Environmental drivers fuelling new retail models

Rather like in the late 1990s, when every retailer made a grandstanding statement about launching an online store, today barely a day goes by without a retailer announcing with great fanfare that it is launching an environmentally-friendly range of goods or is embarking on a sustainable supply chain initiative.

While some of this might simply be derided as publicity-generating greenwash from some of the entrenched established retailers, there is no doubt that the increasing desire – especially among younger consumers – to make decisions based on environmental sensitivities is fuelling the growth of some of the newer retail models.

It is particularly prevalent in the clothing sector where resale, re-use, vintage, rentals and more efficient distribution models for the selling of off-price clothing, are finding themselves in something of a sweet spot. It is even having an effect on the historically staid charity shop sector.

Mike Taylor, commercial director at British Heart Foundation (BHF), is in the midst of an overhaul of its technology infrastructure with K3 in order to take better advantage of the fact charity shops are in a strong position as established traders in used goods. He believes they could potentially be on the cusp of something of a renaissance if they can capitalise on these fundamental changes in shopping behaviour.

“Youngsters do not see the differentiation between pre-loved and new. In fact pre-loved is seen as cool, unique and sustainable. We are called a charity retailer but this is simply where the money ends up. We’re really a re-use retailer,” he stated at RetailEXPO earlier this year.

Certainly the growth of used clothing looks impressive. Chris Homer, CTO of online clothing marketplace ThredUp, says its research found the size of the second-hand clothing market has doubled to $24 billion in the US over the past 10 years and he predicts the market will overtake fast fashion sales within the next 5-10 years.

It is a similar situation at Rent The Runway where Josh Builder, CTO & head of product, revealed at Tech.Festival in London recently that since launching its subscription service three years ago its customer base’s use of its products has increased from an average of 2.7 days per year to an incredible 120.

Discount v sustainability

Although Homer says the initial attraction of ThredUp to customers is the opportunity to purchase premium clothing brands at big discounts, it is the business’ sustainability credentials that are fuelling its ongoing customer retention. Like other businesses in the second-hand area its initial model was not focused on the environment but it has rapidly crept up the agenda and ThredUp along with Rent The Runway are benefiting from the changing dynamic.

Builder says: “A third of all fashion goes into landfill, which is inherently wasteful. If used clothes could be made to look new then they could be made to last longer and given some longevity.” Against this backdrop the company is now tapping fully into the sustainability seam.

Its position has been enhanced further by it handling all dry cleaning of products in-house (it is the biggest dry cleaner in the world). “We can control the water and chemicals used and make more efficient use of the driers, by avoiding having only a few items in them,” he says.

Marketplace model

Just like the second-hand market, off-price retail has also historically been parked in something of a backwater, with the brand owners typically disengaged. But this has changed, according to Chris Griffin, co-owner of Secret Sales, who bought into the business with Matt Purt following the sale of their creation – supply chain technology provider Anatwine – to German-based Zalando.

They have remodelled the business to provide a platform for brands to sell their excess, or end of line, stock. This can be done through the brands using a bespoke digital storefront as well as via a marketplace where Secret Sales purchases the stock on its own account. The company also handles the fulfilment for all goods sold on the site.

Griffin forecasts 75-80% of sales will be derived from the marketplace, which undoubtedly highlights the desire for brands to typically offload this part of their business. But Griffin is clear they realise the value of this part of the market as they acknowledge that the days of throwing clothes into landfill and incinerating perfectly good excess products is now seen as unacceptable.

It is not just clothing where re-use and off-price is enjoying a spike in interest from the increased environmental focus of customers. Speaking at the recent eCommerce Expo Steve Oliver, CEO of musicMagpiethat sells used CDs and refurbished mobile phones among other things, suggested: “We’ve green credentials but we’ve underplayed this. Younger customers really do care. We’re looking at if we can get plastic out of our packaging. We can’t destroy our commercial model but millennials do respond to the environmental message.”