Apparel and Textile: 10 things to know about Circular Business Models
For all the right reasons, there is a lot of momentum about the circular economy: potential benefits are sustainability improvements, reduction of supply and price change risk, lowering the cost of products, and new circular business models altogether. While it’s easy to agree with its principles of a regenerative and restorative economy, it’s harder to put things into practice, especially in Textile and Apparel industry. So, if you are thinking about changing your business model or parts of it, here are 10 things to consider:
Resource optimization and circular business models are linked, but different.
There are connections, but they drive different things: In circular business models resources used for production might even be higher compared to non-circular models, but due to longer use, the goods are still more sustainable.
Circular business models are (and should be) driven by profits, not ‘waste policy’.
That’s simply because you need to earn money to operate a business – even if your aim is to make the world a better place.
Circular business isn’t about materials. It is about customers.
If nobody needs or knows about your products, you don’t have a business.
Business model change happens faster than you think.
Emerging players, such as Depop, CaaStle, YCloset, The RealReal, Tchibo to name only a few, are establishing circular business models rapidly, often competing with traditional outlets.
E-commerce is a key driver for circular business models (focused offers, low stock).
It enables people to find and buy stock around the world and makes niche businesses profitable.
Be ruthlessly commercial.
Circular Economy is a lens with a double benefit: profit and sustainability.
Start at high end of the market, not with $2 T-Shirts.
Because it is difficult to create value from lost-cost products, product margin is the value to play with.
From a sustainability standpoint, re-use beats “re-whatever”, by far.
More than 50 – 90 % less climate impact, acidification, materials use, water use (even biodegradable is just ‘less bad’, not ‘more good’).
Cannibalization of your current business is often feared, but hardly an issue.
That’s because you mainly address new customer segments with circular products. They create new markets by offering good quality products in a different place. Costs also play out differently in circular business models.
Larger players are using 3rd party solutions to trial their circular offers.
They experiment in a safe place and do not risk everything they have. Examples are Stella McCartney using The RealReal consignment service in the US, Gwynnie Bee, Ann Taylor and New York & Company using “CaaStle” clothing-as-a-service subscription model and Patagonia Worn Wear & Eileen Fisher Renew using Yerdle recovery and resale.
For existing or larger companies, transitioning to a circular economy model can be costly and feel impractical. They are lacking the infrastructure for returning products and have difficulties to separate different materials within a product. Are you setting up a circular business and facing these problems as well? How are you solving them? We’re looking forward to discussing your thoughts, so don’t hesitate to leave a comment.
To discover more on Circular Economy, check our webinars here.
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