Circular fashion looks to profitability

The fashion resale market is growing steadily and is expected to keep going throughout the coming decade, but the path to a consistent, and profitable growth looks harder than ever.

Why it matters

Humanity needs to make, consume, and waste less. One of the serious culprits is the apparel industry but a new generation of buyers and shifting attitudes among buyers at large is accelerating a shift toward second-hand markets.

However, finding a way of making profit is extremely difficult. If you think of how difficult it is to wring a profit out of e-commerce at scale, think how much margin would then be eaten up by reverse logistics and authentication.

These challenges, however, won’t just be particular to fashion; as circularity starts to take hold across consumer categories, the fashion industry’s lessons will be a useful guide to many others.

What’s happening

Two major pieces across the B2B fashion press delve into this idea.

• Vogue business explores different models such as Danish brand Ganni’s take-back service, where customers receive store credit for some used items. It also operates online systems that allow owners of pre-owned items to sell through a network of marketplaces or its own marketplace – the brand supplies the payment processing.
  
  Trust is a key factor, and some brands and marketplaces are experimenting with digital passports to smooth authentication.
  
  
• Business of Fashion looks at some of those same challenges but also explores the multi-sided challenge that resale platforms face with marketing to both buyers and sellers causing some of the recent entrants to spend as much as 44% of revenues on marketing.
  
  But there is another question surrounding whether resale at large can scale beyond that initial thrift-shop audience to customers for whom buying clothes is more of a problem to be solved than a pastime in and of itself.

Bottom line: trust

Ensuring authenticity is not just a technical problem but a marketing problem. For more, explore WARC’s What we know about brand trust.

Sourced from Vogue Business, Ganni, Business of Fashion, WARC. [Image: Pexels]