Deciphering McKinsey’s Future of Fashion report. A“Use-more-buy-more” fashion economy?

Today I’m going through “The Next Normal” a 17 page guide by McKinsey and Co.  titled “ The future of fashion”: sustainable brands and “circular” business models.

The first indication I get that the authors are still trying to understand the meaning of circularity, is evidenced by their use of inverted comma ….“circular”. What does it really allude?

At the first glance, the report seems developed society-centric. I still read it to gauge if anything can be applicable to India, one of the largest growing apparel market in the world.

This is some of what was stated:

  1. Circular business models will not be an option any longer, but a necessity.
  2. Sustainability would be led by consumer awareness
  3. Pre worn clothes
  4. Pre worn luxury designer clothes
  5. Digitalisation as a sales enabler

Some of the suggestions given by Miriam, Anna and Karl-Hendrik are absolutely superlative. It demonstrates an industry understanding of the heavily promoted R’s : Resale, Rental, Repair and Refurbishment. Karl has accurately pinpointed the importance of consumer awareness in circular business models.

He says: “What will really move the needle on circular business models is the circular consumer experience.”

It resounds a lot with what an industry person in India, I was recently chatting with commented :“but…would customers be willing to pay for sustainability..”

What Miriam predicts (a style advisor; who knows exactly what you have in your cupboard and offers it for a resale for you) might work in developed countries, but I have difficulty visualising this scenario in India. I’ll explain why.

Anyone who has opened an average middle income household clothing cupboard in India should know and understand the problem. Taking two barometers of clothing purchasers when I think fashion: My mother and my daughter (I skip myself, because I’m an aberration, strictly following Marie Kondo when it comes to clothing). Both their cupboards are overflowing with varieties of styles. They don’t wish to repeat their clothes, but would they want to buy pre-owned clothes? I guess never. Hygiene issues are too important here. Would they like to offer their clothes for sale? Maybe not. It would be sacrilegious. Yes, they do hand over clothes between family, at my mother generation; and exchange clothes between friends, in my daughters. But frankly, I suspect great apprehension if a style advisor were to take stock of my mother’s closet. A closet is a highly personal set of belongings, akin to your gmail inbox. Would you, for example, like Gmail to decide which emails to delete for you? So, would rental, resale of pre owned clothes, even by expensive brands, ever work in India?

Some other industry specific interventions suggested by the consultants are:

  1. Cutting industry emission
  2. Cutting overproduction of garments
  3. End producer responsibility of end-of-life management
  4. Established players to take a lead
  5. Opportunity for entry of new players to the market

This summary is then followed by the transcript of three interviews; H & M, Yerdle and Vestiare.

H & M

Trends:

  1. Algorithmic commerce : AI to understand consumer needs in order to produce only the right products in the right amounts and allocate them to the right place
  2. Looop: garment to garment recycling machine
  3. Renewcell: Renewcell is developing a new material called Circulose, made by gently recovering cotton from worn-out clothes
  4. Product ID: they plan to embed tags into your clothes to “swap, share, show”
  5. Post consumer waste refurbishing into new products
  6. Regenerative farming

After listening to this interview discussion, one can clearly ascertain that H&M’s future business model is still favouring buy-more , make-more, sell-more philosophy. They plan to do this through digital and technological interventions and in future might be actively looking for consumer markets which  are open to purchase of pre-owned goods.

(Would they survive in India with this model? Probably not. Their current romance with the Indian consumer might be short lived. Soon the cupboards would start overflowing and consumers would not know what to do with the excess garments. They are also a tad too fashionable to be passed down to the household help who’s social sphere might frown up on such styles. As the garments are not really meant to last,  would any self-respecting memsahib be pleased enough to hand these down? And> is the Indian consumer aware of the “bring back your clothes for a discount coupon at H &M”? )

Yerdle

Next Andy Ruben of Yerdle, seems to have a great business model which can be best described as  fashion-brand-resale-aggregation. He predicts a $50 B expansion in this market in the next 3 year in US with 33% of Gen Z favouring this mode of purchase. He does however illustrate with example of an outwear garment, the Jacket.

IMO, for outerwear and outgrown garments, resale might just work, and seems to be working pretty well for Yerdle.

Vestiaire 

Max Bittner the CEO of Vestiare, a pre owned luxury apparel ecommerce company, makes some interesting points:

  1. Changing attitudes of consumers: He is of the opinion that if a 15-16 year old is doing something today, then chances are that the older demographics will be doing that in future. Like buying and selling pre owned clothes.
  2. Huge opportunity: “There is somewhere between half a trillion and a trillion dollars’ worth of luxury goods in people’s closets, and probably half of it is unworn.”
  3. Consumer Awareness: ”No one will want to wear new clothes if the process of making those clothes causes people to suffer or to lose their lives.” Max does compare the car industry with the fashion industry citing example of resale of 50% in cars. But again, clothes are not cars. They are highly personal.
  4. Durable clothing: He is however correct to estimate that people would be drawn to durable long-lasting clothing leading to the boom in the luxury industry. He justifies that one can reduce carbon emissions “by extending the life cycle of the products that you wear by nine months, you can help reduce the industry’s carbon emissions by 30 percent.”

If we have to distill the learning for the Indian Market, we could adopt some of the following:

  1. Resale/ Rentals
    • Celebrity or high-end luxury pre-owned fashion. Both the buyers and sellers would be vastly different demographics.
    • Outerwear garments such as Jackets, or rarely worn garments such as sports or hiking wear.
    • Outgrown garments/shoes, especially for growing kids
  2. Durable clothing. We have always been a society traditionally preferring durable and long lasting clothing that can be passed over generations.

There is definitely a big opportunity here, especially for startups. Circular Business Models are the way forward in the fashion industry, but I still prefer my own model, of Regenerative product lifecycle.

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