A circular approach to retailing

fashion supply chains circular retail

A recent article caught my eye as regards to how the sharing economy is extending into fashion. A number of new businesses have emerged that resemble peer-to-peer organisations such as Airbnb and Zipcar. This is where clients rent, rather than own, the use of an asset for a particular purpose.

I am aware that this is not entirely new in the fashion arena, as a number of companies have been working with this business model for a while. But what did interest me was the approach to all of the tertiary operations and processes which have been designed specifically to be sustainable and engender ‘community’ collaboration. Technology has enabled many aspects of this new approach and I think if it catches on, may have some profound implications for how retail supply chains operate in the future.

The central proposition is that high end fashion items are placed on a website (in this case a company called Hurr) and made available for rent. This obviously provides a means for customers to monetise their fashion investments. But the founders of the business realised that their belief in sustainability would also appeal to the community in general and examined every aspect of their business model so that it would operate in a sustainably circular fashion. This is where recent technology has provided the essential mechanisms to make this a reality.

A combination of the central operating platform verifying the lenders and the renters, messaging, tracking and geo location, enables and encourages users to handle the logistics in person, or via the most sustainable route for collection and delivery. At the same time, attention has been paid to the packaging, the cleaning of the garments on return and any related repair services. Again, none of these elements in isolation is new, but in concert with each other. The combination appears to be quite successful with its appeal in the market.

Many of the other garment rental services that compete with them either have similar attributes or could attempt to mimic them. However, it is more difficult to replicate a software platform that engenders clever algorithms to establish and reinforce a sense of community and, most importantly, trust. How this aspect of the business develops may determine their ultimate success or failure.

In broader logistics terms this has major implications for manufacturers and retailers in general. Although the businesses mentioned above are focused on high end fashion, it is clear that for younger demographics, the sharing proposition is more attractive than ownership. There are many reasons for this, but fundamentally, the opportunity to access and experience items that may be way outside a personal budget has appeal.

So if the perpetual acquisition of ‘stuff’ is replaced by a desire to acquire items that last a long time and can be ‘shared’, the supporting logistics models will have to adapt. This poses a number of questions…

  1. Will retail outlets become rental ‘hubs’ providing a range of fulfilment, repair and maintenance services? This is not too dissimilar to how some operations work now, but with perhaps a greater emphasis on a large number of locations, very close to the customers? e.g. Re-purposed shopping malls or revitalised high streets. Even if this means losing some of the operational efficiencies of centralised distribution?
  2. Will delivery services have to develop operational systems that can be tapped ‘on demand’ at a local level, very similar to the hailing of a taxi or an Uber? The emergence of local networks of autonomous vehicles would fit nicely into this concept, especially if they are self-organised according to a smart contract operating on a blockchain?

The other trend that will play nicely into this scenario is recommendation. Social networks created around specific commercial models are very powerful in being able to influence users towards a particular product or service. As more people use these fashion rental services, the growing accumulation of data related to buyer profiles, taste and budgets will feed AI driven recommendation algorithms. Alongside recommendations from the platform itself, as they expand their geographic reach, personal recommendations from users will come from other parts of the world. If this trend gains traction, it will also require imaginative logistical operations as part of the solution.

Fundamentally these peer-to-peer services have emerged due to the seismic shift in many sectors of society caused by technology. The ability to access almost anything, from anywhere, at any time, has forced a reset in the way people perceive access to physical products.

Navigation through this world of unlimited choice requires curation of some form, underpinned by some form of trust mechanism. Social networks have provided a means to engender trust irrespective of geography, albeit not entirely immune to manipulation.

As the younger consumers of today bring their own value systems to bear on the market, how products are sourced, manufactured and their ownership models, will force changes on existing logistics and fulfilment processes. This transition may happen very quickly and if it does, it will not matter if advanced analytics tell you your fulfilment and distribution model must change if your physical operations cannot adjust fast enough. Operational agility and flexibility may become priceless assets.

Source: Transport Intelligence, November 26, 2019

Author: Ken Lyon