CloKi. Wear less, care more

By: Francois Delvaux, Harshita Ramakrishnan, Shobhit Nair, Milou van der Ven

Skid marks of the fast and reckless apparel industry

The Apparel Industry, valued at 3 trillion dollars, accounts for 2 percent of the world’s GDP. [1] As it sets and follows trends, it embraces changes in preferences across the globe. However, in trying to keep up with the current generations’ capricious demand for fast fashion, the industry has ignored the fault lines it created in the environment it feeds off. In addition to being reprimanded for birthing sweatshops, it is now reproached for being the second largest polluter following the oil industry. The industry is intensely competitive and survives on thin margins but now it faces an additional challenge of atoning for the waste and pollution it causes due to its unchecked and insufficiently regulated production methods.

In this blog we look at which UN Sustainable Goals are affected by the industry and suggest an idea for addressing the issues. Let’s look at the three UN Sustainable Development Goals (SDG) relevant to the textile and clothing industry

• UN SDG Goal 6: Clean Water and Sanitation – Avoid Wasting Water

The industry consumes tremendous amounts of water to undertake manufacturing. It takes more than 5,000 gallons of water to manufacture just a T-shirt and a pair of jeans. [2] 20% of the global water waste is produced by the fashion industry [4]. This leads to the clothing and textile industry being the second-largest polluter in the world [2].

While brands have started recognizing the impact of textile production on water consumption and usage, they have incentive to produce more – to grow top-line and bottom-line on. However, the textile industry has now started experimenting with other eco-friendly fibers for production such as Lotus fibers, Banana fibers and coffee ground fibers.

• UN SDG Goal 12: Responsible consumption and production

The fast fashion business model which is currently being applied throughout the apparel industry, has pushed the industry towards the production of non-durable materials on the one side and encouraged over-consumption on the other side.  Despite the growing media attention and the various initiatives developed to change both firms and consumers behaviour, there is still a lot to improve. In 2017 it was estimated that $500 billion worth of clothes is wasted globally due to under-utilization and disposal [8].

With part of the manufacturing taking place in developing countries, the garment industry is associated with child labor, unhealthy and dangerous working conditions. A lack of transparency, visibility and control throughout the supply chain make it difficult to identify and therefore solve these issues. Although slowly, child labor in the industry is declining [9]. Initiatives like the Fair Wear Foundation which provide a list with brands that guarantee to be child labor free should enable consumers to make better informed decisions as well.

• UN SDG Goal 13: Climate Action

The apparel industry contributes to 10% of the greenhouse gas emissions owing to its long supply chains and energy intensive production (United Nations Climate News) [3]. The initiatives taken by the industry so far are mostly focused on reducing clothing production by encouraging re-usage and recycling of clothes. Brands have started rewarding customers for returning old clothes owing to the realization that fabric should ideally be recycled and also the concept of re-usage is gradually gaining acceptance in the fashion industry. For example, the U. S., the largest exporter of second hand clothing, exports over a billion pounds of used clothing every year [6]. Further, a large proportion of people reuse clothes, possibly due to the lower costs associated with re-use of clothes. Over 70% of the world’s population use second hand clothes. [7]

However, there is still substantial scope to increase re-use of clothes, potentially through a rental model versus a donation model. While the problem is large and requires tectonic movements in consumption and regulation for making amends, we considered focusing on an idea for one customer sub set.

CloKi – Cheaper and more sustainable baby clothes through renting

Clothes for babies and kids is one area within the apparel industry that has great potential for improvement, both environmentally and financially. Babies grow fast and outgrow their clothes rapidly, which leads to a high degree of underutilisation of the clothes. It is not uncommon to use clothes for durations less than 3 months.
The current norm is to buy baby clothes – and there is a clear trend towards dressing babies and young kids with more elaborated outfits than before. Despite the fact that some clothes are passed on to other babies in the family or within friend circles, many clothes end up in the bin before being worn out. On the one hand this means more clothes are being produced than used, leading to more waste water and CO2 emissions than required. On the other hand, the consumers (parents) buy more clothes than they need, which leads to unnecessary costs.

These are the motivations behind proposing CloKi, an on-demand platform through which parents can rent baby clothes for the age groups 0-3 years, by paying a fixed fee per piece per month. Once their baby has grown out of the clothes, these clothes will be rented out to other parents. This will increase the effective lifetime of the clothes and thereby decrease their production, lowering both financial and environmental costs.

Furthermore, the social and environmental impact of CloKi will be minimized as much as possible by the following key elements of the business model:

•  Certified suppliers – The clothes will only be sourced  from certified brands which use organic and environment friendly raw material for manufacturing. Existing sustainability certifications (e.g. Higg Index) will be leveraged to ensure the above.
•  Distribution through day care – The clothes will be distributed through day care facilities. By pooling the demand, transportation and the pollution associated with it can be minimized, while maximizing convenience for the young parents.
• Eco-friendly dry cleaning – To avoid the potential negative environmental impact of the cleaning of the clothes, they will be cleaned leveraging latest technologies of eco-friendly dry cleaning. The clothes will be cleaned using organic compounds instead of perchloroethylene which almost all dry cleaners use and is known as a dire air polluter.
• Donation and recycling – After the end of their useful life, the clothes will be either donated to charity or recycled (depending on the state), closing the loop as much as possible.

A solution to address UN SDGs, with positive feedback loop

CloKi will address the following UN Sustainable Development Goals:

• Clean Water and Sanitation: By reusing baby clothes utilization of the clothes is increased and less production is required, which leads to less waste water.
• Responsible consumption and production: Using social and environmentally sustainable suppliers will enhance responsible clothes production. The costs benefit to parents provide an incentive to rent and therefore discourages over-consumption.
• Climate Action: Due to reuse, less production is required which also reduces the greenhouse gasses emissions.

Inevitably, the larger the business becomes, the more clothes will be re-used and the higher the total positive impact the company will cause. This effect will become even stronger because of the economies of scale that can be realized while the business is growing, e.g. by increased pooling resulting in optimized transportation and by optimized utilization of the dry-cleaning facilities.

What’s great about the business model of CloKi is that this positive relationship between financial growth and the social/environmental impact holds the other way around as well. To grow the business, demand should be increased. The demand is expected to come from parents that value the positive impact of CloKi on the environment, the lower prices and the convenience of the delivery and pick-up service, and convey those benefits through word-of-mouth.

The higher the environmental/social impact, the more visible (e.g. through media etc.) and attractive the business will become to conscious parents, thereby increasing demand. In addition, a more efficient distribution system does not only reduce emissions, it is also expected to boost demand since a better service and lower prices can be provided to the consumers. This feedback loop between environmental/social impact and financial growth could become even stronger in the future through governmental subsidies linked to sustainability.

From Clothes to ‘Being Dressed’

Most parents currently purchase their baby clothes new from physical or online stores. CliKo breaks this traditional model and shifts from selling clothes to the concept of ‘being dressed’. Renting used clothes through CliKo instead of purchasing could be a game-changer to consumers by benefiting the parents in many ways:

• Cost savings – Because the parents only pay for the clothes during the time their babies can wear them, large cost savings could be achieved.
• Positive impact – Ultimately the renting model enables parents to contribute to a cleaner environment by re-use of the clothes. In addition, CliKo provides easy access to sustainable baby clothes, by offering solely from responsible suppliers.
• High quality – The cheaper clothing offerings could also increase the accessibility to high quality clothes for many parents of whom the budget does not allow for purchasing new, high quality clothes.
• Convenience (reducing search and transaction costs) – CliKo not only  reduces the search and transaction costs for parents who currently go to buy clothes in physical stores, but also for those who already buy most baby clothes online: CliKo replaces the broad online offer and can provide monthly recommendations based on the parents’ historical choices. Moreover, by offering only responsible brands, parents don’t have to look for sustainable clothes themselves. The consumer also benefits from the pick-up and delivery model through the day care facilities which reduces the time and effort associated with home-delivery of newly bought clothes (e.g. parents must wait at home). Finally, there is no need to drive to a charity bin for clothes after their useful life, because CliKo will take care of this.
• Reduced storage requirements – By renting baby-clothes, parents will only have to ‘store’ the clothes that currently fit the baby. This will reduce the required storage space for baby clothes significantly, since there will be no outgrown clothes left (to be stored for a new family baby or friends) and also no stock of clothes for the future.

From the supply side this clothing-rental model will be game-changing because the supplier moves from selling goods to providing a service. This will have the following benefits for the supplier:

• Reduced information risk – The renting model enables the supplier to make better informed decisions regarding estimation of demand. Consumers will be known in the system (through their personal profile). The future demand of consumers can be predicted through their purchasing history (e.g. volume, size, style). This reduces the overage and underage costs.
•  Aligned incentives – Using durable, high quality materials only pays-off if the clothes are used multiple times. While in the traditional model of selling new clothes, high quality clothes equal higher costs to the supplier and higher prices to the consumer, for CliKo it is cost-effective to use the most durable clothes, since these can be reused the entire lifetime. This is aligned with the parents’ need/preference for high quality clothes for their babies.
• Pooling demand – Using the day care facilities as the deliver and pick-up point enables suppliers to pool the demand making the distribution more efficiently.

Adoption and environmental risks to be mitigated to be positioned for sustained growth

Lack of adoption of this innovative model is a key risk to be mitigated. Parents tend to spend significant amounts for their newborns as they “want the best for their babies”. As a result, they might have reservations towards CloKi with respect to hygiene but also to the social image it may convey towards their social circle.
To counter this, CloKi builds on growing environmental concerns that resonate to at least part of the young adults population. Sufficient levels of quality and hygiene will also be ensured through thorough tracking of each item along its lifetime. Furthermore, each box will contain at least one “first-hand” product. Finally, CloKi recognizes that not all segments of the population will be interested as, for some, alternatives already exist (e.g. storing clothes for the next child, giving away to family and friends etc.).

Another risk is related to the environmental impact of the supply chain – as it requires frequent cleaning of the clothes and a broad transportation network:

• Need for Dry Cleaning: Since clothes will be used by multiple families, it will not be sufficient to wash the clothes before handing them to a new user. Clothes will have to be dry-cleaned. To minimize the impact thereof, sustainable/eco-friendly methods of dry-cleaning will be used.
•  Repeated Transportation of Clothes from one user to another: The clothes will change hands frequently and will be transported from one location to another. Transportation, on account of fuel, emissions and packaging material will be a cost to the environment. However, by using the daycare facilities to deliver and pick-up the clothes, the transportation distance is minimized since parents were anyway dropping/picking up kids from day care centers. Further, a key objective of CloKi is to “get the end-of-life right”, by donating or recycling the item at the end of its life-cycle.
• Low Supply of raw material: Certified suppliers who manufacture using eco-friendly raw material and processes are low in supply. Hence the range of products that CloKi can offer are limited. It is also difficult to ensure that the suppliers are 100% compliant to the eco-friendly procedures. However these risks can be mitigated by singing contracts with suppliers where the onus to remain compliant is upon them. Further an independent agency can be hired to conduct surprise audits and checks to ensure the firm stays true.
• Customer’s habits: Customers may still resort to using hand-downs within family and friend circles. Unless a habit is created customers could easily resort to conventional means of buying clothes. This risk can be mitigated by offering a subscription plan which is flexible. Since eventually the kid will out grow the target age bracket, retention can be sustained by helping customers pass on their subscription to another person who can avail introductory discounts.
• Mishandling of clothes: Another risk is that there can be mishandling of clothes by the parents due to which the clothes fade, stain permanently etc. These cannot be accurately predicted and have to be gauged based on pilot runs. However CloKi can retain a minimum inventory of each type of clothing to ensure that the flow of clothes is sustained.

The business model described above has strong inherent growth potential and other developed countries could be gradually targeted. Additional potential is expected in addressing clothes for pregnant women and furniture/toys for babies.

References:

1.   https://fashionunited.com/global-fashion-industry-statistics
2. http://www.alternet.org/environment/its-second-dirtiest-thing-world-and-youre-wearing-it;  Forbes – Making Climate Change Fashionable – The Garment Industry Takes on Global Warming
3.   https://edgexpo.com/fashion-industry-waste-statistics/
4.   United Nations Partnership on Sustainable Fashion and the SDG’s
5.   http://worldwearproject.com/about-us/global-responsibility
6.  https://en.wikipedia.org/wiki/Global_trade_of_secondhand_clothing
7.   http://www.smartasn.org/ | Secondary Materials and Recycling Textiles [SMART]
8. https://publications.parliament.uk/pa/cm201719/cmselect/cmenvaud/1952/full-report.html
9. https://labs.theguardian.com/unicef-child-labour/
10. https://www.weforum.org/agenda/2018/06/clothes-grow-with-child-petit-pli-sustainable-fashion/