Today, resource efficiency experts WRAP publish a new report that highlights innovative new business models for the clothing sector, which will help deliver the circular economy.
WRAP’s report - Evaluating the financial viability and resource implications for new business models in the clothing sector – looks at the commercial viability of a number of alternatives to make-buy-use-dispose business models. The research takes into account realistic estimates of the required investment, operating costs and sales value. Out of those evaluated one was found to offer great commercial benefits including payback in just over two years.
The models show how the life of clothes can be extended and help prevent them being prematurely discarded. The options range from large scale hiring of designer clothes to retailers offering re-sale of pre-owned garments. Each model was assessed on the opportunity to build turnover as well as deliver a commercially attractive margin and return on investment.
Out of five models reviewed, the most effective sees retailers offering resale of their own brand, pre-owned garments back to the consumer. With relatively low set up costs it provides the quickest payback period; capital invested is met in less than two and a half years (under specific modelling assumptions) and a good return on capital seen over five and ten years.
Dr Liz Goodwin, WRAP CEO, said: “To stay ahead in today’s competitive markets companies need to consider the way they do business. The traditional model of buy-use-dispose can be improved when you consider the significant commercial value that can be realised from used clothes.”
Over 1.1million tonnes of clothes are consumed and disposed of each year, around a third ends up in landfill. UK households are also storing £30 billion pounds worth of clothes in their wardrobes, as highlighted in WRAP’s ‘Valuing our clothes’ report launched last year. By making the most of the unwanted clothes that currently sit in people’s wardrobes or go to landfill the retailers, manufacturers, charities and individuals can work together and inject this resource in back into the UK economy.
Dr Liz Goodwin, added: “Businesses require sound commercial pay back, this report shows how reducing the environmental impact can do exactly that and make the system more sustainable.
“As well as generating profits, the re-sale of pre-owned garments model is one of the most effective at generating waste savings over the long term. Based on this research, the simplicity of the model, means any retailer could implement it. This could be done in partnership with the charities and recyclers to increase overall levels of re-use, bringing benefits to the whole supply chain.”
Lucy Shaw, responsible sourcing manager at John Lewis added: “John Lewis is committed to reducing the environmental impact of the clothing it sells and we continue to implement innovative ways of doing just that. We look forward to continuing to work with WRAP and exploring alternative business models.”
The clothing sector is committed to reducing the environmental impact of clothing through collective action on the Sustainable Clothing Action Plan (SCAP). The business models addressed in this report are only a fraction of those available to the clothing industry, but it is hoped the report will provide a starting point to raise interest and begin the discussion about alternative business models.
Notes to editors:
For more information about all of the business models assessed, please see the full report, pages 2-3 http://www.wrap.org.uk/content/innovative-business-models-clothing
Recently WRAP received an international award for SCAP; the Global Leadership Award in Sustainable Apparel was jointly awarded to WRAP and DEFRA by the Swedish Fashion Industry. See press release for more information.
For more information on SCAP see http://www.wrap.org.uk/content/sustainable-clothing-action-plan-1
Overview of the five models assessed:
1. Retailers or manufacturers providing repair and upgrading services for their own garments;
2. Retailers providing radical new large-scale leasing services;
3. Retailers providing radical new large-scale services for one-off hire;
4. Retailers offering a re-sale section for pre-owned own-brand garments within their store; and
5. Peer to peer exchange.
In Model 4, a fashion retailer offers an incentive for their customers to return their used garments (bought from that retailer) to a store. The garments are then sent to a central warehouse for sorting, cleaning and re-styling and distributed back to stores carrying the 'pre-owned' collection. Model 4 provides the quickest payback period under both conservative and tipping point scenarios and is one of the most commercially viable models over the long and short term. The success of this model is largely down to the fact that it works in the existing retail format and therefore offers a low cost base and rapidly generates profits. It is also one of the most effective at generating waste savings over the long term in both scenarios.
Consumer survey results indicated that there is significant interest from consumers in returning clothes to retailers in exchange for a financial reward
• Nearly two-thirds of respondents would consider using a retailer ‘buy-back’ scheme,
• 23% said they would buy more second hand clothes if the choice improved.
WRAP’s vision is a world without waste, where resources are used sustainably. It works in partnership to help businesses, individuals and communities improve resource efficiency.
Established as a not-for-profit company in 2000, WRAP is backed by government funding from England, Northern Ireland, Scotland, and Wales.
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