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The Cost of Fashion

Fast fashion is becoming less fashionable. You need to know about the Sharing Economy.

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This week is all about the cost of fashion, how Covid has affected cost, and how value is being measured now more than ever before.

Key Terms

Here are three key terms used throughout this post.

1. Fast fashion

This is a business model which is based around taking the latest trends (catwalk trends) and mass producing them rapidly at the lowest possible cost. The clothes are made using cheaper materials than the high end fashion or catwalk versions, and the clothes are sourced from manufacturers in South East Asia, where labour work practices are generally considered as unsafe by western standards. The supply chain is very efficient in terms of rapidly responding to demand, and producing in bulk at low labour costs.

Because fashion trends change so rapidly, there is planned obsolescence in the clothing, clothing is not designed to last because it is expected the consumer won’t want the clothing any more once it is out of fashion, and because it is so cheap, the end consumer buys more and more, satisfying their ned for the latest fashions. This creates significant amounts of waste and pollution, but is a highly profitable business model for the fashion retailer.

2. Value Chain

I have discussed this topic with Dr Daniel Dias (link: Value to Society).

The value chain looks at all the activities that are involved in getting a product to the end consumer and sometimes (but definitely not always) beyond that to disposal. A fashion retailer will look at the value chain as the steps to get from a concept to getting the item to the end consumer. This might include steps like finding a supplier, procuring materials, logistics, and marketing. But this can be broken down further into labour, materials, equipment, infrastructure, administration, and capital. By analysing each of the steps, the retailer aims to maximise efficiency, i.e. delivering the required value for the lowest possible cost.

A value chain that includes the brand awareness in fashion can provide a highly valuable source of competitive advantage, just think of H&M or Zara and how they are perceived compared with Boohoo.

3. Corporate social responsibility

This is a very popular term that no doubt you have heard of, and many companies, big and small, espouse it. There is even an ISO standard for Corporate and Social Responsibility (ISO 26000). Companies may engage in different programs or philanthropic societies as part of their Corporate Social responsibility strategy.

CSR is a way that companies can hold themselves socially accountable to different stakeholders such as shareholders, customers or the wider public. It covers the environment, social and economic aspects. It is now more or less an expectation that organisations will have a CSR strategy in place.

As well as providing a societal benefit, a well publicised and effective CSR is a positive benefit for the company brand. In fact you will find CSR results in the annual report of most companies.

Fast fashion

Cotton mule scavengers – if I grew up in 19th century Britain, and I was 9 years old, that would probably be my job title. My job would be to grab the cotton off the floor that was underneath the machines. It would be a really loud, dusty and busy environment, huge contraptions moving backwards and forwards, pulling out white rope like a giant spider. The machines never rested, so I would be there sliding underneath, in a timed sequence to make sure I wouldn’t get anything trapped, you know, like an arm or my head. I would be doing one of the most dangerous jobs at the time, other than war of course.

Modern manufacturing of clothing still uses child labour. Professor Louise Crewe of the University of Nottingham wrote in a 2008 paper

we all wear clothes, but how often do we reflect on who makes our clothes, where and under what conditions? Your thought processes change with regards to value when you hear the phrases ‘Made in Italia’ compared with ‘Made in China’.

The other questions that come out are the reasons why we buy and wear the clothes we do and how often do we think about where the value lies in it?

We also have a rapidly changing world, and a growth in consumer conscious purchasing. And there are a fair number of problems that result from fast fashion. Environmentally the use of harmful chemicals in production which contributes to polluting water supplies and overuse of water. Transport and logistics contribute to greenhouse gas emissions. Besides generating waste there is also the growing understanding of how microfibres are produced. These lead to uptake into fish and other marine life and circle back into the food chain.

The outsourcing of manufacture to the East and South East Asia lead to fast fashion as the main business model for fashion retail now.

True Cost is an interesting film on the problems of fast fashion, focusing on labour conditions in Bangladesh. One estimate from the International Labour Organisation is that 170 million children are child labourers, many of which are involved in some aspect of fast fashion production, and many of whom are girls.

A student thesis from Fordham University wrote about the environmental impact of fashion, presenting some stark realities. The fashion industry “accounts for around 4% of greenhouse gas emissions globally, equivalent to roughly 2.1 billion tonnes of emissions. These emissions are generated during each stage of the product lifecycle, from material production to transport, washing and drying and final disposal. Material extraction through to manufacture of the textile item is responsible for 75% of emissions. To stay on track to remain below a 1.5 degree warming, the fashion industry would need to cut its emissions in half, to about 1.1 billion tonnes, by 2030.

Covid impact on fast fashion

There is a reputational damage when unethical practices are revealed. There is a growing awareness around consumers about child exploitation, the environmental impact and the unsustainability around the waste generated by these practices. There is also a changing attitude towards promoting the idea that greater investment in time and money to incorporate ethical practices will lead to longer-term success.

An article discussed how Covid-19 has caused some fundamental issues for traditional retailers. In India fast fashion has created a surge in local brands, creating an over choice effect in the internal market. Covid has caused a massive strain, because pre-pandemic the retailer would overstock certain brands to maximise market share, and then have an end of season sale to clear the stock. But lockdown made this strategy unworkable.

So as end consumers, what decisions are we making, how if at all are they influenced by the factors I’ve mentiond so far, not including cost so far?

An interesting study discusses how usage intention is becoming a more significant aspect of decision-making for the end consumer, and particularly due to online fashion retail services. There is a growing tendency towards even more specificity of choice, and actually a greater demand for fast fashion than traditional retailing. But, rather than purchasing the item, there is an increased perceived benefit to the consumer of renting the item.

The Sharing Economy

The sharing economy is growing, there is greater demand for access rather than ownership, and the market will reach £216 billion by 2030 according to The Economist.

Learn more about the circular economy in the episode with Dr Anne Velenteurf.

One definition of the sharing economy is:

“collaborative consumption made by the activities of sharing, exchanging, and rental of resources without owning the goods”.

This is a more circular model, which requires a responsive platform to deliver. Online clothing rental markets are expected to increase vastly over the next 5 years.

What are you doing by changing the fashion retail model? You are increasing the textiles lifespan, maintaining value in the product for longer, and delaying disposal, and potentially providing an alternative route from disposal to reuse. The motivations for renting so-called “second-hand” clothing is the sense of individuality it provides the user, how different it is from current fashion, the counter culture and nostalgia this generates in the consumer.

A lot of consumers still want luxury, but not at the cost of purchasing brand new. So you might buy the second hand luxury designer hand bag or tie and that will also give you a sense that the item is authentic, as well as unique.

As mentioned before consumers have more access to information and are more conscious of the choices they make and the social impact these have. So sustainability is of course a key reason why consumers are renting clothing rather than purchasing.

A study out of Claremont University presents the argument that the fashion industry is responding to the ethical based demands of the consumer by marketing strategies that are more focused on corporate social responsibility. But these brands are going to have to invest in their supply chains, in time, money and resources. Emerging from the crisis in the retail industry will likely impact the decision for the retailer – will they invest or will they focus on their existing offering?

Summary

1. The way we measure the cost of fashion depends on sector.
2. Consider the wider value chain – cost of production should include the ecological and socio-economic impact in that area.
3. The true cost of fashion does not mean you need to pay more, but it will likely influence demand going forward, if it is incorporated into the cost – consistent basis for that cost is likely to require standardisation.

The environmental impact of fast fashion is not considered to be sustainable, and one potential model to overcome this is the sharing model. With resource depletion and overconsumption this model needs serious consideration. The sharing economy could bring fashion retailers into a completely different emerging market, a source of growth in sustainable consumption, as well as improve their reputation and brand image using environmental, social and governance (ESG) factors. For the World Economic Forum (WEF)“sustainable consumption” and “saving the plant” are high on the agenda. So the time appears to be now for a fashion revolution.

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