Throwaway culture is going out of fashion

Consumers buy and throw away a lot more clothing than they used to. At the start of this century, we were purchasing about half as many items and keeping them for twice as long. Now, a truckful of textiles gets sent to landfill or is incinerated every second^1,2.

The explosion of `fast fashion’ has  come at a huge cost, with the industry’s pollution and emissions among the biggest contributors to the environmental  crisis.

At LOIM, we look for investment opportunities in circular business models that help extend the life of products and reduce waste. Fashion re-commerce – where used or overstocked textiles are reintroduced into the economy rather than being discarded – fits with investable themes in our Circular Economy strategy and our Plastic Circularity private-equity strategy. 

Promoting circularity

The linear economy we have relied on since the industrial revolution degrades natural resources, and exacerbates climate change and biodiversity loss. Pressure on manufacturers to meet shorter lead times and compete on price has also contributed to poor working conditions and other societal problems.

Awareness of these issues, combined with economic pressures, is inspiring more consumers (particularly younger ones) to explore second-hand marketplaces  to find quality goods at affordable prices. The resale model also benefits businesses by creating new revenue streams.

It is estimated that the size of the fashion re-commerce market could climb more than fourfold to over USD 450 billion by 2030. It is outpacing the wider fashion market, with projected compound annual growth of at least 15%, versus 3% for fashion overall. Re-commerce could also become a much bigger part of the fashion industry over the next five years, growing from about 5% to as much as 18%³. 

FIG 1. Projected re-commerce market size to 2030 (USD bn, Nominal)³

Re-commerce is good business

Fashion resale business models include peer-to-peer marketplaces with a mass-market focus, such as Vinted and Depop, and platforms like Vestiaire Collective that focus on second-hand luxury clothing and accessories⁴.

In 2021, Vestiaire Collective became the first French unicorn – a privately-held start-up valued at more than USD 1 billion – to have been founded by women. That same year, the firm also became the first fashion resale platform to earn B Corporation certification. (Vestiaire, founded in 2009, has banned ‘fast fashion’ brands from its platform.)

The luxury category is particularly well-suited to second-hand transactions, given that the goods tend to be of more durable quality. Re-commerce allows aspirational consumers to shop labels that would normally be outside their price range. For the brands, having more shoppers engage with their products widens their customer base and builds brand loyalty.

Fashion growth driver

Re-commerce has the potential to become a meaningful growth driver for more established retailers. There are signs that the expansion of the second-hand market is changing how traditional fashion brands do business as they face criticism over their high-carbon footprints (see Figure 2). 

While still a relatively small proportion of overall revenue, sales from second-hand channels tend to grow faster than traditional sales. Companies including Inditex’s Zara and the footwear brand Allbirds⁴ have added second-hand resale and/or clothing repair services to their websites, and some are combining re-commerce programs with customer incentives, e.g., trading in used items for vouchers. 

FIG 2. The number of fashion brands with resale programmes surged in 2022⁵

Challenges remain in the second-hand marketplace. Many consumers may be reluctant to purchase items they can’t try on, for example, and be further deterred by complex or restrictive return policies.

However, re-commerce may soon reach a tipping point that accelerates growth as a greater volume of stock becomes available and as digital technology continues to improve the shopping experience.

The investment opportunity

Fashion re-commerce is a key element of the circular economy, which is designed to extend the life of consumer products, keep them out of landfills and reduce stress on finite resources.

The positive economics of circularity for businesses and the growing appetite for sustainability among consumers supports an investment opportunity in both listed and unlisted markets.

Re-commerce is part of the outcome-oriented economy, one of the key themes of our Circular Economy strategy. It also aligns with our Plastic Circularity private equity strategy, which is focused on innovative solutions that reduce plastic waste and greenhouse gas emissions in the plastics value chain. Investments include companies involved in new usage models that extend the life of goods through reuse.

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Circular Economy

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Plastic Circularity Strategy

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