Examples of Strategic Sustainability

February 21, 2019

Examples of Strategic Sustainability

 

           Sustainability is a buzzword that can mean a lot or very little.  For some retailers it is merely a marketing slogan.  For others, it is fundamental to who they are. Most retailers exist somewhere in the middle.  As do many consumers.  But it is increasingly important for Millennials and Gen Z who proactively consider a company’s environmental impact when making purchasing decisions. Seventy-two percent of consumers say they prefer to buy from environmentally friendly brands – a fifteen-point increase in the past five years.[1]  

There are several types of sustainable trade-in programs in use by retailers today.  

 

1.    Subscription model.

 

Subscription retailers offer sustainable benefits by enabling garments to be worn by multiple customers, for example StitchFix or LeTote.  They send customers curated boxes of clothing on a regular basis.  Users like the ability to show a steady stream of new looks on social media and easily return them for a new item when they’re ready. However, they complain about the quality of the items.  They also dislike the pressure to remember to return unwanted items and manage their accounts.  They equate it to borrowing a library book and stressing when it’s due and you can’t find it, or paying damage fees that are double the value of the item to you when you mistakenly spill coffee on it.  

 

Some shoppers miss the treasure hunt aspect of shopping on their own and continue to search for special pieces and unique wardrobe items beyond what these subscription boxes provide.  In these cases, they serve as complements to, rather than replacements for, traditional shopping.

 

2.    Rental model.

 

Clothing rental providers such as Rent the Runway or Caastle, offer another option for customers to access fashion without having to hold onto it long-term.  With Rent the Runway customers can find something special that they might not be able to afford to buy, but is attainable for a weekend rental. Caastle’s rental process allows buyers to rent items from their favorite brands.  The ability to wear and returnitems has appeal to many, but the process requires active management and tracking to ensure that rentals are returned on time and in good condition.  It also requires a comfortlevel with wearing items that have been previously worn.  

 

 

3.     Trade-in model.  

 

Patagonia is a pioneer of buying back used gear from customers.  They seek items in good condition and offerdifferentiated values based on the type of item being returned.  They clean and refurbish the clothing and offer items for sale as “Worn Wear”.  

 

           Customers can bring items in as they are ready to offload them and get money for repurchasing.  While this program truly embracessustainability at the end of the customer lifecycle, there are opportunities to increase the strategic value.  If Patagonia used data proactively to pull these items back in, they could more strategically manage their resale inventory while engaging customers by delivering incentives in a more personalized way.  They could proactively manage inventory this way and promote sales of targeted items.

 

When it comes to personalized sustainability, three industries have been leading the way:

 

·     The auto industry conducts personalized trade-in campaigns today.  Based on the specific model you have purchased and when you have purchased that vehicle, you receive a monetar yoffer to exchange it for a new vehicle.  

 

·     Electronics retailers conduct similar campaigns. Gamestop, for example, might offer customers who purchased specific games at specific times, a specific dollar amount to return that item and purchase something new at their stores.  

 

·     Sporting goods retailers were early adopters. Both niche players like ski shops and golf outlets as well as broader sporting goods retailers, such as Play It Again Sports, often have mechanisms in place that enable customers to return their past purchases for store credit towards a new purchase.  

 

Rohvi’s retailer trade-in platform offers personalized sustainability to all retailers.  It embraces commitment-free ownership without impacting the upfront buying experience.  Customers shop as they normally would and  receive offers from the retailer in subsequent seasons to exchange the item purchased for store credit.  Customers get all of the benefits of ownership, with an option to hand it back in the future.  Retailers control what offers are extended, when, and to whom, so they are viewed as invitations rather than requirements.  

 

While these are examples of approaches that are both sustainable and strategic, therea re sustainable efforts that are not strategic.

 

1.     “Drop-offs for Discounts”

 

Bring any unwanted clothing items to H&M and get 15 percent off.[2]  Drop off your old jeans at Madewell and get a$20 gift card.[3]  Return gently worn Eileen Fisher clothing for $5 in Renew Rewards.[4]  These programs are an easy way to offer a sustainability narrative.  But these drop-offs have drawbacks.  

 

           Retailers complain about the dissonance of having customers carrying trash bags of used clothing through the stores.  Managing the accumulation of these deposits and disposing of them properly is a burden on the sales staff.  Collection bins take up space in already crowded storage areas.  

 

           Customers assert that they often forget to bring the items when they walk in the store or that they drive around with them in their cars for weeks until they wind up dropping them off for a donation.  This results in frustration at time of purchase.  The items they do turnover frequently are those that are not worth anything.  Items with any value are parceled out for resale.  In effect the collection bins instores act as trash heaps.  These programs offer a minimal amount of repurchase motivation.  

 

2.     Partnerships with Resale Sites.

 

Another approach to recommerce participation is for retailers to participate in partnerships with resale sites.  Stella McCartney and The Real Real are an example. Consigners of Stella McCartney branded items on The Real Real get aone-time $100 gift card towards a Stella McCartney purchase.[5]  The Reformation has a similar partnership with ThredUp where instead of getting cash for items, sellers get Reformation store credit.[6]  

 

These partnerships strengthen the sustainability position of the retail brands by focusing on clothing that can be resold and re-worn.  By leveraging online re-sellers they keep the processing of recommerce items out of their mainstream operations.  

 

Introducing customers to a branded resale site creates a different set of issues for retailers.  Customers are now handed over to a two-sided marketplace.  The RealReal and ThredUp, for example, are looking for both sellers and buyers.  Once a customer interacts with one of these online resale marketplaces, they become their customers too.  Sellers are actively marketed to as buyers.  The growing popularity of these online resellers has put them under significant pressure to attract shoppers.  With these partnerships retailer sare handing over more than just customers – they are giving competitor marketplaces valuable data.  As these sites deepen relationships with retailer customers, they learn what other brands they buy, how long they use their items, etc.  This information is valuable to the origina brand partner.  

 


[1] ThredUp Resale Annual Report2019

[2] www.hm.com/sustainability  

[3]www.madewell.com/inspo-do-well-denim-recycling-landing.html

[4]www.eileenfisherrenew.com

[5]www.promotion.therealreal.com/stellamccartney/

[6]www.fashionista.com/2018/10/thredup-reformation-clothing-recycling

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