Euromonitor International is proud to be a supporting sponsor of the FT Future Retail Summit that will take place on 19 September 2023. As this year’s summit focuses on the importance of delivering a sustainable and seamless retail experience, we are taking this opportunity to discuss the key driving forces that will shape the fashion industry’s retail strategies in the near future.
To register for the event, please click on the link Future of Retail.
High inflation places consumers and fashion companies under pressure
High inflation has been increasing the cost of living in most parts of the world, while the regularity of shocks to the economy has left consumers everywhere with a sense of uncertainty about the future. In this context, many of them feel a strong impulse to save, to reduce unnecessary spending, and to prepare for unknown costs ahead, whilst turning to cheaper brands and discount channels to spend less. Many consumers have also been embracing alternative ways of accessing products, seeking out budget-friendly options and turning to repairing, reselling, recycling and renting.Furthermore, fashion businesses have felt the crunch too, suffering higher production costs from raw materials, to shipping, storage and rent among other operational expenses. They have also struggled to pass on all their rising costs to the consumer, due to concerns that they would stop buying altogether; hence, many market players have suffered eroded profit margins over the past year or longer.
Cost-of-living crisis forces consumers into sustainable behaviour
In the current context of persistent inflation, sustainable consumer behaviour, which has always been hindered by the higher cost of products with eco-claims, is actually becoming more attractive. Green activities such as repairing, reselling, recycling, and renting are enjoying a default consumer boost. In fact, the cost-effective option of limiting or reducing consumption is increasing sustainability by proxy, a trend referred to as “Eco Economic” within the framework of Euromonitor International’s Global Consumer Trends 2023.
Nearly 40% of global respondents stated they repair items instead of replacing them
Source: Euromonitor International Voice of the Consumer: Lifestyles Survey 2023
In this context, fashion players need to retain brand engagement while addressing consumers’ cost-saving needs. This is driving change across fashion businesses, as they need to communicate the value they bring to remain relevant to consumers spending cautiously, especially when it comes to discretionary items. In this context, embracing sustainability and offering purpose beyond profits increasingly resonate with consumers.
Shift in business models comes alongside growing pressure from regulators
The shift towards a more sustainable fashion industry is not only consumer-driven, but it comes alongside growing pressure from regulators, starting with the EU. Indeed, the European Green Deal and Strategy for Sustainable Textile looks at making textiles more durable, repairable, reusable and recyclable by law. Furthermore, sustainable regulation is already shaping up in other parts of the world.
To mention a few examples, in the UK, ESG disclosures have become mandatory for a wide range of qualifying companies. In the US, California’s Garment Worker Protection Act, New York’s Fashion Sustainability and Social Accountability Act, and the Federal Fabric Act all signal a significant regulatory shift. In this context, companies need to show their commitment to sustainability, otherwise they might struggle to comply with potential labour and environmental regulations in time.
Integrating sustainability in retail to communicate value to consumers
With the current shift in mindsets and regulations, fashion players increasingly feel the pressure to show their efforts to become more sustainable throughout their operations, including in their store-based retail and e-commerce operations. They can indeed leverage their retail channels to provide consumers with ways to retain brand engagement while addressing their cost-saving needs and communicate how they increase their commitment to the planet.
Hence, a growing number of companies now provide repair shops for clothing and footwear, in addition to launching resale and rental options. To mention a few recent examples, Inditex started charging customers when they return unwanted items ordered online, unless they do so in-store, in a bid to cut costs as well as carbon emissions and curb overconsumption. The company also created a scheme through which customers can drop unwanted clothes from any brand into the recycling bins located in Zara stores, following in the footsteps of H&M, Marks & Spencer, Mango as well as Uniqlo, which have all launched their own recycling schemes in recent years.
Alfonso Dominguez has also launched a rental service in its core market, Spain, and Cencosud Paris.cl, which works as an aggregator for brands such as Vestua and Nostalgic, among other second-hand sellers, offers buying, selling, renting and repairing of used items in its department store in Paris. Mass retailer Primark has chosen a concession model with the launch of “Worn Well” vintage clothing corners in selected UK stores. This scheme could roll this out across its network, should the pilot phase be successful.
Finally, Danish retailer Censuum, which launched “the world’s first department store for responsible brands” in May 2021, only stocking brands that originated online and that focus on sustainability, has now entered a partnership with DSC to open its concept store in 18 shopping centres.
Recycling, repair, resale services most popular among consumers
In the current context, sustainability is becoming a priority for fashion retailers, and recycling, repair, resale services are flourishing in retail as they are top of consumers’ minds in 2023.
55% of global respondents stated they had bought second-hand or used items
Euromonitor International Voice of the Consumer: Lifestyles Survey 2023
They are set to continue expanding and could become the norm, as they not only help businesses improve their circularity credentials but also allow them to capture a revenue share from the secondary market and secure a source of possible raw materials, should technology evolve to allow “reverse sourcing” with recycled fibres in the near future.To learn more about sustainability as a driver for change in fashion retail and supply chains, please read our report Shifting Channels in Luxury and Fashion.