Circularity is more than just the fashion industry’s latest buzzword. It’s a strategic approach that, when executed properly, can transform your business model. But is your brand ready to manage the operational complexities that come with it? In this Beyond Threads webinar, Hans Robben, our Program Manager for The Renewal Workshop, shares his expertise on how to optimise your operations and build effective circular business models into your supply chain.
Operating an efficient circular model
If you watched our previous webinar– featuring Nicole Bassett, Circularity Lead at Bleckmann – you’ll know what we mean when we talk about circularity. On a practical level, it’s about extending the lifecycle of garments and reducing waste. And the overall goal is to create a model where materials are reused and repurposed, reducing the need to extract virgin raw materials. In this latest webinar, Hans explains the steps you can take to implement circular business models in a way that’s practical and profitable.
Tackling returns with circular solutions
One of the common difficulties faced by many fashion brands is high return rates. This is particularly complicated when returned items are damaged or dirty. Implementing circular operations like repair and cleaning can help to minimise losses by ensuring that a higher quantity of returned items can be resold or repurposed.
In the webinar, Hans highlights the importance of pre-sorting items and conducting strict quality control checks on inbound shipments. “By identifying early on what can be cleaned, repaired or repurposed, damaged returns can be directed more quickly to the appropriate step in the warehouse’s circular process,” explains Hans. “Organising these operations as efficiently as possible helps brands turn returned products into valuable, re-sellable items – a key driver of both sustainability and profitability.”
Finding the right circular solution
Approximately 50% of damaged returns can be restored to their original condition and returned to stock. Brands can still generate revenue out of the other half instead of considering them waste. “The majority of these items can be brought to good quality levels for resale and recommerce through circular operations. Brands should take advantage of the many options available, whether it’s branded online re-commerce platforms, in-store resale or third-party platforms”, explains Hans. “The market for renewed products is growing rapidly, with more and more consumers embracing sustainable fashion choices.” Building on these circular operations for damaged returns brands can in a next step also start a trade-in program to get worn items back from their customers. These can be brought back to the highest value possible using similar circular operations and sold through the same resale channels.
By looking to circular models, brands can not only generate additional revenue but also build their reputation and brand loyalty among an increasingly eco-conscious consumer base.
Whether you’re new to circular fashion or looking to take your next steps, check out the full webinar for actionable insights to help you optimise your logistics for circularity.
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Transcript
Welcome everybody, to our next episode of the Beyond Threads webinar. I'm Hans Robben, within Bleckmann Programme Manager of the Renewal Workshop. And with the Renewal Workshop we take care of all the operational activities needed to keep fashion items in continuous use. In recent years, circularity has become more important within the fashion industry. And circularity is not just about sustainability. It's also about extending the lifecycle of the products to reduce waste and ultimately to drive profitability.
If you joined us in the previous webinar, you know we talked about circular fashion. In this webinar, I will be focusing on circular operations. I will provide more detailed insights into how the operational and logistical set-up for circularity is different from the set-up in the traditional linear take-make-waste supply chain.
First of all, I will give a pragmatic definition of the concept of circular operations to avoid misconceptions. Then I will be looking into the business models that are being supported by these operations. And we will also dive into the detailed operational activities that are done within a circular operational model.
Then I'll point out why these operations are so crucial for the success of circularity in fashion.
And I will close with a couple of challenges that you might face when you set up a circular operation. We can't talk about circular operations without looking at where we're coming from:
The traditional linear take-make-waste supply chain. We take resources from our planet Earth, we make fashion out of them we use it typically only seven times, before we then throw it away. It's very simple. We have become very efficient in it over the past 100 years. But it is also very detrimental to our planet Earth. So you might think: Let's just close the loop and make a circle out of it. Then we have circular operations, right?
But that's obviously not enough. We need a paradigm shift. We need a paradigm shift to keep fashion items in continuous use. Our primary goal in this paradigm shift is to extend the lifecycle of the products we use to reduce the need for virgin materials when making these products and ultimately to limit the waste.
These are ambitious goals, but they are also achievable. In order to achieve these goals we need an operational model, operational practices to keep fashion items in continuous use. And the keyword here is: continuous. Continuous is very different from the current situation in which we only use our fashion items, our pieces of clothing, seven times before we throw them away.
Of course, an operational model cannot exist on its own. It always supports a business model that serves a customer need. And in order to understand the operational model we need to also understand the business models behind it. So let's dive into these business models for a moment.
Let's start with arguably the most-known business model in circularity:
Resale and recommerce. In this, fashion items are being traded in by the customers and are being renewed so they can be sold again. Either in physical stores in a resale programme on branded recommerce sites, peer-to-peer sites marketplaces, et cetera.
A second business model is rental. It's pretty obvious: You don't buy the clothing that you wear anymore, you rent it. And you can rent it for a limited period of time or in a recurring fashion in a subscription model.
Remake is also a very exciting business model. With remake, brands design and construct new items based on the parts and components of multiple defective items. This is a very creative collection and often also contains very collectable items.
A business model that has been around so long that it's become trending again is customer repair. In this, brands enable you, as a customer, to send damaged items to them. They repair it, and send it back to you as a repaired item. This is basically the same as going to your local repair shop but then with an added layer of convenience.
And then I would like to mention a business model that is gaining a lot of traction recently. And that is the one of repairing damaged returns. We know that the fashion industry suffers typically from high return rates. Twenty, thirty per cent is no exception. And an important part of these returns are damaged. You can tear off a button when you try on a new shirt, or a seam can become undone. And so the return arrives damaged at the warehouse. Now, these items are mostly put aside and stockpiled separately in the warehouse and then ultimately they are discarded. What we see, is that up to fifty per cent of these damaged returns can be brought back to a new state and can be sold as a new item at the original value of that item. Definitely worthwhile looking into.
At the core of these business models lie operational capabilities to keep these items in continuous use. And until now, we've been pretty abstract about circular operations so let's dive into the details:
What operational capabilities are we talking about exactly?
Let's start with the most obvious one: cleaning and repairing an item. An item that has a loose button, or a seam that becomes undone or a ketchup stain, or a zipper that is broken. Repairing and cleaning these items either through spot cleaning or a wet wash or an ozone treatment is all very much at the core of renewal activities of the circular operational model. But before you can repair or clean an item, you also need to know what needs to be repaired or what needs to be cleaned.
So you need to do a quality control on each item. That means that you have to look thoroughly: Where is it damaged? Is it damaged in the first place? Where is it damaged? Can we repair it? What flow does it need to follow in the operational process? And before you do a quality control you also need to create a data record of that specific item. A data record to be able to log where it was damaged.
And also: What is then the treatment that you are giving this item? And not only that, you also need to log the product data of that specific item. Oftentimes, consumers cut out the care label of the product and you don't have an identifier anymore on that piece. Then you need to recreate the product master data.
Shirt, blue, long sleeves, male, XL. For example. This all gets stored in that data record. And before you can create a data record, you need to identify each piece uniquely. So incoming piece get a unique identifier to be able to track this piece uniquely throughout the entire process. And to also present the data of that specific item to the consumer that wants to buy this item.
Now, before you go on to do all these steps and invest all this time in that specific piece you might want to do a pre-sort where you already take out those items of which you know that they are beyond repair and will have no more commercial value after you've tried to renew them. So this is already a bit more complex than just cleaning and repairing, right?
And it doesn't end there. There is also, in certain business models the need for specific photography of each item that you repair. For example, in recommerce online often, brands want to see a specific picture of that specific item. That also means that, in your operational flow you need to take three to five pictures of each item that you're handling. And then lastly, of course, often these items get a specific packaging to highlight that they have been repaired or are part of a specific renewed category or collection.
So why is it so important to talk about circular operations? Because circular operations are really at the core of the business models they also drive the profitability and the success of these business models.
And let's look at the first key success factor. The first one is effectiveness. How effectively can you repair and clean an item? If only a minority of the items can get repaired and cleaned there is very little impact that the brand is reaching. There is not a lot of inventory available of renewed items customers do not find what they want, and the model doesn't work.
Secondly, we can look at efficiency. You have already seen the different steps involved in circular operations and you realise that they take a lot of time. And a lot of time means that it is a costly operation. And part of this is driven by the fact that fashion items are not designed and constructed for repair. They are designed and constructed to look nice and to be durable but not to be repaired and repaired again and repaired again. And this drives the time you need to spend on repairing and cleaning a fashion item. We do see already some initiatives of brands to increase the design for repairability. But they are few and far between.
And lastly, let's look at quality as a key success factor. If the quality of a repair done is not in line with customer expectations then he or she will not be willing to pay for the repair. This will, of course, drive volumes as well and drive profitability of these business models. So quality is a critical factor in the success of circular fashion. I pointed out three key success factors of circular operations.
Now we will look into some challenges that you might face when you start a circular operation.
First off, everybody knows that the fashion market is a very diverse market. It's diverse on the front of product categories. We're talking about clothing, shoes, we're talking about luggage items, accessories, et cetera.But we're also talking about different materials being used. We're talking about different trims being used. And we're talking about different types of stitches being used. All this diversity leads to specific skills and specific equipment needed to be able to do a repair or a cleaning of these items. And this, of course, drives the complexity of your operational flow and hence, also the cost.
A second challenge that you're facing is the lack of an industry standard on quality. What constitutes a new item? What constitutes a like-new item? What is slightly damaged? What is a heavily damaged item? There is no alignment within the industry on this. And each brand is trying to define these levels on their own. This leads to complexity in operations on the one hand but also to confusion for the customer on the other hand. So what if we could design an overarching quality system based on a very precise classification of the location of the damage the functionality of the item, the visibility of the damage and also the different steps that it has gone through in the operational flow?
We can get inspired, for example, by machine parts, like nuts and bolts of which the dimensions have been standardised already for ages which makes them interchangeable all over the world. The last challenge I would like to point out is the fact that circular operations often need a single SKU flow. That means that each item that's coming into the process needs to be identified as a unique item. You need to know if the blue shirt has a hole on the left sleeve or the similar blue shirt has a stain on the right sleeve. You need to know this to be able to do the correct process steps on it but also to inform the customer about the quality of the item. This uniqueness within the process is very different from the traditional supply chain. And it drives complexity both in process and systems.
We've come to the end of the webinar. I've talked about circular operations and how they are at the very heart of circularity and fashion. How they drive the success of these new business models and also what challenges we are facing in making them work. I hope you found it useful and I hope to see you again in the next webinar.
