Ep 175: Exploring fashion rental and resale with ACS and SuperCycle

[00:00:00.400] - Emma Elobeid Welcome to the Circular Economy show brought to you by the Ellen MacArthur Foundation. I'm Emma and in this episode I'm joined by guests Andrew Rough, CEO of Europe's largest circular fashion hub, Advanced Clothing Solutions, ACS, and Ryan Atkins, co founder and CEO at SuperCycle, a circular commerce platform that offers brands the chance to do rental and resale natively on Shopify. As enablers, both ACS and SuperCycle provide services which make the circular economy easier, smoother and ultimately more doable for brands and retailers. Together, we'll be discussing the economics of circular business models, the different physical and digital infrastructure requirements needed to make them work in practice, and how collaborating with different partners can help to ease the entry burden for brands who are keen to start capturing circular value for themselves. Andrew and Ryan, thank you both so much for joining us today. Andrew, I wonder if I can come to you first. You've been in the circular fashion business for kind of 25 years and I think you can probably safely wear that first mover badge with pride. I'm just wondering, interested to hear from you some of your reflections on where you've seen the increased recognition of that big economic opportunity in circular business models over the time that you've been in business with acs. [00:01:37.590] - Andrew Rough Yeah, thanks very much for allowing me to contribute today. Yeah, I feel like a bit of a old timer at this, but hopefully we're still keeping active and moving forward. Yeah. Fundamentally, circular fashion solutions allow brands to enhance their profits. That's basically what they should be doing for their shareholders. And they can achieve that by offering their customers different ways of interacting with fashion, whether that is resale or whether that's rental. And then you can break down rental into one time rental or subscription rental. But basically they all come down to the fundamental basics of utilising the assets that a brand carries. And we are very much of the view that fashion items should be and viewed as a long term asset of a brand rather than the traditional linear model of buying fashion items and then selling them on to the customers. We believe that everyone should look at it differently, allowing customers to interact with fashion different to the traditional way that they have done that. And that is very much able to be achieved by brands enhancing circular fashion. This isn't just about being more sustainable and being environmentally positive is about enhancing the profits of the brands that we work with. [00:03:08.480] - Emma Elobeid And we see from some of our modeling this figure that circular business models for fashion represent a $700 billion opportunity for brands. And that's really huge, isn't it? But I think what you're saying is it kind of boils down to quite a common sense view of the ability to make revenue from use, from actually less products in use over a longer period of time. And that seems kind of almost the common sense commercial choice. Is that something that you would. [00:03:43.280] - Andrew Rough Yeah, yeah, very much so. I know that obviously the EMF has done a huge amount of work in this area and identified that we're overproducing and a lot of those items that are produced don't end up being sold. Circular solutions allow those elements of fashion to be repurposed and introduced to new customers. Because that's really important for brands as well. Because a lot of brands that we work with, individuals might not necessarily be able to buy new product from them. But circular fashion allows them to get access to these items, items by. Through rental or resale. We talk a lot about pre loved or resale, but fundamentally they're similar to rental. It's just providing different ways of a brand interacting with their customer and allowing the customer who has aspirational choices and might not necessarily be able to afford to buy something new, but they still want to look good. Fundamentally we all like waking up in the morning and putting on something good to feel good about ourselves. And that's what fashion is all about. And you don't want to feel guilty about that. That's. We're constantly in the press about how there was so much waste in the industry. [00:05:10.650] - Andrew Rough There's lots of imagery shared with us which is really quite upsetting and we need to change that. But it's not because we need to change it by cost, it's because we can change it, allow everyone being enhancing their value of their brands and also benefiting their shareholders. [00:05:29.790] - Emma Elobeid And I think what you were saying there as well is that customers are already there. You know, like the, the cultural, the kind of appetite for it, the desirability of it is already being proven. And you know, do you feel like at this point maybe brands almost need to catch up to that kind of desirability that's already out there in consumers? [00:05:53.740] - Andrew Rough Yeah, very much so. If you look at the second hand or the resale market, it's really been driven by the resale marketplaces. So your likes of Depop or ebay or Vestaire Collective, they're the ones that are growing this area. It isn't the brands generally. There are specifically some brands that are recognizing this and they're creating their own marketplaces. And that's really exciting because the brands that are creating their own marketplaces are managing how their brand is delivered to their customers and potentially new customers, they can control authenticity of the product that's on display as well. The issue that you have with the likes of general marketplaces is that it's a lot of individual sellers that are on peer to peer selling from one individual to another. That transaction misses out the brand completely. If I sold a jumper to Ryan on Depot, then the brand doesn't benefit at all from that transaction. So the brands are missing out on that secondary third or fourth income. But the good smart brands that know that they have to interact with customers differently are very much joining this journey and they're joining it now. We can see that the growth in the resale market of white label platforms is growing quite exponentially and the UK is catching up with the US but it is happening and some of the resale programs in the US are significant and it's really quite exciting to see that the growth that they're achieving there and it's just a matter of time before other brands start offering that in the UK and Europe and we're perfectly aligned to be able to support them with that. [00:07:43.290] - Emma Elobeid That's great. Thank you. Andrew and Ryan, if I could come to you quickly as well because you must have not only seen kind of like the big opportunity in the circular economy as a whole, but also the very specific economic opportunity to be an enabler, a kind of service provider as well a partner to help brands get in on this circular economy opportunity kind of what's your sense on the direction of brands seeing that opportunity more and more? [00:08:16.240] - Ryan Atkins Yeah, so my, my background has always been working with merchants. So last decade I've spent helping merchants so go from E commerce being an experiment for them to being, you know, their primary, if not their only sales channel. And I see that same transition where circular will be ubiquitous. And I think we're just at the start of the, the mainstream shift to that. And I think it's, it's two things and I think Andrew articulated these very well. One, it's that opportunity to unlock new revenue that whether it's the aspirational customer, whether that's someone that's environmentally minded, whether it's someone that just wants to wear different things for different events and kind of always be expressing themselves with something new. So there's lots of opportunity of just why people would want to engage with circle models, rental or resale and then the other one which is coming in and I would say it's kind of a double edged sword with things like Depop and ebay. They've really moved the circle of models forward. And the adoption of circle models are so much greater because of them. But if we distill it down to the brand's point of view, they're in a situation now where their customers are actually becoming their primary competitors. [00:09:35.350] - Ryan Atkins Their own products are being sold by their customers and those brands aren't seeing that. And it's a complicated dynamic that you need to navigate then when your customers are now the people which you're competing with to sell your own product. And I think circle models really address both the opportunity to, you know, unlock new revenue, but also the opportunity to protect against this new way of losing revenue. [00:10:04.400] - Emma Elobeid Yeah, and because you're, you both help brands get started on the circular economy journey, but in slightly different ways. So there's, we know for example, that one of the key barriers of entry, that kind of, you know that there's an entry burden, there's like a transition friction, like it's hard to get started, it's completely different way of doing business. And there's so much operational complexity for brands that haven't yet explored circular economy business models. And I wondered if you could kind of walk us through in quite a concrete way the different ways in which you both help brands on that journey. So Andrew, I think, you know, what ACS do is everything to do with the journey of the physical product in a circular model rather than a linear way. Are you able to kind of help us understand that? [00:10:56.930] - Andrew Rough Yeah, I would say that it isn't complex. I think that people think it's complex because it's new, but it isn't really new. It's just utilizing assets in a different way. If you think about the traditional model that many fashion brands and retailers follow is that they have a front end tech platform that interacts with their customers. A customer places an order and then it's shipped from the DC or the warehouse. And that that brand has and that could be outsourced to many three PL providers. And if you think about that traditional linear model, it's basically the same in a circular model. You have a tech platform that the consumer interacts with and then behind that you'll have someone like ACS that supports that tech platform. The difference is that ACS is very much focused not on items going out, but focusing on the longevity of the garment, keeping the clothes in circulation. So if it's a rental model, we always want to get the item back. And then when it comes back into our warehouse, we inspect it, we clean it, we repair it, we sanitise it, and get it ready for the next customer. [00:12:12.700] - Andrew Rough If it's a resale model, we receive inventory from brands that we support and then we work on those items and we clean and repair them depending on what needs to be done to the item. And then we will then allow them to be then advertised or marketed to consumers either through photography or listing them on, on the platform which the brand wants us to interact with their customer. So I do feel that there is a lot of uncertainty, but it's just an educational piece if you break it down. Ryan. I work together and support various brands and it's a very easy operation. We take a lot of the load away from the brand to follow the traditional model that they have at the moment with the linear offering. [00:13:11.230] - Emma Elobeid And the offerings are also embedded alongside their current model. Right. So over time they can see how the market demand is shifting and they can kind of gage how appetite is increasing. Right. [00:13:27.710] - Andrew Rough Yeah, it's a really exciting point. Technology has come on as, as we all expect it to. It allows customers of certain brands to interact with those items differently. So you could purchase it in your basket, you could rent it, or you could buy and pre loved items in the same basket exit. And I think that's fundamentally a really good shift and that's been achieved probably over the last 12 months. And it's really exciting because it's allowing people to have choices on how they want to interact with items that are displayed on a website. And fundamentally a website is just another shop front. So it's allowing customers to go to a shop front and say, well I can't necessarily afford to buy that item but I'd really like to have it and therefore can I rent it or can I get it in a pre loved option? And I think that's incredibly exciting. It's just mirroring what's happened in other sectors and where we enjoy music very differently. I'm of an age where I used to buy vinyl and then I got into stage of getting CDs but now I don't buy music. I subscribed, I receive it that way. [00:14:43.320] - Andrew Rough And you can see that through the car industry as well. Very few people now purchase motor vehicles and they lease them. So it's. The fashion shift isn't something new, it's just mirroring what's happened in other sectors. [00:14:59.030] - Emma Elobeid And I think when you see the transition in that exciting way, like we're right in the middle of it now, it is super exciting. And Ryan as well, the software that Supercycle provides, it enables you're basically meeting the customers where they already are at the point of where they already might be considering a purchase from the brand. What's the benefit? I know Andrew spoke to that a bit as well, but from your point of view, can you talk us through the benefits of being right there at point of decision so that, you know, customers can see quite clearly the benefits of making a circular choice? [00:15:40.430] - Ryan Atkins Of course, I mean there's, there's a thousand things I can talk about on, on this area. But I guess the point that, which usually resonates the most is simply at the moment we assume that 1% is a reasonable conversion rate for a typical fashion brand. 100 people visit that product page and, and 1 in 100 after considering, commit to purchasing the item. Our view is if you have alternative circular methods, so ability to rent that for the weekend, but it's add that to a subscription or like a membership library, you had library of items or to purchase that from resale, there is an additional 1 of those 99 people that would also consider those options. Now in that situation, two out of 100 people have now completed a transaction and your conversion rate has doubled from 1% to 2%. So you've doubled your conversion rate with, without at this point increasing, increasing the traffic, which we also believe circle models will do. So obviously with a double conversion rate that impacts every other metric in the business, impacts the lifetime value of the customer, impacts your cost of acquisition for that customer. It fundamentally changes the economics of that business. [00:17:06.780] - Ryan Atkins So it's just really about the commerciality of, you know, life changes. My, my weight fluctuates during maternity. You know, you change, children grow up, you know, life changes and the products in our life should just change with them. And circular models allow you to do that. Allows, you know, the, the products in our life to, to match the reality of our life. [00:17:30.980] - Emma Elobeid And I think what you're saying there as well is really valuable for brands because it offers so many different interaction points, so many more opportunities for kind of deepening a customer relationship that they might from that kind of, you know, buy, sell, goodbye, linear model. [00:17:48.010] - Ryan Atkins Yeah, absolutely. I think the thing that I'm kind of excited about as well is as you start to really double down on the commerciality of these circular programs, the commerciality and the environmental benefits really start to kind of more tightly intertwined with each other. A really good example of that I've seen, particularly in phones is probably the best example. I'm starting to see this with fashion and I really hope we see the increased adoption of this with mobile phones. Most people weren't trading in their, their old phone, they would go to their carrier, they would get, you know, get a new phone and then their old phone would go in the draw. Now because I'm purchasing and I've got this kind of pursuit of new and I'm excited about this new thing because that journey is interrupted with you can get this new thing for a lower cost. If you trade your old phone in, you're intertwining the environmental benefit into the pursuit of new journey and you're much more likely to get an increase in adoption. You're certainly seeing a rapid increase in trade and adoption if it's part of the purchasing of new and pursuit of new journey. [00:19:05.070] - Ryan Atkins And I think we're going to see the, the adoption of this massively in fashion over the next year. [00:19:10.340] - Emma Elobeid That's super interesting as well because we know that obviously brands have so many environmental targets and kind of looking for different business models to help meet those climate goals. And obviously they want to make more money and increase their revenue and cut costs and what, you know, actually circular economy business models then they're not like it's not a binary either or it's both the environmental benefits and the economic benefits and also both for the customer and for the business itself. I was wondering, we're seeing like these different proof points and maybe a question to you both is that do you feel like the benefits of where would you see circular business models for fashion and maybe more widely on that kind of hype cycle? Do you think that the kind of the benefits of early adoption are still ripe for the taking? Do you think we're kind of just starting to see a very obvious increase? Just kind of curious where you would plot it. [00:20:10.020] - Andrew Rough It's interesting. I still feel that we're very much in early adoption for both rental and resale. Certainly from a resale program perspective where brands are managing their own resale program and what I mean by that is that they invest in the real marketplace. They are offering pre loved items to their customers on their E commerce platform. Touching on Brian's point. And that's happening stronger in the US than it is in the UK and the UK is ahead of Europe. So there's a lot of work to be done with brands to certainly the global brands that want to move into new geographical locations because they've seen that it works in one geographical location so why wouldn't it work in another? And you could see that happening touching on where we were on access to Ubers, for example, we followed what happened in the US and then it's just as popular here and then it became popular in other geographical locations. So I would say that we're still very much early adoption. I would say that there has been a shift in mentality though, because I would say that probably over the last several years people were coming to speak to us about trying to improve their environmental footprint rather than recognizing that this makes commercial sense for them. [00:21:46.720] - Andrew Rough I think that there's been a mind shift in that I think a lot of brands are realizing, touching on all the points that myself and Ryan have covered there, it makes fundamental sense for brands to offer circular fashion solutions. I will always think that there will be a space for people to buy fashion because people will. But if we are able to reduce that and introduce more circular fashion solutions, we're doing the right thing. And also we're generating lots and lots of profit for our brand partners. So therefore that is a good thing because we touch a bit on legislation. Brands shouldn't be doing this because they're forced to do it legally. They should be doing it because it's a strategic objective of their business because then it will be long lasting. It won't be something that they just want to do to tick a box and move forward because that isn't where we're, where we're moving with this. [00:22:56.380] - Ryan Atkins I'd love to build on what Andrew was saying there about kind of where we are in the industry because I feel like we've been talking about circular for a number of years now and the implementations of that have been, have evolved and changed. Whenever something new happens in the industry, there's always a, you know, you start with a number of experiments, a number of stepping stones and usually those stepping stones result in the merchant not really taking the majority of the money. There's maybe revenue achieved from circular models or that. In my mind there's been a lot of revenue generated but very little profit ended up on the merchants, you know, the brand, the person that manufactured the products, bottom line. And I think it's that playbook which is now changing. And we've had a number of kind of stepping stones to prove that there is consumer demand and the playbooks that are coming out now and how do merchants capitalize on that. And I think the most important thing there is the merchant owning that customer, owning the relationship with that customer, owning the data and the relationship between what a customer purchases from new, what they rent, what rent turns into, you know, what, what rentals turn to purchases. [00:24:14.950] - Ryan Atkins And what I'm finding there is the playbook is different for each Merchant. You know, I'm certain there is a model that increases the bottom line for any fashion brand. Is it always the same playbook? Absolutely not. Sometimes it's rental, sometimes it's resale, sometimes it's membership, sometimes it's membership with a heavy discount for them purchasing. There's lots of different formulas that, that might work for that, for that brand. And in this case I'm iterating through various different models and various different price points until you find the formula that is a net benefit to, to that merchant and to their bottom line. What I would say is because a 3PL is adopting circular services and people at ACS kind of pioneering that and then with, you know, platforms like Super Cycle, I really don't think it's ever been easier or I would, I would argue meaningfully profitable than it is now. The, you know, the, the, the ease and low cost of entry is a point where most brands should now be iterating on what formula, what model of circularity works for them. [00:25:38.590] - Emma Elobeid If that's not a call to action, I don't know what is. But yeah, so it's almost. It's not just about getting started, is it? We're now at the point of keeping going and keeping learning and. Yeah, and stepping up I think as well. Thank you both so much for your perspectives and joining us today on the Circular Economy Show. It's been great to chat. We've heard there that circular business models are nothing new. They're already well established in other sectors such as music and transport. And while the practicalities of things like reverse logistics can seem overwhelming compared to our take make waste system at this early stage, they don't have to be. We also talked about how the commercial benefits have never been easier to capture, not only in terms of revenue but, but also by expanding the opportunities for customer acquisition and interaction. The case is clear. Find out more about how circular business models can bring these benefits to your business in the show notes. Thanks for listening to the Circular Economy Show. 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