Posted on April 21 2020
The COVID-19 pandemic has the retail and fashion industry in a free fall and struggling to adjust to customers staying at home. Meanwhile, blue skies return to China and Italy’s waterways are clearer. - an unexpected effect of a global lockdown. As the economy suffers from a halt in many human activities, the burden we’ve put on our environment has eased a bit. In the spirit of Earth Day, I want to explore how this global crisis is helping us to rethink sustainability in fashion. Slowing down might be just what the industry needs to reduce its footprint and reduce overproduction, one of the biggest environmental issues in fashion.
The Environmental Case
It’s not a secret that the fashion industry has a devastating impact on the environment. It is the second-largest polluter in the world and the second-largest consumer of water. According to research, 30% of fashion products are never sold, resulting in 92 million tons of solid waste. It’s time to reduce our footprint and have a mindful and conscious approach to design and distribution models.
The call for sustainable fashion has been going on for a while, and it’s more than a “nice to have” but a must. However, the wake of this pandemic creates a timely moment to address the business case for a slower and more sustainable fashion industry as a whole. We have to think about intentionally slowing down our quick pace and avoiding overproduction as we consider our post-crisis environmental approach.
The Business Case: Our Broken System
For 20+ years, fast fashion has dominated the industry, pushing brands to churn out new designs quickly. This has resulted in massive overproduction and a consumer mindset of buying trendy and disposable pieces. Department stores and boutiques feel the pressure to keep fresh and novel pieces in store at all times, resulting in frequent purchases and frequent markdowns for unsold inventory. Meanwhile, brands have their own share of risk as they front production costs with the hope that purchase orders won’t be cancelled or later returned.
For a while, DTC became the savior in this messy value chain. The thinking is simple: if brands can skip the middleman, and take advantage of cost-effective online ads to acquire customers directly, they can maintain the same margin without wholesale markups. This seems to make sense, except it doesn’t solve the inherent risk of holding inventory and what happens if that inventory doesn’t sell. If anything, our social media feeds and email inboxes have now become an endless aisle with more products than we can possibly absorb. Recent years also see growing competition for online ads and increasing customer acquisition costs. Some even say online ad spend is now the new rent, and google and facebook are the new landlords.
Nowadays, almost all brands have to go omnichannel in order to stay competitive. Although in the face of this unprecedented lock-down, brands with offline exposures either through their own stores or wholesale relationships are impacted. Not surprisingly, as the pandemic started to impact our lives, it caused a massive trickle-down effect in the entire value chain. Stores are put in a tough spot with their doors closed. With no revenue coming in, stores had to cancel or delay purchase orders, which subsequently impacted brands and factories downstream. This pandemic shows painstakingly how broken and fragile our existing system is.
If DTC is no longer the shortcut, and brick & mortar continues to suffer, where do we go from here? The pandemic forced a “slowdown”and it might help our industry to reflect and see that slow fashion and reducing the environmental footprint is good for business.
Slow down Fashion and Embrace the Sharing Economy
This crisis will likely have lingering effects on consumer behavior even after the pandemic. Guram Gvasalia, cofounder of Vetements, predicts that after the pandemic, “each purchase will become an investment...fast fashion will go out of fashion." Previously, designers thrived on having more collections and selections as increased opportunities to sell. This approach creates waste, and people are learning to live with less during this lockdown.
The trend of getting back to basics with brands like Cuyana and Everlane will continue. Giorgio Armani recently wrote an open letter on WWD, calling for a return to value and artisanship. After all, a well-thought out, well-designed, and well-made piece of clothing deserves to be on the floor for more than three weeks before going on markdowns. By creating timeless and versatile pieces, there is also less pressure on selling based on seasonality. At ALLY, that’s exactly what we are doing. We spent the past two years perfecting - the classic pointed-toe pump and making it comfortable and accessible for women. It’s an investment piece intended to last - we want people to get the maximum use from our brand.
Does that mean we have to fill our entire wardrobe with ever-green pieces? Of course not. The popularity of fast fashion among consumers is rooted in the notion of “democratization of runway”, i.e., I can get the most trendy runway look for a fraction of the cost. Thanks to the popularity of the sharing economy we can still get the same “deal” that fast fashion promises. With companies such as Rent the Runway, The RealReal, and ThreadUp, we can get new looks from quality brands, without paying hefty prices. The beauty of this new approach is it creates the same optionality for consumers by having more usage per garment, instead of producing more and disposing after one season.
Brick & Mortar 2.0: Shift to a Reduced Inventory Model
The case for offline retail has always been a tough one. The question “is brick and mortar dead” has been asked over and over again in the past 10 years. We see more brands start to experiment with the idea of retail showrooms. However, most boutique retailers and big department stores are still relying on the buying / wholesale model. There are so many big brands and retailers with space that they have to pay rent on, and there are so many smaller brands who can’t afford to pay rent trying to compete online because they don’t want to go through wholesale. Is there an alternative?
What if we can utilize all of that space and effectively share with other brands? What if instead of holding inventory, stores don’t have to take on inventory risk, by offering their space for sample display, while brands still take care of fulfillment and have that direct relationship with customers? On the production side, instead of trying to optimize for lower unit cost by implementing large minimum order quantity, what if we instead explore flexible supply chains to allow for smaller batches with faster turnaround time? Those are not novel new ideas, but perhaps it’s time to make this alternative model more mainstream.
A Call for Action: Join the Sustainable Fashion Movement
At ALLY, we are re-inventing the traditional footwear business model by offering micro-sizing options and carrying less inventory. We are able to keep costs down by having a lean product line with one silhouette all the while diversifying color and sizing options. It’s important to make a luxury product affordable and accessible. Our business model includes a custom approach that ensures a better fit, reduces overproduction and waste as a fashion brand. ALLY’s proprietary online fit-finder uses an algorithm designed by Dr. Clarke and powered by data, to get your fit right. This further reduces the need to carry excess inventory. We have also implemented a flexible supply chain with an on-demand, 2-week turnaround, while maintaining a healthy gross margin. The biggest benefit is that it’s a way to slow down the overproduction habits. We are not the only one. In fact, there are a growing number of emerging brands such as A.Lynn, Altress, and Tux Couture, innovating in their own ways to tackle the same issue.
We see this slowdown as an opportunity for the fashion industry that we love to do the same. Hopefully, we will emerge from this stronger with a renewed focus on sustainability and curbing overproduction. We can take this time to innovate our systems and find new ways to adapt to shifting customer habits. It’s a call to embrace quality and fewer collections and also enjoy the benefits of clothing rental and resale as a way to shrink our footprint, so this time next year we can make real progress.