Insights
2022 Round Up 5/5: Alternate Revenue Channels
With growing expectations around sustainability, brands are looking towards alternative methods to grow revenues without increasing production. Some of the most popular have been circularity and paid memberships.
Circularity has been one of the hottest topics in the apparel industry over the past few years and it seems as if almost every brand from fast fashion to luxury is getting involved in the market. The resale market has been predicted to grow to twice the size of fast fashion by 2030. Brands that offer their own resale grew from 8 to 30 from 2020 to 2021, platforms that manage resale like Vestiaire Collective and ThredUp have significantly grown both their inventory and funding, and the rental market is making a recovery following the COVID slowdown.
A key component for the success of circularity is the production of high quality items. A criticism for fast fashion brands that are trying to offer resale, aside from greenwashing, is that the quality of the items which are typically designed to be worn only a handful of times, are not suited to be resold. On the other hand, in luxury markets, brands like Chanel are looking to limit purchasing to prevent resale and maintain brand equity.
The rental market also faces challenges as platforms try to reach profitability. Given rental is a logistically intensive and often seasonal business, centralised platforms that operate across geographies and product categories have struggled to scale. Several rental companies have either pivoted or expanded to offer white label services to power rental at larger companies.
While resale and rental both face challenges as they grow in their respective categories, the interest in circularity is hopeful progress as the fashion industry reckons with the realities of the environmental damage caused by overproduction. While many companies are in the early stages of building these into their operations, the fact that so many are trying is promising for the future of the fashion industry.
Over the past few years brand loyalty has also taken a new form as paid memberships. Brands like Fabletics operate VIP programs where paid members ($60USD per month) receive 20-50% off all styles, early access to products and sales, and cash rewards. lululemon recently announced a two tiered membership program. The paid tier which is tied to the lululemon studio mirror offers access to workouts, product discounts, partner studio discounts, and access to events.
This is being taken a step further through the world of web 3.0 and decentralised autonomous organisations (DAOs). DAOs are entity structures where tokenholders (paid members) own the portion of the company that their token represents and can participate in management and decision making. The tokens, which often take form as NFTs, are exchangeable and can change in value.
Degrowth brand Early Majority is an early adopter of this structure in the fashion industry. They are focused on creating the fewest products possible by ensuring that what they do make is designed to last. The DAO structure is designed to forge deeper connections across the community through shared vision and ownership. The brand is even anticipating that the membership fees will eventually contribute more to revenue than product sales, setting an interesting example for brands looking into similar opportunities to grow while producing less.
Photo credit:
Early Majority: Fashion's First Degrowth Brand
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