Circular Fashion - Resale, Refurbish and Rental

It’s no secret that the fashion industry is considered one of the world’s least environmentally friendly. Brands have been working to become more sustainable for decades. Still, according to Eric Fisch, National Sector Head of Retail and Apparel for HSBC, the emphasis has historically been on pre-sale processes. “We hear a lot about what goes into ESG in terms of production,” he says. “Where is the cotton sourced? How much water was used? What are the factory conditions? What is the packaging?”

However, there’s also a huge environmental impact post-sale. According to the UN Environmental Programme, for instance, one garbage truck full of old clothes, shoes and other textiles goes into a landfill or incinerator every second! Fast fashion, inexpensive products meant to be worn a few times and disposed of, has only made this problem worse.

There is good news, though. The tides are starting to change as younger generations become more important in terms of purchasing power. “As consumers, they have become more cognizant of how their actions impact the environment,” Eric says. “And today they can be – and often already are – active participants in post-sale sustainability.”

Resale is nothing new, but the business models have changed.

Everyone can be a vendor: With various platforms, virtually anyone can become a reseller. Think The Real Real, Poshmark, ThredUp and eBay, for instance.

• Win-win for environmentally conscious consumers.
  • They can move unwanted items out of their closets without sending them directly to landfills.
  • They can shop a much larger universe of products and brands – including several past seasons – at a much lower price point.

• The downside? Counterfeits.
  • Platforms specializing in high-end resale will often hire people to confirm authenticity.
  • These people need to be educated on a wide range of different types of products from a number of luxury brands, making it expensive to grow a luxury resale business.

Retailers are getting into the game: Why? Sustainability is part of it, but they also want to be able to control their brand.

• Owning the brand throughout the lifecycle.
  • Some brands are creating their own resale storefronts to better control the image they’ve worked hard to establish and maintain.
  • It comes at a cost: Each item coming in for resale is unique – a different season, wear pattern, condition and more.
  • That means each item must be processed, photographed, categorized and assigned its own SKU individually.
• The upside? In-house authenticators.
  • Luxury fashion houses already have experts on staff who know their products inside and out.

Some brands – mainly in the outdoor and luxury categories – were built on the philosophy of long-term value and sustainability. For them, refurbishing products so they can continue to be used and enjoyed for decades is simply part of who they are.

It's all about the craftsmanship: Several outdoor brands give consumers lifetime warranties on boots, tents, backpacks and more.

• They believe the craftsmanship that went into the product in the first place is worth restoring.
  • Sometimes the brand will return the refurbished items, such as boots, to the customer.
  • Other times they'll send a new pair – but the original boots will still be refurbished and donated in good condition for reuse.

Protecting an investment: Most luxury brands market their products as investments.

• If a consumer has spent money on a high-end handbag, for example, they will take the time to have it refurbished.
  • Why? Many of these items will grow in value over time – and condition impacts that value.

With a focus on women’s business wear and formal attire – the rental market took a pause during COVID-19. Interest is growing again, however, and subscriber bases are ticking up.

More interest in event wear: With many still working at home at least part of the time, women’s business wear has taken a backseat to formal wear.

• Renting gowns and evening wear is a sustainable solution for those who don’t want to buy an expensive outfit that will only be worn once or twice.

• Retailers put a lot of effort into presenting each item in a way that makes it feel new.

What's on the horizon? Developing a cost-effective way to recycle cotton, fiber and synthetics, explains Eric. “It's scientifically possible. It's just not financially viable right now.” But when it does happen – it will be a game changer in terms of sustainability for the industry. However, the resale market has the most growth potential for the short term. “It's most impactful from an ESG perspective, and US consumers are already sold on it,” says Eric.

To learn more about how HSBC supports the retail and apparel industry – check out our article about how retail brands are building more transparent supply chains and how the HSBC-sponsored the Return on Sustainability Investment (ROSITM) framework developed by the NYU Stern Center for Sustainable Business works.