Financial viability of innovative business models in clothing

21st June 2016

This report explores case studies of new, innovative business models of clothing retailing which may be better suited to an economy where businesses and consumers are facing the impact of resource constraints and higher raw material costs.

Key findings
On the basis of the research in this report it would seem that there is a potentially attractive business case for some resource efficient business models.

Overview

Overview

Over 1.1 million tonnes of clothes are consumed and disposed of each year. Of this 31% ends up in landfill (while 48% is re-used, 14% recycled & 7% incinerated).

Due to this, a number of reports published in recent years have pointed to the need for economies and businesses to develop sustainable strategies on resource use.

In January 2012, the Ellen MacArthur Foundation published Towards the Circular Economy: Economic and business rationale for an accelerated transition, making the case for a faster adoption of a circular economy, quantifying the economic benefits of circular business models and laying out pathways for action.

Furthermore a McKinsey report Resource Revolution: Meeting the World’s Energy Materials, Foods and Water Needs suggests that businesses are facing a paradigm shift in resource price and volatility.

The need for innovative thinking has been underlined by recent price volatility of raw materials such as cotton, concerns over supply instability, extreme weather events, and wage inflation in South East Asia.

With this context in mind, this report explores new, innovative business models of clothing retailing which may be better suited to an economy where businesses and consumers are facing the impact of resource constraints and higher raw material costs – models which extend the life of clothes and increase the proportion of garments which are re-used instead of being discarded prematurely. 

The models in this study: 

Model 1: Retailers offering repair & upgrading services of own garments >>
Model 2: Retailers providing large-scale leasing services >>
Model 3: Retailers providing large-scale one-off hire services >>
Model 4: Retailers offering re-sale section for own-brand garments and restyling services >>
Model 5: Peer to peer exchange >>

Business model 1:
Retailers offering repair & upgrading services of own garments

Model 1 is based around the idea that many garments could be repaired rather than sent to waste. 

In this section of this study WRAP details the cost and resource implications of adopting this model in your business, giving advice on consumer demand, potential business scenarios and the practical application of this type of business model. 

To find out more about this model, use the links below:

Jump to:

Introduction >>
Model description and assumptions >>
Financial modelling and analysis >>
The conservative scenario >>
The tipping point scenario >>
Estimation of potential to reduce resource impacts >>

Business model 2:
Retailers providing large-scale leasing services

Model 2 is based on the idea that some items of clothes such as baby clothes are used for a limited period of time before the baby has grown out of them and needs a new set. Many baby-grows are still useable at this point. Although there is a healthy culture of passing on baby clothes to other parents and younger siblings there is still room for a business model which takes the limited use span of baby clothes as its starting point.

In this section of this study WRAP details the cost and resource implications of adopting this model in your business, giving advice on consumer demand, potential business scenarios and the practical application of this type of business model.  

To find out more about this model, use the links below:

Jump to:

Introduction >>
Model description and assumptions >>
Financial modelling and analysis >>
The conservative scenario >>
The tipping point scenario >>
Estimation of potential to reduce resource impacts >>

Business model 3:
Retailers providing large-scale one-off hire services

Hiring formal wear is a long-established business model in the clothing industry.

Moss Bros, for example, has been in business since 1851. However in recent years the model has been reinvented as online hiring has allowed new businesses to hire upmarket and high-fashion items to discerning customers wherever they are based. Examples such as Rentthereunway and Wishwantwear have been established by graduates of Harvard Business School and London Business School respectively. Both businesses cite ‘Collaborative Consumption’ as a potentially disruptive business model for the fashion industry

In this section of this study WRAP details the cost and resource implications of adopting this model in your business, giving advice on consumer demand, potential business scenarios and the practical application of this type of business model. 

To find out more about this model, use the links below:

Jump to:

Introduction >>
Model description and assumptions >>
Financial modelling and analysis >>
Estimation of potential to reduce resource impacts >>

Business model 4:
Retailers offering re-sale section for own-brand garments and restyling services

One step that a retailer could take to encourage the re-use of garments is by creating an incentive for customers to return used garments to store. A recent high-profile initiative in this area is the collaboration between M&S and Oxfam. Under the Clothes Exchange scheme launched in 2008 customers who bring a used M&S item of clothing to Oxfam receive a £5 voucher for purchasing new M&S clothes. According to Oxfam the scheme has helped prevent over 2,500 tonnes of clothing going to landfill and raised £3 million for Oxfam’s work.

In this section of this study WRAP details the cost and resource implications of adopting this model in your business, giving advice on consumer demand, potential business scenarios and the practical application of this type of business model. 

To find out more about this model, use the links below:

Jump to:

Introduction >>
Model description and assumptions >>
Financial modelling and analysis >>
The conservative scenario >>
The tipping point scenario >>
Estimation of potential to reduce resource impacts >>

Business model 5:
Peer to peer exchange

Peer to peer networks have the potential to allow large scale swapping and hiring of clothes between consumers and peers. The difficulties with these types of social media platforms however are twofold: how to estimate the growth of these networks and; how to commercialise what is essentially an exchange between two peers rather than between a business and a consumer. 

In this section of this study WRAP details the cost and resource implications of adopting this model in your business, giving advice on consumer demand, potential business scenarios and the practical application of this type of business model. 

To find out more about this model, use the links below:

Jump to:

Introduction >>
Model description and assumptions >>

Financial modelling and analysis >>
The conservative scenario >>

The tipping point scenario >>
Estimation of potential to reduce resource impacts >>

Where next?

Want to know more about resource efficient business models in sustainable electricals? Take a look at our reports, guides, tools and case studies for further information:

Reports >>
Guides >>
Tools >>
Case studies >>