This article was written for FashionUnited by Gwen Cunningham, Textiles Programme Lead at Circle Economy and Andreea Theodora Baniceru, Textiles Programme Intern at Circle Economy.
It is well understood that extending the life of a garment is considered one of the most effective ways to reduce the overall impact of the clothing industry. Why? Firstly, optimising the use of clothing can contribute to a decrease in production and consumption of new garments and secondly, it can reduce the growing volumes of textile waste that are generated every year.
Hence, circular business models, like rental and resale, are increasingly recognised for their significant potential to curb the immense and damaging effect the fashion industry has on the environment. And while these business models’ impact potential is clear, so is the business opportunity. Recent forecasts indicate resale, rental, repair and remake models are growing, and reaching billion-dollar valuations. The latest report from the Ellen MacArthur Foundation, ‘Circular Business Models: Redefining Growth for a Thriving Fashion Industry ' reveals that circular business models in the apparel industry have the potential to grow from 3.5 percent of the global market today to 23 percent by 2030, representing a 700 billion US dollar opportunity.
However, despite the environmental and economic benefits that circular business models promise, and while brands see their potential, many businesses still struggle with implementation.
In November 2018, the Switching Gear project was launched to tackle just that. Its mission was to accelerate the implementation of circular business models in the fashion industry. The two-year project, led by impact organisation Circle Economy and partly funded by the Laudes Foundation, was set out to support four apparel brands - Asket, Lindex, Kuyichi and ETP - in the design and launch of a rental or resale pilot by the end of 2021. To be successful, these new models were optimally designed to meet three key criteria: (1) have a value proposition that is convenient and affordable for the customer, (2) have a positive business case that can compete with, and in time, even become an integral part of the brand’s primary business model, and (3) they should have a net-positive impact on people and the planet.
The participating brands followed an 18 month circular innovation process consisting of intensive masterclasses, live-prototyping and online ‘scrums’ to make sure the brands were staying on track with their development. In April 2021, the four brands finished their journey, equipped with a clear value proposition for their new circular business model, as well as a detailed pilot plan and a solid communication campaign. They were finally ready to launch!
So what has happened since? This article looks back on the journey of those pioneering four brands, explores the learnings that emerged along the way, and reports on what has happened since the pilots launched. Using their stories and experiences as illustrative case studies, the associated challenges and benefits of designing and launching a circular business model become clear and Circle Economy provides the tools necessary to answer the question that brands continue to have today: where do I start?
The idea of a circular business model had already been on Kuyichi’s mind, long before joining the Switching Gear project. As a purpose-driven brand, it has a strong track record of creating garments made from sustainable and circular fibres and built for longevity. A circular business model was the logical next step. Kuyichi considers this a way of taking responsibility for their products at the end of their lifecycle - and truly appreciating and preserving the craftsmanship behind each pair of jeans. At the same time, the brand considered this a great opportunity to receive feedback from their customers on the quality and durability of their products, post-sale.
The Kuyichi resale business model serves two different customer needs. The take-back programme offers loyal Kuyichi customers who want to consciously clear out their closets an easy way to give their old denims a new life. Meanwhile, the upcycled resale collections aim to attract a younger generation who are in search of unique items with a cool story and values they can get behind.
Kuyichi views resale as a natural extension of their current model and believe that they will gain plenty of non-financial value from it. So the model in itself does not need to drive revenue growth - it just needs to sustain itself. To this end, their focus is to start with small volumes and grow the model over time.
For a brand like Kuyichi - which keeps sustainability at the core of their business - a resale model is a natural extension and a way to change customers’ behaviour and mindsets when it comes to garment care and disposal. By offering a take-back scheme for their denims, the brand hopes to divert products from landfill. Through their upcycling collaborations, the brand also aims to demonstrate the inherent, long-lasting value of their products. It supports their ‘Unfashion’ message that goes against the fast pace of fashion.
Kuyichi's pilot was launched in September 2021 in GreenUp Utrecht - the largest sustainable department store in the Netherlands. In a dedicated section of the store, the brand collects, upcycles and sells its reworked denim collection. The store takes back used Kuyichi jeans from customers, but also accepts defect items from the warehouse stocks. The collected items are reworked by Petra van de Laar from Indigo Ravens, into a variety of unique items, from patchwork jackets to bucket hats or even made-to-measure items, which are then sold in the GreenUp store. The price points vary depending on the work that has been done - some with repairs are sold at a lower retail price than the originals, while upcycled items have a premium price due to the handwork and time they require.
One of Kuyichi's main challenges is to scale their product take-back and renewal, due to logistical pressures on their team and the warehouse they work with. Thus, the brand realised it needs to find an external partner with the capacity and specialised knowledge to support them. In the upcoming year, Kuyichi is planning to collaborate with Responsible, which will provide a tool that will enable Kuyichi to buy back worn products from their customers in return for store credit in their webshop. Responsible will then repair and renew the items, reselling them on their platform for the next wearer to enjoy. The collaboration will first launch for the brand’s main European markets, but they hope to spread the initiative across Europe over time.
”Logistics is underrated. You have to work with a proper logistics partner, especially if you are a small brand, because it’s quite time intensive. It’s almost like building your own new company. Find the right partner. Find a partner that has that in-house knowledge you need or is willing to build it,” says Zoé Daemen, CR Manager at Kuyichi
From the moment they were founded, Asket took a clear stance against fast fashion and its exploitation of human and planetary resources. Core to the brand is an intention to restore the value of garments by creating meaningful and durable essentials. Therefore, the development of a circular business model was a natural next step for the Asket team, which would allow them to truly maximise the use of their garments by taking responsibility beyond the point of sale.
The Asket circular business model serves two distinct customer needs. The take-back programme offers loyal Asket customers - who are already conscious of their clothing consumption - a convenient and responsible way to dispose of clothes that they no longer use. At the same time, through the resale model, Asket aims to offer high quality, timeless basics to those for whom high prices constituted a barrier to responsible consumption.
The resale model was launched with a geographical focus on Sweden and Germany. In both countries, Asket offers free returns for take-back. From a financial perspective, the brand’s objective is to make the circular business model at least self-sufficient. As with many circular business models, the business case is sensitive to key indicators like the collected items’ sellable rate, repair rate and resale value. The Asket team hopes to support the collection of reasonable volumes of quality products through a variable reward structure.
For Asket, a clear goal is to maximise the use phase of their garments so that they can contribute to decreased levels of production and consumption within the industry. In order to realise this goal, it is crucial for the brand to safeguard the impact of its new business model as it rolls out. Key considerations in managing the impact of their resale model include 1) ensuring they do not heavily incentivise customers to dispose of their garments before they otherwise would have and 2) not to stimulate further consumption in any way. In addition, they are careful to minimise shipping and other operational impacts throughout the new supply chain.
Since its launch in May 2021, Asket’s take-back pilot has collected over 2000 pieces.The collection volumes are growing steadily, as is their customers' overall awareness of the Revival Programme. A 2021 survey showed that 42% of customers were aware of the programme, and the survey in 2022 showed that awareness of customers has increased to 58%. Today, the brand includes information about the programme in its newsletters, on social media, on its website, and has even started listing the 'Revival Reward' per garment, at the point of purchase on the webshop.
In the early days, Asket's internal team sorted the collected garments themselves - and even commandeered the help of the design team, so that they could learn about the quality and condition of Asket products post-use. However, sorting is labour intensive, and requires specialist knowledge. Therefore, Asket has now decided to partner with an external company, Fabrikörerna, who can manage the sorting, washing, revival, tagging and pricing. This has proven to be a symbiotic relationship, for the Asket team have essentially supported Fabrikörerna to diversify their business model (which is traditionally based on manufacturing of new products), and become a circular solution provider. Collected garments are first sorted according to quality ie. on whether or not they are rewearable. So far, Asket has been pleasantly surprised by the quality of what is collected - 81% of the total volume has been suitable for revival. This fraction is then sorted for washing, based on colourways and materials. After washing, all rewearable garments are sorted according to the specific type of repair they need; hole, pilling, stain etc. According to Estelle Nordin, Head of Operations, ‘one challenge is assessing the correct route for each individual item, since it varies from garment to garment and it is therefore difficult to fully standardise the procedure. It is always a ‘case by case’ with each garment’. For now, the non-rewearable fraction (19% of total collected) is being stored and stockpiled until they have a sufficient volume for upcycling or recycling.
In addition to the product take-back and sortation, Asket has also started reselling revived items through a series of pop-up events, with the first in June '22 and the second in November '22.
Asket’s goal for 2023 is to double the number of collected garments to 4000 items. In May 2023, the brand is planning to open a long term pop-up physical Revival store, which will offer a mix of revived items, as well as an archive of sample items and defective returns. They hope to trial upcycling and recycling solutions for the non-rewearable garments, however this is currently in ideation phase.
”Design a take-back programme that works for your business, and understand your needs in order to make that work. A take-back programme comes with additional processing and logistics such as sorting, repairing, shipping etc., and that can feel overwhelming in the beginning, but remember that there are many services with the expertise to partner up with that can simplify for you.” Estelle Nordin, Head of Operations at Asket.
Lindex’s ‘sustainability promise’ is to make a difference for future generations by empowering women, respecting the planet and ensuring human rights. For the brand, who has already established a form of take-back and reuse with partners since 2014, joining the Switching Gear project was about taking their commitment a step further. Lindex recognised the clear environmental urgency for circular business models and also noticed an increasing demand for them in their customer base. In addition, the business opportunity and rationale was important to them. Lindex understood that if they truly wanted rental or resale to be the way garments are traded going forward, then they should make it part of their own commercial offering and make it financially viable.
The Lindex resale business model serves two different customer needs. The take-back offers an environmentally friendly solution to parents who have unworn baby or kids outerwear at home that they want to get rid of in order to make space in the closet and an easy way to get refunded since they receive membership credits for every sellable product. Meanwhile, the resale of pre-owned baby and kids’ garments offers environmentally conscious parents high quality, functional outerwear at a good price.
The Lindex resale pilot was launched with a geographical focus on Sweden and the short term objective is for the model to be at least financially self-sufficient. In the long term, however, Lindex aims for the circular business model to be both scalable and profitable.
The transition towards a circular business model - resale - is part of the brand’s growth strategy with the ultimate goal to decouple growth from production volumes by ensuring all garments are designed for longevity and circularity.
Since its launch in May 2021, the aim of the pilot was not to sell large volumes of pre-loved products, but rather to gain insights on customer needs and preferences by testing a number of take-back and resale solutions in the market. Lindex began by taking back kids' outerwear, but has since expanded to accept all kidswear through the postal drop-off collection method. The brand has also experimented take-back for womenswear with help from charity partner Fretex in two of its stores in Norway. Digital and online tools proved to be the most popular options, especially when made extremely simple - customers do not need to print out anything, but can simply register the package with a QR code on their phone and use any recycled packaging from home. Regarding the resale process, multiple channels have been tested out - in-store resale offering, resale only pop-up event, online resale - and each of them was equally successful.
In 2021 Lindex collected around 1,000 pieces and in 2022 approximately 30,000 pieces, 80% of which were in great condition and resellable. The remaining 20 percent is being analysed, and the insights gathered will be shared with the design teams to inform their work and ensure all Lindex products are designed for longevity and circularity. Simultaneously, the teams are testing different methods of upcycling.
Lindex's biggest challenge right now is moving from pilot to scale and developing the right systems and infrastructure for this new business model. This year, they moved post-consumer garment processing from the headquarters to the warehouse, and have hired a new team member to oversee the backend. The brand has realised that its existing systems and databases were inadequate to enable this new business model. The broader their take-back criteria was, the more complex and varied the products they received back were, and the more advanced the sorting and renewal processes needed to be. In the existing system, each process covers thousands of items, whereas in the new system each unique piece has its own separate set of operations, from photographing the item to registration and logistics. Therefore, this system needs to be built from scratch.
Circular business models are a key part of Lindex's sustainable growth strategy. Therefore their core focus in the coming year is to build on the pilot's successes, invest and take the steps needed to enable it to operate at scale.
“Follow the Switching Gear methodology of develop - test - iterate. Don't presume you have all the answers. Follow data, not opinions,” says Annette Tenstam, Strategy Lead Circularity & Environmental Sustainability at Lindex.
ETP’s goal is to keep their garments in use for as long as possible—a sentiment shared by their business customers. Joining the Switching Gear project was a natural stepping stone for the company, which was looking to develop a circular business model in line with its ambition to take sustainability efforts beyond recycling and to build a futureproof business case. As a B2B workwear brand, it was also in a unique position to do so, as it had access to a wealth of relevant insights about its customers.
There is a significant opportunity for improving workwear efficiencies, as a significant percentage of workwear garments is only slightly used before employees change jobs or sizes. When collected, these garments could easily be worn by other employees or the yarns can be reused, instead of producing more new items and new yarns. This could not only result in significant impact savings—contributing to the customers’ CSR performance and image—it can also empower employees positively in engaging in sustainable behaviour.
ETP has rolled out the circular business model pilot with one of its clients, Dutch bank ABN AMRO. Take-back of used garments will happen through collection boxes in the different ABN AMRO offices. Employees will be educated on the benefits of circularity through different online and offline communication materials.
With its pilot, ETP expects to reduce the total production of new yarns by 20 to 30% over the course of four years. As a B2B apparel brand, it has the advantage of being able to easily track and measure its impact through changes in production volume and in energy and CO2 savings. The brand expects results to be visible in the second year of the pilot, when enough items have been returned and can be brought back into circulation. For the brand’s ongoing production, it wants to further focus on circular design and more sustainable materials.
Since May 2021, ETP’s first pilot customer (ABN AMRO) has been closing down many of its office locations. Therefore, the pilot - in its original formulation - was put on hold. However, during this time the brand collected all the old garments from the previous collection. All of these garments were sorted and recycled by ETP’s new partner Gaia, a company specialised in return logistics and recycling of products. Half of the resultant fibre was used to make recycled socks for ABN AMRO and yarns for seating in the automotive industry. The other half is currently being stockpiled in order to see if they can be transformed into furniture for the bank's new head office.
To date, one of ETP's main challenges has been the lack of investment from their customers in circular solutions. Customers usually expect that circular solutions should be in place and available to them at no extra cost. The brand reports that the pending EPR regulation is already helping to shift this mindset. There are more and more requests on end-of-life solutions and new customers even provide a separate budget for these services from the start of the project. This is encouraging, and ETP feel well positioned to support this growing demand. Since the pilot launch, the brand has secured seven customers, who wish to start their circular business model solutions. Operating at this kind of scale will allow the logistics behind the take-back model to be more efficient.
ETP will revive its pilot plans in January 2023, when it will distribute take-back boxes to all ABN AMRO offices. The boxes will remain there until they are filled and ready to be collected, after which they will go through ETP’s circular programme. ETP plans to take a product-specific approach - ie. certain products will be sorted for re-use of the yarns (e.g. polo shirts & jeans) and others will be sorted for recycling. The brand has already confirmed that Gaia will process the next batch of recyclable grade products into new polo shirts for ABN AMRO, and are exploring recycled sweaters made from jeans too. Gaia will measure and track the impact of this first pilot, in terms of volumes processed, and energy, water and CO2 saved. ETP hopes that reporting on these impact indicators will allow them to improve how they communicate the value of their circular business model to potential new clients.
” Go after the figures and collect as much data as possible - this will help you tell your story and show your value to customers,” says Nancy Dingshoff, Project Manager at ETP.