Measuring the State of Circularity in the UK Fashion Industry
Executive Summary
Part 1
16
Introduction
Part 2
Part 3
Conclusion
Making the business case stack up
Rallying brand support
Fashion retailers must balance a variety of interlinking pressures that continuously test efficiency, profitability, sustainability and ethics. The continued migration to online shopping exacerbates challenges for brick-and-mortar-focused retailers, while influencer culture and social media generate demand for even faster fashion. At the same time, economic instabilities threaten supply chains across industries and markets. For circularity to be successful, it must be supported across all areas of the business. Leaders must be confident that initiatives can meet the pressures of margins, marketing, operations and people, and build ongoing momentum.
Businesses need to drive customer buy-in by aligning circular initiatives with their brand proposition – but are facing four major barriers: o The newness conflict. In a crowded market, businesses must prioritise newness and are less incentivised to promote circularity at the expense of higher margin sales. o Authenticity. Brands struggle to navigate how, when and where to communicate initiatives in alignment with their image and in ways that resonate with customer priorities. o Low return on investment (ROI). The cost of additional marketing and PR makes the financial margins of circular initiatives even more limited. o Fear of greenwashing. Watertight sustainability claims are difficult to make due to variable definitions across the industry and varying legislation across geographies. Marketing is closely scrutinised for misleading claims, which can lead to reputational and financial damage. This is having a greenhushing effect on the industry as a whole. Marketing and PR teams can play a pivotal role in circularity messaging and publicity, but engagement is low; just 29% of retailers have accessed marketing or PR support for their circular initiatives, and only a third (33%) said they’d like further support in this area.
Generating a competitive and stable margin is many organisations’ biggest challenge.
Rising material and operational costs are already putting pressure on both top- and bottom-line measures, and many businesses cannot afford the additional costs or risks associated with implementing new models. And, although a fifth (20%) of respondents say they had accessed operational support, inefficiencies are still viewed as a “leaky bucket” for financial sponsorship and increased lead times to profitability. This perpetuates a loop, where siloed initiatives and pilot phases aren’t benefiting from economies of scale and are consequently struggling to make an impact. Revenue opportunity and customer participation are the most tracked KPIs, but customer demand is inconsistent. There is a disconnect between sentiment and behaviour, and shoppers are not yet willing to pay a premium for circular products, forcing retailers to price competitively. To break this cycle, the fashion sector needs to create more pull factors using marketing, education, alignment with customer needs and market- wide interventions to facilitate behavioural change. And there’s an appetite for regulatory support; retailers perceive government intervention as the biggest enabler to circularity, and feel like existing measures aren’t enough. Seven in 10 (71%) want more financial incentives, but just 10% report receiving any to-date. Only 2% of organisations have so far been impacted by government regulatory requirements, whereas 52% of organisations stated that government regulatory requirements would further support scaling.
Overcoming these challenges is necessary for building external support, and collaboration is the key to devising clear messaging frameworks.
Credit: Ancuta Sarca
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