The clothing and fashion industry has been going through a shake-up for some time now. The rise of e-commerce, which in 2020 accounted for over a quarter of retail shopping, is widely cited as the main catalyst of the ongoing change. Online shopping has added a new variable to the mix and it has seen a few of the traditional big high street fashion and clothing chains, Next and JD Sports deserve honourable mentions here, strengthen their position.
Traditional clothing and fashion chains and brands to have flourished are those that have successfully combined their bricks-and-mortar high street and retail centre stores with a strong online offering. Done well, the evidence suggests hybrid physical and e-commerce retail operations can become more than the sum of their parts with the two sides to the business strengthening each other.
Others have struggled to get to grips with e-commerce and have lost market share. For some, Marks and Spencer springs to mind, there is still a strong enough core business and belated drive to crack e-commerce, to mean a bright future could still be achievable.
For others, Philip Green’s Arcadia Group which included brands like TopShop, TopMan, Miss Selfridge and Dorothy Perkins established over decades on the high street the prime example, it’s already too late. Arcadia Group entered bankruptcy this year and the brands picked from the carcass.
Illustratively, the Arcadia brands have been divided up among e-commerce buyers who are shutting down the physical stores and transforming them into online-only businesses.
Online fashion firm Boohoo acquired the Burton, Dorothy Perkins and Wallis brands, including intellectual property and inventory for £25.2 million in cash. Boohoo wasn’t interested in the 214 stores.
Boohoo’s online-only fast-fashion competitor Asos acquired the Topshop, Topman, Miss Selfridge and HIIT brands plus stock for £265 million. It also wasn’t interested in the stores.
Both Boohoo and Asos were built from the ground up as online fashion retailers targeting young adults. They, along with others like Misguided, are the heirs to the big high street fashion retailers.
The cultural divide – fast fashion vs ethical and sustainable clothing
The likes of Boohoo and Asos have been very successful at the expense of traditional high street rivals who were unable to adapt to a changing retail fashion and clothing environment. But big, online, fast-fashion companies selling cheap clothes, footwear and accessories made to be worn for not much longer than a season are not the only companies to benefit from changing consumer habits.
Fast fashion has proven profitable in an era dominated by social media influencers with armies of followers keen to mimic their example of a fresh outfit or ensemble for every picture posted on Instagram or TikTok. But it is also attracting plenty of criticism.
Cheap clothing that is often only worn a handful of times before going to landfill is an environmental problem. Making these garments and getting them into the hands of consumers overhauling their wardrobes every few months has an environmental footprint that many fear is spiralling out of control.
There are also ethical concerns around how fast fashion garments are made. Keeping prices down for the end consumer means keeping costs extremely low. Using cheap materials is one way to do that but so is keeping labour costs down. That’s already seen Boohoo engulfed in scandal after it came to light garments made for the retailer were being manufactured in Leicester factories employing illegal immigrants at salaries far below the official national minimum wage or working under illegal conditions in unsafe premises.
The company more or less wriggled out of the scandal because the factories involved were sub-contractors to those Boohoo had direct contracts with and ignorance was pleaded. Not many are convinced Boohoo will have been as shocked and surprised as the company claimed that such issues existed along its supply chain.
Chinese rival Shein, which has moved aggressively into the UK market to challenge Boohoo and Asos represents an even ‘faster’ version of fast fashion. Shein churns out 6,000 new items every day, six times more than Asos, and they are cheaper. The company’s supply chain is much murkier than even Boohoo’s was. There are unconfirmed whisperings of the Chinese labour camps widely believed to exist in the vast country’s industrial hinterlands.
Like Western consumers throughout the years, most fast fashion buyers avoid thinking too deeply about the environmental or social impact of their retail choices. But there is a growing group of consumers that do mind. They want to buy clothing and footwear they feel confident are high quality, environmentally sustainable and socially responsible. And are willing to pay more for it – usually arguing paying more for high-quality items that will be worn over years, rather than constant wardrobe churn, saves money in the long run.
The ethical fashion market’s value – 2015-2030
Market research firm Research and Markets estimate the global ethical fashion market was worth $6.3 billion in 2019, having benefitted from a compound annual growth rate (CAGR) of 8.7% since 2015. CAGR of 6.8% is expected to take the market’s value to $8.2 billion in 2023 before the growth rate picks up again to 9.1%. That would see the ethical fashion market’s value top $15 billion by 2030.
Most ethical and sustainable fashion brands have also grown online with the move to e-commerce and the decline of big high street names opening up opportunities just as they did for fast fashion.
However, while the price-sensitive nature of fast fashion means it is a natural fit for larger players, the ethical fashion market is extremely fragmented, with a large number of small players in the market. While some bigger companies are likely to develop over the years, most likely by acquiring a number of brands under one umbrella group, the nature of the ethical and sustainable clothing market would seem to suit a fractured market.
That does, however, make investing in the ethical and sustainable clothing market more of a challenge for those who would like exposure to a quickly growing industry. But a growing number of ethical fashion brands are now reaching the scale that is allowing them to become public companies.
Allbirds, the sustainable wool footwear brand that is also a certified B and public-benefit corporation, enabling its board to balance generating returns for shareholders with conserving the environment, recently filed for a U.S. listing. The company has said it hopes to pioneer a framework for the first “sustainable public equity offering” – a process that it set up with an adviser to show that it meets ESG criteria.
Revolve Group, which sells a “curated selection of products that are carefully crafted with the environment in mind, making it easy for you to shop more sustainably”, went public through a 2019 IPO and trades on the New York Stock Exchange. Its share price has done very well for investors over the past year after a tough first several months as a public company.
However, while we can expect to see many more sustainable and ethical fashion brands go public in coming years, most are still private which limits investment options. One route to go down is to participate in crowdfunding campaigns or, for higher net worth individuals, as an Angel Investor through tax-efficient schemes like the UK’s government-backed EIS.
Another, lower risk, option is to support larger established brands that show commitment to sustainable and ethical fashion. Levi’s jeans are one example, and H&M’s Conscious line has been well received.
There are currently no thematic funds dedicated to the sustainable and ethical fashion sector, however, some general ESG funds may have holdings in sustainable fashion brands.
This article is for information purposes only.
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