samples. Styles are limited and sizes tend to be small (items that have been outgrown & sample pieces from catwalk). Secondhand store is not styled by Filippa K, and so doesn t fully align with brand image. Store has limited storage, and can therefore only accept gently worn, seasonal clothes from consumers. Consumers who bring clothes to the store are often disappointed when their clothing isn t accepted. It is also a unique marketing opportunity, allowing them to make a statement as a brand

Denim to Denim recycling using overstock, returns and post consumer garments. On-off projects in close collaboration with value chain partners. New denim fabrics with up to 33% recycled cotton content produced (e.g. RAW Recycled - orange label). Not yet translated to sales/competitive advantage. Needs to become more strategic through the business model, brand competitiveness and/or technology drivers. Marginal cost savings possible Waste scenario: 0.30-0.35 per kg Downcycling scenario: ± 0.20-0.25 per kg High value recycling scenario: ± 0.10-0.20 per kg

OPPORTUNITIES FOR REPAIR/WARRANTY & RENTING/LEASING Servitization models can help to build a unique relationship with the consumer and increase brand loyalty and insight into consumer needs. Introducing a renting or leasing doesn t immediately require adjustments of product design, sourcing, production or the organization of new partnerships and therefore cost and time of implementation can be relatively limited. Huge branding/marketing potential exists in publicly communicating an innovative, sustainable concept. Repair services are a particularly attractive proposition for garments that easily experience wear and tear and are expensive (eg. outdoor gear, jeans) and where customer service plays an important role. Renting/leasing works best for high quality, durable, expensive and/or seasonal products (e.g. occasion wear, maternity wear and kidswear), where there is an opportunity for the brand to rent out the product multiple times and there is a benefit for the customer of paying only for the use of the product (cheaper than buying)

Nudie customers can visit 19 repair shops worldwide. All repairs happen in-store and are free. This service is a big part of the brand s USP and demand for this service is high. The Repair shops service 300-500 pairs of jeans/month (±3% of jeans purchased), and repair only Nudie products. Consumers who do not wish to repair their old Nudies can sell them to the store and get 25% off a new pair of denims. The used Nudies will be repaired and resold instore. For consumers unable to visit the store, Nudie will send a free repair kit (incl. 2x Denim Patches, 1x Black Denim Patch, Iron Patch, Needle, Spool of Thread, Repair Kit Booklet and Thimble) to their home.

KEY STRENGTHS Increases consumer awareness and offers a sustainable choice. Increases 1-on-1 consumer interaction, footfall and dwell time in stores, which in turn, creates new sales and creates unique feedback loops. Generates interest in the brand and strengthens the company USP. Consumer feedback is very positive. The take back scheme allows them to secure raw material for further product development. They have 2 tonnes of denim stored, ready for processing into new products. Availability: All future Nudie stores will be repair stores. Nudie plan to open more worldwide, as demand is now bigger than what they can supply. Nudie encourage consumers to take pride in the wear & tear of their jeans. KEY CHALLENGES Activating all consumers who have a broken pair of jeans to hand them in and get them repaired. Shortening the waiting time for a repair and keeping up with demand. Current wait time can be 1 month. During busy periods, Nudie employ extra repair staff or pay for overtime and this is not ideal. One week would be acceptable. Translating the value of the secondhand jeans to the consumer. People want to break in their own jeans. Nudie hope that this reuse initiative will grow. Generating additional revenue through the concept: Nudie view this service as an investment into the brand, instead of a costing. They believe that they have a responsibility for the garment throughout its entire lifespan, in what they term lifecycle management.

Vigga is a children s clothing brand offering a subscription service to the clothing. The brand was started in April 2014 by Vigga Svensson and has been up and running since early 2015. WE WOULD HAVE BEEN A LESS INNOVATIVE COMPANY, HAD WE NOT BEEN SUSTAINABLE - VIGGA SVENSSON, FOUNDER It was necessary to develop an entirely new business model for the brand in order to enable circularity. Once the baby s clothing is no longer fit for circulation (roughly 82 weeks) it is transferred to an external recycling facility where the fibres are recycled and used for new, different products. The clothing goes up to the age of 27 months purely because up until this age, the clothing will not undergo heavy wear and tear.

KEY STRENGTHS KEY CHALLENGES Vigga uses the highest quality cotton meaning that the clothing can be in circulation for as long as possible (82 weeks). Using baby clothes so effectively can dramatically reduce the total lifecycle impacts of these products. Vigga is targeting a group of consumers which does not require much convincing. Parents are very eager to get rid of the used baby clothes that their child no longer fits. Vigga subscribers love the brand, so much so that an ambassador programme, for highly interested users, will be launched in the future. Personal taste is a challenge in that some parents look for different colours for their sons or daughters. Clothing packages are currently preselected by Vigga (based on baby s sex & age), and this could be more flexible in the future as users have expressed the need for a more personal selection based on the needs of their babies. Vigga hopes to tackle new markets in the coming 2 years. The model is scalable but requires setting up of distribution, laundry, recycling and logistics systems locally. Home parties to allow users to feel the clothing and well as other pop-up events will be organised. The model is scaleable and could grow to include outerwear and toys for instance.

Insights & Conclusions The majority of the business models evaluated are still in early stages most new concepts require a broader consumer mindshift and change in industry practices, resulting in longer lead times towards profitability are. In spite of this, there is a great potential. Many models might be confronted with a limited market today, but are part of growing trends like the circular economy, sharing economy and performance based economy. Most business models applied by brands show no significant direct revenue generation. Costs are considered a marketing cost or a necessary company investment to increase consumer loyalty and brand competitiveness. A large part of the success of these models is determined by communication; whether a company is able to engage the market and translate the activities into positive brand value. Service based business models & circular strategies require a new way of working with and relating to your customers and value chain. It requires increased transparency & collaboration with existing suppliers but also engagement of new smart partnerships (logistics, laundry, repair, recycling, platforms, IT).

EXCITING!!!

NOW WHAT? It is new, it is the future, it is not easy Be bold, be brave and proceed! Increase transparency & understanding of the baseline. Align, Involve, Focus & set goals. You can t do it alone. Build a network & Work together! Experiment and pilot! Someone has to be the first but being second or third is just as important. Learn from others!

Join us on twitter! @CircularFashion @CircleEconomy