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Retail & Consumer Market Insights

Quarter 1, 2019: Consumers push for fashion industry sustainability

The latest consumer insights highlight a significant story when it comes to fashion and clothes shopping: recycled and secondhand clothing is trending.

In the past twelve months, more than one quarter of surveyed shoppers have used or purchased secondhand clothing. In the same period, only 2 per cent of consumers have rented an item of clothing. It appears that consumers are finding it easier to embrace and access secondhand clothing compared to renting clothing. We expect this to change, particularly with Gen Z and Millenials who crave the newness that a sophisticated, scaled rental clothing platform can deliver.

Let’s pause to consider some sobering statistics from the Ellen MacArthur Foundation, A new textiles economy: Redesigning fashion’s future report*:

  1. Every second, the equivalent of one garbage truck of textiles is landfilled or burned.

  2. If nothing changes, by 2050 the fashion industry will use a quarter of the world’s carbon budget.

  3. Less than 1 per cent of materials used to produce clothing is recycled into new clothing, representing a loss of more than USD100 billion worth of materials each year.

This highlights the huge sustainability problem faced by the global fashion industry. But where there are challenges, we believe there are innovative solutions too. Often these are consumer-driven. In this quarter’s Retail and Consumer Market Insights, we surveyed Australian shoppers about their clothing purchasing behaviours and their sentiment towards fashion retailers to find out their approach to a more sustainable fashion future.

*Ellen MacArthur Foundation, A new textiles economy: Redesigning fashion’s future (2017, http://www.ellenmacarthurfoundation.org/publications).


Giving consumers options through transparency

In terms of sustainability and ethical practice amongst retailers, our survey respondents indicated that value for money is the main factor they consider when making a fashion purchase - this doesn’t necessarily mean that they want items to be cheap, but rather they want assurance that the money they do spend is on clothing items that will last.

Australian brand Arnsdorf provides transparency to their customers by revealing the process, materials and costs that go into every clothing piece. Arnsdorf also discloses details such as who the machinist and patternmakers are that create the pieces. This form of transparency not only gives customers the opportunity to assess value for money but also allows them to feel closer to the human side of the brand.

The spotlight on sustainability

Interestingly, for the first time, the Baptist World Aid Ethical Fashion Guide* has included environmental management into its scoring, broadening out the original scope from purely labour rights to address all aspects of environmental management including emissions, materials, water use, wastewater and chemical use. The overall report this year highlighted the efforts of some large Australian fashion brands which have improved their scores over the past year due to their sustainability and transparency efforts.

Beyond 'value for money', other factors impacting consumers heavily when it comes to clothing purchases are the treatment of workers making products, creative integrity (i.e. designs not copied) and authenticity of the brand. Interestingly, the least impactful factor identified was alignment with a charity / foundation - this is perhaps due to consumers looking for retailers to more holistically embody their values rather than just through one specific initiative.

Positively, shoppers told us that they are willing to pay more for purchases that are aligned with their ‘most important ethical factor’ - 15 per cent significantly more and 38 per cent a little bit more. This presents retailers with an opportunity to more clearly articulate the ethical factors in their business that justify any price differentials.

Australian online aggregator, The Iconic, has recently announced the initiative ‘Considered’, which provides their customers with options to shop by filtering according to their personal values. The five values they’ve identified are: sustainable materials, eco-production, fair production, animal-friendly and community engagement. Currently, 6.5 per cent of The Iconic’s entire range is part of the 'Considered' range, including sustainable Australian brands such as Kit X and Outland Denim. This initiative provides values-based retailers a significant platform to demonstrate their value credentials directly to shoppers.

Re-sell, rent and refurbishment are growing very quickly

While 27 per cent of Australian shoppers have purchased secondhand clothing items in the last year and 2 per cent have rented items, it seems the experiences of the US retail and consumer market indicate this is going to grow exponentially.

The re-sale and rental clothing markets are huge in the United States. Refurbishment is also making its mark, albeit more niche. The RealReal, which offers consignment of luxury fashion goods, has recently raised USD115 million in Series G funding which will be used to improve fulfilment centres and increase a bricks and mortar presence. Rent the Runway has also received a recent funding injection of USD125 million, lifting its valuation to USD1 billion. Its model was strengthened in recent years when it moved from purely renting individual pieces of clothing to a monthly subscription (where subscribers get a certain number of pieces each month curated for them). Currently, there are no subscription-based rental offerings in Australia, presening a big opportunity for retailers.

Influence can come from within

Consumers told us that a brand’s retail stores and department stores remain significantly important in their purchasing journey. 56 per cent of customers seek inspiration first from a retail store - interestingly only 3 per cent are influenced by ‘influencers’. Then when it’s time to purchase, 36 per cent of consumers head straight to a department store and 27 per cent head to a brand’s retail store.

Given the perceived huge influence a brand’s retail stores and department stores have on the clothing purchase journey, this means there’s also an opportunity to embed sustainable practices in-store, such as recycling drop-offs direct to a brand and refurbishment centre. Also, stores should be considering how to tell their values-based 'stories' through in-store marketing.

*Baptist World Aid Australia: 2019 Ethical Fashion Guide, Edition 6

What does this mean for retailers?

While consumers can change their purchasing and usage patterns, there's a significant opportunity for retailers to tackle the sustainable fashion crisis. We think retailers should look to the US for inspiration on how they can drive a more sustainable fashion future. In thredUP’s recent report*, 96 per cent of Senior US Retail Executives surveyed said they wanted to get into Circular Fashion by 2020 - this would require a huge shift in focus for Australian retailers to achieve in the near future. Concepts that have been tested and are embedded much more deeply in the US market are:

Focus on purchasing materials that are safe and renewable, and invest in quality over cost price. Design with single-fibre fabrics that are much easier to recycle. Alternatively, if less sustainable materials are required for design purposes (such as oil-based nylon and polyester), source synthetic fabrics that are made from recycled fibres such as dumped fishing nets and plastic bottles.

Melbourne brand Obus runs a ‘Obus Swap Shop’ whereby customers can take their pre-loved Obus items into a retail store to receive store credit. In December 2018, Zara announced that its Australian stores would partner with secondhand charitable retailer Red Cross to collect unwanted clothing. This strategy drives sustainability - and also traffic - to full-price stores where consumers might choose to make a purchase.

International retailers are working with re-sellers to develop collections that will purely be offered for re-sale. The partnership between Stella McCartney and The RealReal (US-based luxury consignment retailer) has many facets including the development of bespoke clothing ranges purely for re-sale. In addition, customers who consign select products to The RealReal get a USD100 dollar credit to spend in full-price stores.

Explore opportunities to encourage the re-use of gently worn but slightly damaged clothing items by investing in an in-house refurbishment department. US brand Eileen Fisher - which is focused on creating simple, timeless designs - has introduced a ‘renew’ model where refurbishment includes re-sewing, overdying and mending donated Eileen Fisher clothing.

* thredUP’s Annual Resale Report

Where to next?

 

The Virgin Australia Melbourne Fashion Festival’s Knowledge Summit was an inspiring day attended by thought leaders from around the world who have 'sustainability in fashion' front of mind. A key message from the Summit was that change is being driven from many angles - retailers, suppliers, disruptors, not-for-profits, government agencies and most of all consumers.

In the next few years we can expect to see more:

  • Sophistication in Australia’s re-sale and rental markets. We are yet to have any big players dominating this space like in the US and Europe, so we can expect a brand will fill that void soon.
  • Increased pressure on Australia’s brands and their suppliers to improve transparency in regards to sustainable practices.
  • A slow down from fast fashion as Gen Z and Millenials signal their values through purchasing less (but better quality) and increased participation in the re-sale, rental and refurbishment markets.

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Donna Watt

Donna Watt

National Retail & Consumer Leader, PwC Australia

Tel: +61 421 141 350

Daniel Rosenberg

Daniel Rosenberg

Retail & Consumer Leader, Financial Advisory, PwC Australia

Tel: +61 3 8603 3886

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