Crucial to the fashion industry’s transformation, new business model innovation has been a long time coming. Designed to help the fashion industry move away from the ‘make more, sell more’ mindset, most of the new business models promise long-term support for future consumer trends, including the rising generation of environmentally and politically mindful consumers.
With a lot going on in this space, allow me to introduce you to five new business models that are steering the fashion industry towards a more resilient future.
Factory-to-Consumer (F2C) Model: From Factory to Your Front Door
Described as the gateway to scaling up a Made-to-Order model, which has been made famous by Farfetch founder’s startup PlatformE, the F2C model embraces the idea of manufacturers selling their garments and shipping them straight from their factory to the consumer. With no go-between or famous name brand attached, the factories can sell them for significantly less than the retail cost.
Helping scale a more sustainable growth model for the fashion market, the F2C model has been adopted by Chinese factories, which have sold directly to consumers on shopping platforms like Amazon.
Sustainable Fashion Marketplace Business Model: Placing Value on Efficiency, Accessibility & Circularity
The adoption of digital-first and sustainable solutions is now an expected next step in the fashion industry. These new sustainable business models are not only supporting fashion businesses to place new value on efficiency, accessibility and circularity; they are also assisting fashion and apparel businesses to rebuild their business models.
As the transition to more sustainable models continues to push companies towards a more positive future, we see a rise in adopting the re-commerce business model. Shifting to online platforms, we have seen many fashion brands become pioneers of resale models. Exploring the opportunities of re-commerce are companies like H&M. The high street giant dived into one of the fastest-growing market segments within the fashion industry when it became the majority owner of Swedish online second-hand shop Sellpy.
The Upcycling Business Model: Can it be Profitable?
Upcycling is now a thing. Although still considered a niche, upcycling is a process that centres around taking material waste and repairing, reusing, repurposing, refurbishing or upgrading it into a sellable product. Increasing the quality and lifetime of materials, we see collaborations across the upcycling value chain. A great example is a partnership between Kering’s Houses and La Réserve des Arts, an NGO. The collab’s aim was to optimize leather and textile scrap management in Kering’s operations so creative professionals can reuse it.
In June 2020, Gucci launched Gucci Off The Grid. The luxury brand’s first collection was created using circular design innovation to champion the regeneration of materials and textiles.
Also wasting less through upcycling is Tommy Hilfiger. When they piloted the Remixed Line, the PVH brand expanded its business model by introducing an upcycled collection created with materials that would have otherwise gone to waste. The one of a kind upcycled styles are not only born from damaged materials, but the brand is also taking back items from consumers, so they restore them to their former glory.
On-Demand Manufacturing Business Model: Could Left Over Inventory Be A Thing of the Past?
Whenever I think of on-demand manufacturing, it sounds like such a great idea that I wonder why the fashion industry, as a whole, continues to drag its feet when it comes to adopting this business model. But, of course, it makes sense to start creating a garment after a customer places an order, so why are fashion brands still saddled with unsold inventory?
Offering a promising lifeline for the fashion industry, especially for those severely affected by the pandemic, pivoting from the traditional model to the on-demand manufacturing model could be the difference between surviving and not.
Some examples of this business model at work have been presented by companies like Adidas and Zara. They are reportedly experimenting with on-demand technology, hoping to find ways that could allow them to make designs in small batches. Others rethinking their relationship with the traditional business model are startups like the Ministry of Supply and Rapha. They have been creating some of their pieces on 3D printing machines after a customer places an order.
With the industry becoming a bit more eager to shift away from the old and embrace the new, the only catch with the on-demand manufacturing model, the manufacturers have to buy in.
Rental Business Model: When Borrowing is Better Than Buying
With the second-hand market projected to reach nearly twice the size of fast fashion by 2029, did you know that one pre-owned purchase is said to save on average 1kg of waste, 3,040 litres of water, and 22kg of CO2? I didn’t either. According to the Ellen Macarthur Foundation, the rental and resale business models can generate numerous economic benefits, as demonstrated by fashion resale companies like Depop and Vestiaire Collective. They have played a pivotal role in enabling the success of the clothing rental and resale business model.
Another business encouraging customers to choose the subscription to rent rather than buy new clothes is Dutch startup, Lena. Offering customers access to a library of clothes; the Amsterdam based company has encouraged consumers to shop differently since 2018. Naturally, there have been hiccups, like merchandise being returned damaged or never coming back, but this has not deterred the small innovator from solving one of fashion’s big problems and creating a social sustainability community.