RE:WIND the future of clothing

Fashion produces 10 percent of the world’s carbon emissions and uses 20 percent of the world’s wastewater. One garbage truck worth of garments is dumped in landfills or burned per second and a half million tons of microfibres are released into the oceans through washing each year. These problems have only continued to worsen. Growing populations and economies gave rise to fast fashion, which produces lower quality and rapidly outdated apparel. People currently buy five times more clothes than they did two decades ago.

The good news is that consumers are asking for more environmentally sustainable solutions. But the market has not yet fully met these demands. Organic or ecological supply chains are growing and help reduce the impact of production. Recycled materials are also becoming more frequently found in clothing. However, consumers often do not have access to these alternatives and the market for those upcycled materials remains limited. As a result, neither consumers nor producers are taking responsibility for the final stage of the product: disposal.

Re:wind attacks this problem head-on. It is a closed loop e-commerce apparel B2C company that takes ownership over the full life-cycle of its clothing. Though apparel is a competitive industry, there is a gap between the fast fashion companies, which offer low prices but lag on sustainability, and the smaller, sustainable actors who charge a premium. Exploiting this gap simultaneously solves SDG 6, by reducing water waste, SDG 12, by promoting sustainable consumption and production, and SDG 13, by reducing greenhouse gas emissions. If Re:wind demonstrates success in the next few years, the impact could be multiplied significantly as Re:wind itself expands and larger players take note of the business model, sustainability approach, and consumer response.

We are optimistic about the market opportunity. In Europe, only 15% of consumer-used clothing is recycled, with just 1% turned into new clothes, whereas more than 75% of pre-use clothing is recycled by the manufacturers. This represents a loss of more than €92 billion worth of materials each year, which are compounded by the high costs of textile waste disposal. Furthermore, the environmental impact reduction when using recycled fibers is extremely high. In a recent pilot project with a jeans manufacturer, production with recycled fiber used 53% less energy, 99% less water and 88% less chemicals compared to production with virgin fiber. This is the niche Re:wind will exploit.

Project value proposition and goals

Re:wind occupies a new space in the fashion market: apparel that is both affordable and sustainable. Re:wind’s goal is to compete with fast fashion brands on price, especially through the discount offered for repeat purchases, while offering the sustainability benefits so far provided only by premium brands. This niche is unoccupied, but, as discussed above, there is high consumer demand.

Competitor group 1: Fast-fashion brands (H&M, Zara)

Mainstream fashion brands offer cheap items made from low quality virgin cotton. Typical prices for these products are approximately €20 for a t-shirt and €50 for a sweatshirt. These brands rely on capturing the latest short-term fashion trends and leverage their unique supply chains to have the fastest speed to market. This results in vast amounts of unsold inventory and encourages customers to rapidly turn over their wardrobes for the latest trends, which further increases waste.

In response to increasing awareness, some fast-fashion brands are looking to add sustainability to their supply chain. However, these efforts have little impact on the use of virgin materials and waste of old clothing through incineration or landfills. For instance, H&M has introduced a take-back program, but most of these items are donated or exported to developing countries for second-hand use, which eventually end up in landfills. Furthermore, only 0.7% of the material used to make new clothing by the brand is recycled material.

Competitor group 2: Sustainable Brands

In the European market, brands such as Organic Basics offer everyday clothes that are ethically made and use materials such as organic cotton or chemically engineered fabrics such as Tencel. While such solutions reduce the environmental impact of manufacturing compared to using regular cotton, they do not reduce post-consumer textile waste. Furthermore, the price per t-shirt for fabrics such as Tencel are in the range of €50-60, which makes them inaccessible for the majority of consumers.

Re:wind’s Competitive Advantage

Re:wind will have the first mover advantage. While For Days in the US has a similar business model, no brand in the European market currently guarantees that customers’ clothes will not one day end up in a landfill or be incinerated. Competitors may try to imitate us, but we will build our brand and customer loyalty through two main lock-in strategies. First, the discount we provide for return customers makes it financially appealing to continue purchasing from us over time. Second, customers will be able to track their environmental impact on their profile on our website and earn rewards upon hitting certain targets. (For example, once a customer purchases 10 t-shirts, which corresponds to 25,000 liters of water or 20 kg of CO2 saved, corresponding to 10 t-shirts, they would get a €30 voucher.)

Tracking environmental impact

Re:wind can directly track the resources saved per garment created, across its life cycle. For example, for a t-shirt: 1,500 litres of water and 2 kg of CO2 emissions are saved in its production, while the recycling removes 300 grams of fabric from a landfill.

Re:wind will measure contributions against the following indicators:

• 6.4.1 – Change in water-use efficiency over time and 6.4.2 – Level of water stress: freshwater withdrawal as a proportion of available freshwater resources: Re:wind’s work will increase water resource efficiency through its garment production process, with measurable impact by the level of water resources used overall and benchmarked water use efficiency against competitors making similar products.
• 12.5.1 – National recycling rate, tons of material recycled: Re:wind’s initiatives will increase recycling volumes in the countries in which it operates.
• 13.2.2 – Total greenhouse gas emissions per year: Re:wind will measure the CO2 reduction through its better production practices and its recycling processes.

Additionally, Re:wind would commit to fulfilling indicator 12.6.1 by publishing an annual sustainability report, as part of the company’s advocacy and awareness-raising initiatives.

Project operating model

Re:wind is a closed loop apparel company that takes ownership over the full life-cycle of its practical, comfortable clothing with the minimum impact on the environment.

Sourcing and production

Our brand will manufacture and sell everyday essentials for men and women starting off with t-shirts and sweatshirts made from upcycled cotton and polyester. Upcycled cotton is made from yarn generated through textile waste, such as old clothing or cutting scraps. The polyester will come from recycled PET (rPET) bottles, keeping both out of landfills and incineration.

Closed-loop consumption and recovery model

Customers make their first-purchase at the full retail price, use the product and then have the ability to order a replacement when the product is worn out. The replacement would be available at a considerable discount, 50% of the original retail price, provided that the customers send back their old product. The old products are used as raw materials by our upcycling partner to make new yarn which the company would then use to make new apparel.

This closed loop approach allows Re:wind to be more sustainable than what is currently available on the market for the following reasons: 1) By keeping control of the apparel throughout its lifecycle, we control composition and color in order to make recycling easier. This way, the materials are not downgraded like most recycled clothing, to be used as lower quality materials for items like rugs and insulation. 2) After reuse and recycling, the clothes never end up incinerated or dumped in a landfill. 3) Reusing fabric avoids production of the virgin cotton, polyester, denim and other materials, saving thousands of litres of water, several kilograms of greenhouse gases, and used chemicals for every T-shirt. All of these benefits outweigh the environmental impact from deliveries and returns which we will nonetheless limit as much as possible.

Project financials and levers of growth

Volume & Price: We expect low volumes in the first year of the newly introduced products, as it will take time to generate customer awareness and demand for the product. For future product launches, the ramp up in sales is faster with an existing customer base and a strong brand name in the market. Pricing is based on our strategy of positioning our brand between fast-fashion brands and premium sustainable brands.

Customer Churn: We expect a 40% customer churn rate after the first purchase, accounting for customers that drop off as they were unsatisfied or simply failed to return their old items. Of the remaining 60% that do return for their first replacement purchase, we have assumed a 10% churn rate for all subsequent purchases.

Replacements: For t-shirts, we have assumed that replacement orders would be placed in the next year from purchase date. For all other products, we have assumed that replacements would be placed two years after the purchase date.

Marketing Expenses: We plan to invest an aggressive 40% of revenue for total marketing costs in Year 1 and Year 2, moving lower to 35% in Year 3 and 30% in Year 4 and Year 5. 65% of the marketing expenses will be spent on acquisition campaigns in Year 1 and Year 2, 60% in Year 3 and 50% thereafter. This is important to rapidly build brand awareness and establish a defensible competitive advantage.

Alignment of environmental and financial goals

	Carbon Neutral We wish to be carbon neutral. The carbon footprint of our products will be low due to the usage of recycled materials. Still, we will partner with an offsetting company (e.g. Offset Earth) to help evaluate and offset the carbon footprint of our operations and products’ lifecycle.
	Sustainable Materials Materials used will be limited to recycled fibers and organic and sustainably harvested cotton.
	B Corp Certification[1] We aim to get B Corp certification within 3 years, which shows our commitment to social and environmental values.
	Greener Deliveries Products will be delivered in return envelopes made of recycled and recyclable materials. This way transport costs and materials used are reduced to a maximum. Standard delivery (4-5 days) with lower carbon footprint will be encouraged.

Handling information uncertainty and risk

The biggest risk we have identified in this business is consumers’ willingness to change their consumption habits for affordable fashion products. To deal with this adoption risk, we have conducted initial market research through quantitative surveys and a smaller number of qualitative interviews. The survey showed encouraging and positive results with 65% of 200 respondents signing up for our future product launch.

User feedback and pain points

Overall, user interview feedback was positive. Potential customers highlighted sustainability as an increasing driver of their purchasing behavior and stated that re:wind’s mission would induce them to (a) purchase re:wind products over non-sustainable brands and (b) hold loyalty through repeat purchases with re:wind over moving to another supplier.

Potential customers also consistently highlighted several concerns. These pain points focused on three areas:

1. The return / repurchase process

Multiple potential customers stated that the ease of returning products would be the biggest barrier to them adopting re:wind’s fashion cycle. A recurring point was that asking customers to do the return themselves by going to the post office to mail the return package was actually not all that different from asking customers to return items to a store — the trip to make the return is an extra burden no matter where that trip goes.

Suggestions for reducing this friction included:

• Giving customers packaging with which to execute the return (at the moment they decide to make the return, rather than delivering the return packaging at the moment of purchase and expecting customers to retain this packaging until they are ready to return their re:wind garment)
• Directly organising returns for customers, including organising doorstep pickup

2. Tying customers into re:wind

While the discount for people returning clothes was appreciated, interviewees were concerned that this unnecessarily tied them into re:wind. This concern was especially important for people with concerns over the quality of re:wind’s sustainable product compared to typical fash fashion garments. These people would not see the discount as an inducement as their decision process about whether to purchase a re:wind product extended only to the point of purchase. Tackling this at the front end (ie through pricing or a one-time discount for first-time purchasers) would be potential solutions.

3. “The sustainability paradox”

A classmate astutely pointed out that because she is trying to reduce her waste, she is consciously reducing her consumption, which has two consequences for re:wind. First, if she really likes the article of clothing from re:wind, she is unlikely to return it and get a new product. This would hold true even in the face of the 50% discount offered to repeat buyers. Second, even if she doesn’t love it, she is unlikely to simply return it — because she purchased it and made that consumption decision, she is more likely to try to hold on to the shirt for longer to prevent making waste too quickly.

For lack of a better term, we are calling this the “sustainability paradox”. By this we mean that we are trying to promote sustainable consumption — even though re:wind is trying to be sustainable, we still need consumers to consume in order to have a long-term viable business. Because purchasing cycles are likely to be slower than normal fast fashion producers, we will need to convince investors that rapid growth in our customer base will counterbalance a slower repeat purchase cycle.

This feedback from potential customers highlighted our key challenge — the returns process — and points to where our biggest investment is likely to come if we are to achieve long-term growth. The cost of returns is significant across the fashion and ecommerce industries — both from a logistics perspective and from an inventory turnover perspective — but putting this on a sustainable footing will be re:wind’s key to sustainable growth.

Market size and dynamics in the next years

The fashion industry is one of the biggest in the world, worth €2.8 trillion. The sustainable apparel market is still a small part of that, around 1%, but growing rapidly. From 2016 to 2018, the number of sustainable apparel items available worldwide surged from 58,144 stock-keeping units (SKUs) in 2016 to 353,817 SKUs in 2018^[2], indicating retailers’ and consumers’ increased enthusiasm. In a 2020 study by McKinsey, when asked about the biggest challenges in fashion, executives all agreed that ‘Sustainability is the next big thing.’^[3] This is mainly driven by consumers who demand the industry to change. Another study by Global Fashion Agenda, BCG and the Sustainable Apparel Coalition showed that 75% of consumers view sustainability as extremely or very important when purchasing fashion.^[4] This is further substantiated by an increase in sustainability mentions on social media, which was a third higher than the overall growth of social media posts.

Sustainability motivations are also impacting consumer behavior. 38% of consumers report actively switching from their preferred brand to another because it credibly stands for sustainability. Even more encouraging, the next generation is driving this change with 48% of Gen Z stating they have switched brands based on these considerations.^[5] This is accompanied by their willingness to pay more for sustainable brands. Of Gen-Z respondents, 31% said they would pay more for a product that has the least negative impact on the environment, compared to only 12% of baby boomers.^[6]

Project scalability

Recycling is still very complicated and more expensive than producing apparel using virgin low quality, low sustainability materials. However recycling capabilities are improving rapidly, with new technologies such as Fibersort, an automated material and colour sorting machine, and chemical recycling which is both a threat and an opportunity. Recycling will become cheaper and easier overall in a few years, which will allow us to greatly increase operations. That will also increase competition within the circular apparel market, and it is likely that larger, established incumbents (Zara, H&M etc.) will initially have more access to these breakthrough technologies than smaller players such as us. However, the apparel market is so big, that we feel that if we can establish ourselves early and quickly with a strong brand, we will be able to keep our market share.

Project launch and next steps

• Phase 1: Validation

• Kickstarter: in July 2020 we will launch a kickstarter campaign to raise €50k amount of funds. This will also allow us to truly validate that we are targeting the right customer profile with the right product. We will see whether the customers we’re targeting consider clothing disposal as a problem and that they believe our product and service will help them address it.
• Seed Funding: in addition to the kickstarter campaign, we will pitch to venture capital firms and angel investors throughout the summer and fall in order to raise an additional €150k for 20% of equity
• Product development: Based on the samples we’ve ordered from our suppliers, we will partner with a designer for our first batch of t-shirts. We will use those to reward those who placed orders on kickstarter as well as sell them to people who supported us with interviews or referrals at a 15% discount. We will use their feedback to improve the design of our product and improve our operations.
• Competitions: To help gain attention as well as funding, we will participate in competitions around the world such as The Green Product Award^[7] or The Sustainability Award^[8].
• Market selection: based on where we got more traction, we will choose to launch full-scale in France or Germany.

• Phase 2: Launch

• Incorporation: By October, our company will be incorporated and occupying a small office in one of the two capitals. Our website will be ready to take on orders.
• In November 2020, we launch operations at full scale with our marketing campaign in our key target market focusing on brand awareness and customer acquisition. We place our first considerable order of 5,000 T-shirts and 1,000 sweaters from our suppliers.

• Phase 3: Growth

• Staff: After our first year of operations focused on improving our product, operations and awareness,we will increase the company size to include a full time designer, salespeople, a logistician and an admin.
• Increase product selection: to offer a greater range of tops and t-shirts and expand our materials to denim and tencel.
• Second funding round: late 2021, about a year after our seed round, we will raise another €500k in order to push for an aggressive expansion in the rest of Europe.
• Recycling: By early 2023 we have started recycling clothes from our clients who have now placed replacement orders.

• Our 2025 vision:

• We will have reached 14.2m euros in sales through a complete range of clothing made of fully recycled materials.
• Pregnant women and children will also be shopping with us for the clothes they need to replace fast.
• Brand partnerships We will have partnered with other labels to create product collaborations in the closed loop model.
• Certified high ranking B-corp. All of our products are made of 100% recycled materials, and we collect 90% of the clothes we sell

• Our 2030 vision:

• We will have .5% of the market with 100m euros.
• Diversify our product range to include household linens such as curtains, towels etc.
• B2B: We will target businesses or organizations with uniforms such as airlines, hotels or sports teams in order to improve the environmental impact of their high turnover and huge volume apparel needs. We will also supply organizations such as Mapo Tapo, or WWF that are concerned about the environment and selling or giving out branded clothing to customers, members or employees.
• Vertical integration: have internalized manufacturing as well as recycling of fabric.

---