Fast fashion, with its overproduction and waste, opaque supply chains, and exploitation of human rights and environmental laws, was leading the growth of the fashion industry in the last two decades. But things have been changing, and the pandemic has accelerated a re-think. There has been growth of slow fashion, and consumers have become more aware of sustainability and vote with their wallets for brands and retailers that share their values. Moreover, new technologies are disrupting traditional retail and creating new business models for all players in the industry.
In this article, Tech Couture team is sharing the key learnings from the INSEAD Summer Start-up Tour 2021.
Digitization and new technologies application are no longer needed to be the first, but to stay in the industry.
FashionTech is broad
If you look at the innovations in the value chain of fashion, you can find out that new technologies emerge and are being implemented from the beginning of the value chain, starting with garment design, through material production and sourcing, through garments production, sales and distribution and until their resale and end-of-life. Tech Couture team met with the companies that found business opportunities across the whole fashion value chain and implemented digital technologies to optimize it.
Disrupting garments design
Clothes and garments designed by Artificial Intelligence? It is not the future anymore; it is present, thanks to the technology developed by Yoona.ai. Yoona is a B2B AI-based analytical tool that aims to shorten the design process to a few simple clicks. It makes the fashion design process more effective by removing the repetitive tasks that could be automated, especially when it comes to standardized designs that are constantly reused in fast fashion. The software can be fed with any possible visual and text data like design trends, drawings, photos, and inputs from social media and will generate ready-to-produce garments and accessories in just minutes. By implementing such software, fashion brands can free up designers to focus on more creative and value-adding work, ensuring that the AI-designed clothes will still be meeting their consumers’ tastes.
In search of alternative (raw) materials
Every garment production starts with the sourcing of raw materials. Well, but do they have to be actually “raw”? With the brands focusing more and more on sustainability and efficiency of their value chains, there has been growth in alternative materials usage.
Tech Couture team spoke with the New-York based Queen of Raw, which offers high-quality, sustainable textiles, a so-called ‘deadstock,’ at a discount. Using integration to the brands’ ERP systems, Queen of Raw can identify companies’ unused fabrics and offer them at its marketplace so that other brands can use such materials for clothes production. Another company Tech Couture met was Weturn, which recycles unsold textiles from fashion houses and manufactures them into new quality yarns and fabrics. Customers can choose either to use the recycled thread or to sell it, getting transparency on the source of the materials.
Pangaia, a trendy lifestyle clothing brand that positions itself as a ‘materials science company’ and sells its clothes via TikTok, among other channels, chose the materials from which it produces its clothes as a differentiating factor. Pangaia develops or buys alternative materials that, as the company puts it, “consider the delicate balance between sustainability, functionality and purpose.” And that definitely resonated with its customers, among which many are influencers, during the pandemic.
On-demand production solution
One of the essential decisions that starting brands need to make is how and where to produce their designed apparel. When you are just starting as a brand, you want to test your market first to see if there is enough demand for your offerings and you don’t want to overproduce. There are also brands nowadays (like Nudea in lingerie) that specialize in an unconventionally broad range of sizes, where some sizes are required to be on brands’ stock in very low quantities. Traditional manufacturers, on the opposite, work with large order quantities. A solution to this problem can be efficient on-demand production offered by SLEEVE. The company has an on-demand production management platform and product configuration software that works without minimum order quantities. It allows brands to order only the products they need when they are required.
Sales and distribution: fighting returns and creating circularity
Returns are one of the pain points of online fashion retailers and can seriously impact profitability. One of the reasons customers return apparel bought online is that the size or style does not fit. Many people order the same product in different sizes to ensure the right fit, thus generating a return flow. Tech Couture team saw that the ‘fitting problem’ was a popular one to be tackled by the FashionTech start-ups, but their approaches varied.
Fitle has developed software that leverages Artificial Intelligence to predict customers’ sizes for every apparel based on the customers’ height and weight. The technology can be incorporated into brands’ or retailers’ online shops and can advise shoppers the right size at the point of sales. Mys Tyler took a different approach and created an app where women can get inspiration from other women with similar body types who love to share information about their outfits. Like that, a user can shop the style that she liked and select the correct size.
One more idea comes from Sozie, which offers a solution to brands and retailers to integrate user-generated styled photos of product try-ons to their e-commerce sites to show their shoppers how fashion looks on real people like them.
Another area of innovation in the fashion value chain is the introduction of reusable packaging. By replacing single-use cardboard boxes with waste-free packaging, companies can build closed-loop logistics systems that contribute to their sustainability goals. Returnity provides such a solution to customers; however, the company focuses on use cases when customers already have a platform for circularity in their supply chains, including customers with high return rates (e.g. rental businesses) or with shipments between locations where reverse flows can be controlled, to ensure that the solution is economically viable. And although it will take time for reusable packaging to become mainstream and profitable for all use cases in the fashion industry, the change towards more environmentally friendly solutions in fashion distribution has begun.
Closing the loop and creating more value: fashion rentals and resale
Why make a profit on a sale only once when you can do it multiple times? With rentals and resale models, brands can continue capturing value and maintaining relationships with their customers for much longer.
According to an Online Clothing Rental Market report, the online clothing rental market size is estimated to reach $1,856 million by 2023, growing at a CAGR of 10.6% from 2017 to 2023. And the secondhand market is projected to double in the next five years, reaching $77 billion in 2025, according to Thread.up.
The Tech Couture team spoke with FashionTech start-ups that enable companies to do rentals and resale via their own online shops.
Lizee is a SaaS platform that enables brands and retailers to manage their rental offerings. According to the company, studies have shown that >90% of brands want access to the circular economy but don’t know how to do it because of little or no experience with circular business models, need for a shift in mindset from product to service, and frictions with handling operations aspects.
In the area of resale, the Tech Couture team spoke with Reflaunt, which provides brands with white-label technology and capabilities. Amongst core services, Reflaunt manages end-to-end logistics and distribution to over 25 global secondhand marketplaces while ensuring service quality, preserving the brand’s image, and reducing fraud risks.
The paradigm is shifting in the fashion industry. With the rise of the rental and resale marketplaces and more consumers enjoying fashion this way, many brands and retailers realized that they don’t want to be just observers but also want to participate. And with the propositions of companies like Lizee and Reflaunt that commit to a standard of quality and experience for brands’ customers, rental and resale business models became more accessible.
Brought to you by the Tech Couture team: Inna Kostyuk, Aya Murr and Apeksha Gupta
INSEAD SUMMER STARTUP TOUR 