SAMINT-MILI 2045
Master’s Thesis 15 credits June 2020
Motivating factors for utilizing rental fashion as a part of the sustainable supply chain
The key driving factors and barriers for fashion companies to utilize fashion rental service in their sales offer
Maria Gabrils
Master Programme in Industrial Management and Innovation
Masterprogram i industriell ledning och innovation
II
Abstract
Motivating factors for utilizing rental fashion as a part of the sustainable supply chain
Maria Gabrils
Purpose
The purpose of this study is to complement the existing theory in closed loop rental based sales in fashion. By identifying driving consumer factors, organizational enablers and barriers for fashion producers to utilize rental based sales as a part of a sustainable supply chain.
Main research question
What factors enables, drive and hinders the utilization of rental fashion as a part of the sustainable supply chain model?
Sub research question
1. What motivating factors are there for fashion producers to adapt to rental- based sales? 2. What are the driving factors for consumers to utilize rental- based sales for fashion consumption? 3. What obstacles and hinders are there in rental-based sales?
Methodology 15 ECTS
This qualitative case study is conducted with the goal to investigate rental fashion within several Swedish fashion producing companies. Data was collected from sustainability reports of six Swedish fashion producing companies, web content and new papers articles. Findings of this report are supported by theory in sustainable supply chain management, circular business models and fashion theory.
Findings
Findings from this study presents factors that enables, drives and hinder the utilization of rental fashion as a part of sustainable supply chain management.
The motivating factors are; increasing customer value, responding to customer demands and decrease the damaging the environmental footprint.
Fashion consumers motivations to consume rental fashion are concluded in four enabling factors for rental-based sales (1) clothes that are trendy “in fashion”, (2) a price lower than normal consumption budget, (3) fashion products from designer brands and (3) clothes appropriate for single occasions.
Obstacles and hinders in rental sales are; (1) lack of understanding the specific customer base, (2) challenges in changing production volume and operations and (3) uncertain business profitability.
Subject reader: Simon Okwir Examiner: Sofia Wagrell
SAMINT-MILI 2045
Printed by: Uppsala Universitet
Faculty of Science and Technology Visiting address:
Ångströmlaboratoriet Lägerhyddsvägen 1 House 4, Level 0 Postal address:
Box 536 751 21 Uppsala Telephone:
+46 (0)18 – 471 30 03 Telefax:
+46 (0)18 – 471 30 00 Web page:
http://www.teknik.uu.se/student-en/
III
Table of content
Abbreviations & acronyms IV
List of figures V
List of tables V
1. Introduction 1
1.1 Background 1
1.2 Problematization 2
1.3 Research purpose & research question 4
1.3.1 Research question 4
1.3.2 Approaching the research questions 5
1.4 Research limitations 5
1.5 Structure of thesis 5
2. Theoretical framework 6
2.1 Sustainable supply chain management 6
2.1.1 Sustainable supply chain in fashion 7
2.1.2 Closed-loop rental-based sales in fashion 7
2.2 Drivers and barriers of rental-based sales in fashion 9
2.2.1 Challenges and barriers 10
2.2.2 Consumers drivers 11
2.2.3 Fashion companies drivers 12
3. Method 14
3.1 Research setting and design 14
3.2 Data collection 14
3.3 Data Analysis 15
3.4 Research quality 18
3.5 Ethical considerations 19
4. Empirical findings 20
4.1 Purpose of working sustainable 20
4.1.1 Assist consumers 21
4.1.2 Meeting consumer demands 22
4.1.3 Communication to consumers 22
4.2 Rental business models opportunities and threats 23
Rental business models opportunities and threats 24
4.2.1 Adapting to circular business models 24
4.2.2 Opportunities in rental sales 25
4.2.3 Enabling factors 26
IV
4.2.4 Driving factors of consuming rental fashion 26
4.2.5 Threats in rental service market 27
5. Analysis 28
5.1 Purpose to offer rental based sales 28
5.2 Drivers to offer rental based sales 29
5.3 Drivers to consume rental based sales 31
5.4 Fashion market barriers 32
5.5 Conclusions of empirical findings 33
7. Discussion 36
7.1 Theoretical contribution 36
7.2 Practical contribution 36
7.3 Future research 36
7.4 Implications for practise 37
9. References 38
10. Data collection references 41
Web content 41
News Papers 41
V
Abbreviations & acronyms
SSCM Sustainable supply chain management TBL Triple bottom line
List of figures
Figure 2.1.1 13
Figure 2.2.1 a 15
Figure 2.2.1b 16
Figure 2.2.3 18
List of tables
Table 3.2, Sources of data 20
Table 3.3, Data analysis and themes 22
Table 4.1, Summary of findings for category one 26
Table 4.2, Summary of findings for category two 29
1
1. Introduction
1.1 Background
Fashion and sustainability are words often mentioned together in daily newspapers as well as in global environmental reports. The fashion industry is experiencing a higher stress and pressure from media and consumers regarding the sustainability issues in comparison to other industries due to it has higher public profile (Caniato, 2012). In order to understand the spotlight fashion industry are under in terms of sustainability, one first has to consider the size of the fashion industry that operates over the world. According to The European Commission (2013) the fashion industry operates 7% of all exports globally and is the 2nd largest economic sector in the world. Secondly, note the identified sustainability and environmental issues addressed in manufacturing and transportation of fashion products. Fashion products are defined by Wen et. al. (2019, p34);
Fashion products are like fashion apparel, footwear, accessories, and fashion beauty One factor that has contributed to the focus of sustainability in operations of fashion production is the development of fashion products are damaging the environment (Jia et al, 2015). Textile and clothing sector are responsible for a considerable amount of carbon footprint (Muthu et.
al., 2012). The size of the industry together with the sustainability issues in the supply chain are causing a lot of damage to the environment. Nevertheless, the academic literature and science have noticed this topic of sustainable fashion products as an opportunity to impact and decrease the world's overall carbon footprint. Considering the term sustainability in fashion it is most commonly used to address the work that has been done to make the development of fashion products less damaging to the environment. In the literature different driving factors are presented for companies within this industry to act upon. Carter & Easton (2011) argues that the common awareness of climate change is a driver for sustainability work. Further the authors state that awareness relating to energy consumption and understanding of science are main enablers for sustainability improvements in supply and demand area (Carter & Easton, 2011). Another explanation to the sustainable development is presented to come from the natural respondents that is between customers and retailers. Fashion producing companies are competing in environment that requires fast responding to customers’ demands, that have over time become increasingly more demanding (Hu et. al, 2014). This theory is also presented by
2
Carter & Easton (2011) who argues that organization’s that develops customer products are generally early adopters to environmental initiatives. Nevertheless, fashion consumers are increasing their environmental awareness which has led to a change in attitude towards consumption and sustainable fashion production (Shen, 2014). According to these studies the consumers have taken a great part of driving this change.
1.2 Problematization
Fashion industry is currently one of the most outstanding industries in the world (Jia et al, 2015). In the literature of fashion studies (Svendsen, 2006) (Simmel, 1957) the term fashion is often mentioned in terms of a mechanism that creates trends and new clothing. Although before the phenomenon of fashion and trends, common people were wearing clothes only for practical matters and the only difference between rich and poor was material and details (Svendsen, 2006). Later on, fashion became the phenomenon for scrutiny as it is today. Svendsen (2006) states that fashion as we know it today started in the eighteenth century from the faster cultural changes and customized clothing for the individual. Fashion is a social mechanism that drives trends, the most commonly used definition of fashion as a mechanism is stated by Simmel (1957, p.541);
Fashion is a form of imitation and so of social equalization, but, paradoxically, in incessantly, it differentiates the one time from another and one social stratum to another. It unites those of social class and segregates them from others.
There are three important assumptions from literature that underpin this study; the trickle-down effect, Democratization, and circular business models.
First the trickle-down effect, Simmel (1957) states that fashion itself changes due to the imitation and differentiation of people in a matter the author called the trickle-down effect.
Simmel's theory is based on that the imitators are from a lower social status and the differentiators are from a higher social status. The imitator will copy the style of higher social class and the differentiator will change design as the lower class starts wearing the design (Simmel 1957), this is the social mechanism that produces the speed of fashion changes.
Presendorfer (1995) describes fashion mechanism as a continuous innovation process where new designs will replace old designs which makes the old design obsolete. However, with the current sustainable awareness, demand patterns in fashion continue to change.
3
Second, is the ability for consumers and producers to be able democratize the value chain.
Today fashion industry has democratized and have become a mass industry, with low prices which have invited new entrance as more consumers in the value chain (Svendsen 2006).
Although not universal, democratization impacts prices dynamic in the market and have influenced on the speed to changing designs along the product value chain. According to Turker
& Altuntas (2014) the change of fashion industry started 30 years ago, with changes in customer base, entrance of new competitors and globalization. Democratization also impacts seasonality in fashion, before these changing factors there was a fixed calendar for the season trends, then there was easy to forecast the design and production long before delivery date (Turker & Altuntas, 2014). At present, seasonality impacts consumers especially with the current trend of fast fashion. Now the situation has changed into fast fashion with short market cycles and several season trends, this requires flexible manufacturing and design capabilities (Turker & Altuntas, 2014). Fashion producers takes a fashion product from conceptual design to final fashion product in stores within a few weeks (Haenlein, 2014). Fast fashion is the norm where trends are changing faster than ever before (Giertz-Mårtenson, 2012). The fast-changing trends are affecting the market both for the consumers and producers according to Samsioe (2017), for the producers it creates higher volatility and low predictability for purchase and production. For the consumers it creates shorter life cycles of commodities and increases the impulse purchasing, which has initiated a shopping behavior where clothes are bought for one occasion only. Fashion magazines have also impacted the speed of fashion by sharing fashion trends (Svendsen 2006). However, currently the social media is affecting the speed of fashion even more (Samsoie, 2017). This changing circumstances in fashion industry has had negative impact on environment, therefore the fashion producers are adopting to sustainable strategies.
Third is the ability to come up with circular strategies, within the industry companies and brands have different strategies when it comes to design and trends. Fashion products that have a short lifecycle time is called fast fashion, often low price and low quality but is considered to be trendy and used for a short time (Hu et. al, 2014). The opposite strategy to fast fashion is slow fashion. Slow production is not wasting resources and a slower consumption generates longer life cycle for each garment, which means that the time is longer from production to recycling or wastage (Jung & Jin, 2014). Hu et. al (2014) argues that fast fashion is generating more waste than other clothing with longer life cycle. Further studies confirm this result that fast fashion is more harmful than slow fashion. Fast fashion industry has a major role in the
4
fashion industry carbon footprint (Loetscher et al., 2017). While one could think that more actors would choose slow fashion as these research results indicate that fast fashion is more harmful. Still, in opposition to this there is an increased number of fashion producing companies that are adapting to fast fashion in terms of short lead time of the product offering (Jia et al, 2015). As different strategies and circular business models pave way, we still know very little how rental fashion should be understood as part of the fashion industry.
1.3 Research purpose & research question
Based on the above assumptions, the purpose of this study is to complement the existing theory in closed loop rental based sales in fashion. By identifying driving consumer factors, organizational enablers and barriers for fashion producers to utilize rental based sales as a part of a sustainable supply chain. By studying whether rental based sales contribute to sustainable supply chain in fashion and how rental based sales assists in decreasing the environmental damages. With the objective to find success factors and obstacles for it to succeed in the future.
Research questions will approach the motivating factors for fashion brands to use rental-based sales and the consumer demand there are on the market for this closed loop clothing chain. The research also attempts to address the obstacles for rental-based sales in terms of fast fashion and changing customer behavior.
1.3.1 Research question
The research question guiding this study will investigate the current position of rental-based sales of fashion in sustainable supply chain.
What factors enables, drive and hinders the utilization of rental fashion as a part of the sustainable supply chain model?
In order to answer the above main research question, the study and the empirical findings will be composed by three sub research questions. Research sub question 1 will address the driving factors from industry to adapt to rental-based sales and how the players on the market harm or benefit from rental-based sales. Research sub question 2 will approach the market demand for the rental market and investigate how different factors such as, quality, price and brand, influences the consumer. Research sub question 3 are investigating the obstacles and hinders there are in the fashion market for rental based sales.
5
1. What motivating factors are there for fashion producers to adapt to rental-based sales?
2. What are the driving factors for consumers to utilize rental-based sales for fashion consumption?
3. What obstacles and hinders are there in rental-based sales?
1.3.2 Approaching the research questions
The sub research questions have firstly been investigated by secondary data from a theoretical framework with theories from supply chain management, circular economy and fashion.
Further the questions have been studied by industry documents in the form of annual reports and sustainability reports. The data is later presented in subsections to be analyzed and concluded in each research question. Results are presented in this report through a literature review and data collection from previous studies on the topic. This study is conducted to contribute to literature of fashion and sustainable supply chain management to provide support to tested theories in rental-based sales.
1.4 Research limitations
The research will only cover Sweden in terms of secondhand data from the industry documents, focusing on 6 fashion companies. Companies that participated in this study:
● H&M
● Ellos
● Peak Performance
● Filippa K
● Gina Tricot
● Acne Studio
1.5 Structure of thesis
The thesis is structured as follows, in the introduction, the problematization and research questions are presented. In the second chapter, a theoretical framework is built with fashion supply chain and circular business models dimensions that will enable answering the research question. In the method part, an inductive type of thinking was adapted using secondary data from sustainability reports, that are presented in the empirical findings chapter. Further the empirical findings are analyzed together with the theoretical framework, in the analysis chapter and finally the findings are concluded under the sub-research questions.
6
2. Theoretical framework
The theoretical framework is built on research from different fields that all correlates to sustainable fashion and rental-based sales in order to investigate the research topic from different perspectives. First, the theoretical framework focuses on sustainability in fashion supply chain management with reviewing studies on the topic itself and even more focused studies of closed loop supply chain and frameworks of rental-based sales. Secondly, rental- based sales is reviewed from the influenced parties’ perspectives, the drivers from consumers are reviewed from fashion mechanism studies and drivers from retailers are reviewed from agency theory studies.
2.1 Sustainable supply chain management
Considering the term sustainability, several different meanings and definitions are used in the literature and by companies themselves. According to Gardetti & Torres (2013) the most commonly used and accepted definition of sustainability is written by Brundtland (1987). The author defines sustainable development; as we should regulate our needs and our development so that this do not affect future generations ability to the same (Brundtland, 1987). In other words, the current development pace and methods used should not affect future generations development. From a fashion business and operations perspective, all processes from manufacturing to stocks in stores are the focus in the previous research. Textile and clothing sector with its long and complicated supply chain is one of the biggest sources of greenhouse gas emission and is responsible for a considerable amount of carbon footprint (Muthu et. al., 2012). Sustainable Supply Chain Management (SSCM) (Carter & Rogers, 2008) is a commonly used term that describes a supply chain which is considered to be sustainable to a certain extent. In accordance to Carter & Rogers (2012), Turker & Altuntas (2014) argues that SSCM is an integration of SCM and corporate sustainability.
The Triple Bottom Line (TBL) is a widely used framework in the literature of sustainable development. TBL is according to Elkington (1997) considers the three pillars of sustainable development (1) the social, (2) the environmental and (3) the economic aspects. To achieve sustainable development in the fashion industry all parts of the business operations has to be addressed by the TBL (Jia et al, 2015). TBL is a more explicitly utilized method for sustainability, where the focus is on finding a balance between the three components (Li et. al.
7
2014). Several studies (Cruz, 2009; Margolis & Walsh, 2003) have according to Li et. al.
(2014) provided support for a positive correlation between the three components. Cost of activities in environmental protection will be regained long term and these benefits will enable corporations to take more responsibility, therefore SSCM is a method to strengthen the core competitiveness against competitors (Li et. al. 2014). Business operations in the fashion industry are presented by Jia et al (2015) as four different levels of operation; production of raw materials, production of fashion goods from raw materials, retail sales, and advertising and promotions.
2.1.1 Sustainable supply chain in fashion
Previous studies in SSCM and especially in SSCM for fashion the results imply that the actors in the industry should adopt their supply chain management into SSCM methodology.
Contributions to SSCM literature by Carter & Rogers (2008) provides empirical supports to that organization’s sustainability engagement in general and SSCM in particular is not optional but it is considered as required. Further examples are a study from H&M by Shen (2014) presents that it is and will be essential to develop a sustainable supply chain for many fashion companies. SSCM is very critical in fast fashion which can be noted as fast fashion companies pay significant attention to report SSCM (Haenlein, 2014).
Insert text of SSCM.
2.1.2 Closed-loop rental-based sales in fashion
SSCM literature has recent studies from Hu et. al. (2014) that involves circular economy and closed loop supply chain within fashion. Closed loop systems often also called circular economy is defined by Geissdoerfer et al (2016, p. 759):
A regenerative system in which resource input and waste, emission, and energy leakage are minimized by slowing, closing, and narrowing material and energy loops. This can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling.
Geissdoerfer et al (2016) states that in a closed loop where waste is prevented, the resources needed are utilized efficient manner and attempts to have rental based sales of goods. In terms of fashion supply chain closed loop, this would imply that in order to achieve a closed loop system these attribute should be met (1) design, (3) maintenance, (3) repair, (4) reuse, (5)
8
remanufacturing, (6) refurbishing, and (7) recycling. Rental based sales fulfill the fourth attribute of the closed loop definition by offering customers a service of clothing rather than buying clothing. Rental-based sales for fashion products works for the consumer like a traditional rent-based service, a service cost for renting one or several garments (Somethingborrowed, 2018).
In previous chapters several studies are presented that indicates that producing textiles and clothes is harmful our planet. Many actors have recently started collecting old clothes to be reused in new production, although this has proven to have some difficulties. The recycling of garments that are in the end of life stage is challenging and concerns considerable barriers (Hu et. al, 2014). Reusing garments on the other hand can be beneficial if this leads to less production of new clothes and it decreases the amount of carbon footprint from the fashion industry (Hu et. al, 2014). Although recycling is one of the attributes of Geissdoerfer et al (2016), Pal et. al. (2019) argues that the concept of circularity has gone beyond recycling today and presents five major principles are used: (1) circular supplies, (2) resource recovery, (3) product life extension, (4) sharing or collaborative economies, (5) and product-as-service.
The fifth principle in this theory is concerning rental based sales and gives a narrower definition of the circular sales model. Figure 2.1.1 presents a framework for a closed loop fashion supply chain where consumers rent clothes rather than buying new garments. Below are all the steps described:
Step 1: Manufacturing of clothes and textiles.
Step 2: Transported to Retailer or Rental service provider.
Step 3, 4, 5, 6: Is the regular supply chain for garments that is sold and then the textiles are refunded to the Material supplier.
Step 8: The garments and clothes that consumer wants to rent is matched and sent to the Consumer.
Step 9: After x units of time the clothing is sent back to the Rental service provider.
Step 10: The rented clothes are washed and repaired if necessary and sent back to the Rental service provider.
Step 11: At the end of the garment life cycle textiles are refunded to the Material supplier.
Step 12: The material that is non recycle are disposed.
9
Figure 2.1.1 flow of closed loop fashion supply chain (Hu et. al, 2014)
One current example on how this set up have benefitted organizations are charity organizations that are collecting used clothes to sell as second hand and use the profit for charity (Hu et. al, 2014). According to Hu et. al (2014) different industries have already developed widely used leasing and renting financial options to products. Leasing cars and leasing furniture are commonly used today, as well as special types of clothing for masquerade, weddings and other formal occurrences (Hu et. al, 2014). Therefore, the author sees enablers in terms of the general attitude towards customer service models.
2.2 Drivers and barriers of rental-based sales in fashion
Companies in capitalistic society drive for profitability (Harvey, 2010), the same applies for fashion industry companies. Although the challenges and questionable profitability, organizations are still working towards SSCM and a closed loop supply chain. The drive for consumers has been described to be of good will for the environment. Although there are other factors such as economy and social status that is not as commonly used in the literature.
Nevertheless, despite to the lack of identified drivers for fashion companies there are some methods and theories concerning this.
10 2.2.1 Challenges and barriers
In order for actors to adopt to rental based sales previous studies have identified challenges in, manufacturing, transportation etc. (Hu et. al, 2014). Hence, fashion supply chain have to be responsive to changed production and to produce lower quantity instead of today's mass production (Haenlein, 2014). Therefore, new logistic system needed to be considered for the life cycle of products (Pal et. al. 2019). Moreover, there are several internal barriers for organization’s defined in research from Pal et. al. (2019): technological limitations for supply chain to be circular to the desired extent, institutional inertia in the organization in terms of business models and dynamic customer preferences. All these mentioned barriers restrict the scalability of the circular business models. Further on, the authors have state that there is a lack of understanding what motivates their consumers to consume rental services. The complete list of barriers from the research of Pal et. al. (2019) is presented in figure 2.2.1a
Figure 2.2.1a, List of impediments, (Pal et. al. 2019).
11
Li et. al. (2014) divides factors that influences governance of sustainable supply chain, see figure 2.2.1 b, the factors presented are; internal members, transaction characteristics and external stakeholders such as consumer demands. Consumers drive to consume new clothes are described in terms of fashion as a mechanism and the drive to consume sustainable are the awareness of sustainability. Key integrators for operationalize circular supply chain are (1) design and technology, (2) collaboration and (3) consumers (Pal et. al., 2019).
Figure 2.2.1b influencing factors of supply chain, (Li et. al. 2014).
2.2.2 Consumers drivers
According to Simmel (1957) fashion as a mechanism is driven by imitation and differentiation in order for people to unite and to achieve a higher social status. This is what is driving the speed of fashion. Meanwhile, Simmel (1957) also argues that there are some people that change the fashion direction. Further he states that the speed of fashion is set depending on how nervous an age is getting the higher desire for differentiation and faster changes in fashion (Simmel, 1957). The speed of fashion is considered to be the fastest today (Giertz-Mårtenson, 2012). Fast fashion production has become the norm and is built around the consumers constant new desires (Samsioe 2017). Customers’ demands fast fashion in order to create an identity and belonging.
Competitiveness in the fashion market will maintain by meeting customer needs is argued by Li et. al. (2014). In consent to this, Pal et. al. (2019) claims that consumers are playing an active role in slowing down fashion in order for creating longer lifetime for fashion products.
12
Meanwhile, consumers are increasing their environmental awareness which leads to a change in attitude towards consumption and sustainable fashion (Shen, 2014). The literature is accordant that fashion and fast fashion in particular is damaging the environment and therefore described that SSCM is not optional, but it is considered as required (Carter & Rogers, 2008).
Large global actors in fashion industry e.g. ZARA, H&M, UNIQLO uses “green marketing”
to attract customers, while fashion brands in China are initiating return policy into their supply chain (Li et. al. 2014). These attributes do not align for normal supply chain. Consumers demands for sustainable fashion are increasing but still the fast fashion industry production is still the norm. Nevertheless, these are some identified drivers to implement rental based sales in SSCM. Pal et. al. (2019) presents three drivers of consumer to buy sustainable fashion; (1) economic, (2) critical – ecological and ethical, and (3) hedonic/recreational. Further the authors state that financial reasons are essential for consumers to get quality products. Although for reusing of fashion products, like rental-based sales, quality and cleanness is the most crucial factors.
2.2.3 Fashion companies’ drivers
The definition of circular economy and rental-based fashion sales opposes the fast economy of fashion industry and the development of new styles and trends. According to Samsioe (2017) fashion industry is built on consumption of clothes and textiles which makes the industry dependent on constantly creating new trends. Nonetheless, recent studies have presented that brands and fashion producers are working with and towards SSCM and rental based sales. One argument that advocate organizations to continue working towards sustainability is to acknowledge other factors than economy. Jia et al (2015) argues that one has to consider more that economic aspects in order to achieve sustainability in the fashion industry. Although, SSCM and rental based sales will demand organizations to change due to decreased speed of production. To consume fashion from rental services a change of manufacturing scale might be required according to Hu et. al (2014). Therefore, it is essential to evaluate the self-interest of the actors in order to identify the drivers there are for rental-based sales. One theory that works on the assumption that decisions are made for everyone's self-interest is Agency theory (Jensen & Meckling, 1976). The agent’s and the principal's self-interest. In figure 2.2.3 agency theory is visualized, there are two parts the principal and the agent that are both driven by the principal. In this case of rental-based sales of fashion products will the principle represent the way fashion products are consumed, and agents are representing the brands.
13
Figure 2.2.3, Agency theory (Jensen & Meckling, 1976)
14
3. Method
3.1 Research setting and design
This paper has been conducted as a qualitative research by doing a case study of six Swedish fashion producers in order to meet the objectives which aims to investigate and understand a new phenomenon in fashion in terms of consumption and production. A qualitative approach is according to Bryman & Bell (2011 p. 383):
“… an epistemological position described as interpretivist, meaning that, in contrast to the adoption of a natural scientific model in quantitative research, the stress is on the understanding of the social world through an examination of the interpretation of that world
by its participants...”
Research method for this study is an inductive research design where the secondary data interacts with the theoretical findings. Inductive design is according to Bryman & Bell (2011) often conducted as an iterative design, where the researcher can revisit the secondary data in order to find theoretical support. The secondary data is the empirical findings from the data collection from the six fashion producers’ corporate reports, websites and newspaper articles, see table 3.2 for detailed information. The theoretical findings of previous research that can be found in the theoretical framework. Findings from the empirical data and the theoretical framework are analyzed and concludes in some stated driving factors, enabling factors and barriers.
3.2 Data collection
The secondary empirical data was collected from several different sources to get different perspectives on the topic. Secondary data is convenient to use as the researcher can focus on the analysis of data rather than collecting of data from interviews etc. Although it is crucial to understand for what purpose data is collected from to decide whether the data source is appropriate to use (Wegner, 2008). For the public reports, the purpose is to present the fashion producers vision and actions in sustainability for their company, likewise the articles found on the websites. For the articles in Newspapers and on websites the purpose is to interview people and present news from the industry. See table 3.2 for all data sources specified.
15
Firstly, sustainability report from the six brands H&M, Ellos, Peak Performance, Filippa K, Gina Tricot and Acne Studio. Secondly, annual reports from the only listed company H&M.
Further, data was collected from web pages of H&M, Filippa K, something borrowed and Baam. Finally, newspapers were used to collect articles and interviews on the subject for the previously mentioned brands. Each document was treated an artefact for examination and searching for the phenomena under study.
Data source Type of source Title
H&M (2019) Sustainability Report H&M Group Sustainability Performance Report 2019
Ellos (2018) Sustainability Report Extended Sustainability Report Ellos Group 2018
Peak Performance (2018)
Sustainability Report 2018 Sustainability Report Peak Performance
Filippa K (2018) Sustainability Report Filippa K Sustainability Report 2018 Gina Tricot (2018) Sustainability Report Sustainability Report 2018 Gina Tricot Acne Studio (2018) Sustainability Report Acne Studios Sustainability Report Financial
year 2018–19
H&M (2019) Annual Report H&M Annual Report 2019 H&M
Filippa K
Something borrowed Baam
Web Content “H&M tests rental service”
filippaksecondhand.se/
somethingborrowed.se/
“Uthyrning och skönhetssalong! Allt om H&Ms nya butik”
Dagens Handel Elle
Damernas värld Femina
Dagens Industri
News Papers
Table 3.2, Sources of data.
3.3 Data Analysis
The data was analyzed with a qualitative content analysis approach, which involves coding the raw material from the different sources in themes. Understanding and interpreting the data is done by reviewing the content and applying labels to data that are of interest of the study (Bryman & Bell 2011). There are different approaches of qualitative content analysis, for this
16
study the conventional content analysis was selected. In the conventional content analysis categories of data is collected directly from the data in order to place these categories to themes and codes (Hsieh & Shannon, 2005). Two different categories were identified with three themes each, see the table 3.3. The themes were later sorted from all sources to see patterns, commonalities and differences, with the purpose to identify approaches and perspectives to the subject/theme. In the right column of table 3.3 there are examples of wordings from the specific theme and category.
17
Categories Themes Subjective
Purpose of working sustainable Helping consumers Assisting customer Raise awareness Encourage customers Help customers achieve sustainable lifestyle Inspire customers Meeting consumers demands In response to customers
growing interest Surprise our customers Expectations
Communication to consumers Transparency in reporting Inform about
Report
Transparency in supply chain
Purpose on adapting to circular business models
Adapting to circular business models
Linear business models Circular business model Closing the loop
Integrate reused products Develop new circular Access to rental services Commercially viable Business opportunities Profitability
Scalability
Sustainable lifestyle Growing interest in renting Enabling factors Facilitates reuse
Enables rental fashion Rental service models Demand
Consumers drive Cost effective Quality Up to date
Not increased consumption One occasion
Threats on the market Creating a solution Decrease waste Stopped shopping
Decrease shopping budget Access to several brands Table 3.3, Data analysis and themes.
These themes are later summarized in the empirical findings sections and also visualized with quotes under the specific theme heading. Possible issues with this approach are getting data
18
“out of context” as only fragmentation of data is presented in this report. Further issues are mentioned by Cummings & Teng (2003) that analysis of this sort can lead to oversimplification or the opposite preoccupation. In order to minimize the risk of these mentioned issues the findings are anchored in evidence from previously conducted research.
3.4 Research quality
Validity is according to Bryman & Bell (2011) the most important criterion of research. There are different types of validity; Measurement, Internal, External and Ecological (Bryman & Bell, 2011). This study however is only considered by internal and external validity. Internal validity is according to Bryman & Bell (2011), the validity of the research processes and analysis of data. External validity accounts for the study’s findings to be generalized (Bryman & Bell, 2011). In inductive research the empirical findings lead to a generalized conclusion (Bryman
& Bell, 2011). Although, findings from one case study cannot be generalized (Flyvbjerg, 2006), therefore all findings from empirical are discussed and confirmed by previous research and theories. Further, in qualitative studies there is a risk for interpreting the data incorrect (Norris, 1997), therefore the data is presented with respect to synonyms to the themes of the coding in the empirical findings. Furthermore, the limitation of validity is discussed in the limitations section of this report.
The reliability of a study reflects on the possibility to replicate the study and get the same results (Bryman & Bell 2011). In respect to reliability, the methodology, research questions and limitations are presented in this paper, to minimize the risk of making too much generalization of the results. Reliability of a report decreases if there is lack of transparency in the data collection and the data analysis (Yin, 2003), therefore robust methods are utilized and presented in the Data collection and Data analysis chapter.
In terms of bias, the sources of the empirical data are subjective on the matter of company success and commitment in sustainability. Therefore, other sources of data are used in parallel to the sources written by the companies themselves. Further biases in this report is considered to be the values of the writer. Bryman & Bell (2011) argues that research cannot be done unless the researcher’s values are transferred into the study.
19
3.5 Ethical considerations
According to Bryman & Bell (2011) the ethical principles in research are concerning the participants privacy and consent to be published. This study does not include any participants and only analyses secondhand data. The secondhand data collected for this study is found on the participating brands official website and official reports, therefore should be considered that the participants have given their consent as all data is public.
20
4. Empirical findings
The empirical findings are sorted into different themes that the investigated companies are approaching from different perspectives. Firstly, the different purposes and objectives that fashion producing companies have in order to work more sustainable is presented. Followed by the opportunities that drivers the industry as well as the consumers towards sustainable fashion and the market situation in terms of competition and threats.
4.1 Purpose of working sustainable
The data presents that all companies are working with sustainability although the effort might differ between the fashion producers in Sweden. In terms of the companies’ purpose to work with sustainability most reports mention the damage to the environment as an driving factor to work more sustainable. Although later on in the sustainability reports several factors are described as purpose for the work towards becoming more sustainable. In the empirical data there are different approaches towards the consumer perspective as a driver. (1) Helping consumers to become more sustainable, in terms of assisting consumers in sustainable fashion, (2) meeting consumer sustainable demands and (3) consumer communication and presentation sustainability work is a motivation for the participants to work with sustainable supply chain.
In the table 4.1 below the themes are presented together with the data sources.
21 Purpose of working
sustainable
Data source
Helping consumers H&M Group Sustainability Performance Report 2019, Extended Sustainability Report Ellos Group 2018, 2018 Sustainability Report Peak Performance, Filippa K Sustainability Report 2018,
Sustainability Report 2018 Gina Tricot,
Acne Studios Sustainability Report Financial year 2018–19, H&M Annual Report 2019,
Meeting consumers demands H&M Group Sustainability Performance Report 2019, 2018 Sustainability Report Peak Performance,
Filippa K Sustainability Report 2018, H&M Annual Report 2019,
Communication to consumers
H&M Group Sustainability Performance Report 2019, Extended Sustainability Report Ellos Group 2018, 2018 Sustainability Report Peak Performance, Filippa K Sustainability Report 2018,
Sustainability Report 2018 Gina Tricot,
Acne Studios Sustainability Report Financial year 2018–19, H&M Annual Report 2019,
Table 4.1, Summary of findings for category one.
4.1.1 Assist consumers
One of the identified purposes to work more sustainable is according to the data to assist consumers in consuming fashion sustainable. Consumers need help to consume fashion products in a sustainable manner (Filippa K, 2018). This is a driver for fashion producers to offer more sustainable products. In order to do so companies argue that they are educating their consumer on how to act sustainable, one example stated in Ellos Sustainability Report 2018, p.
23;
“raise awareness among our customers on how to consume more sustainably.”
One approach is to educate the consumers, another is to offer products without involving the consumers sustainability awareness. In this approach the companies are also providing a solution to the consumer by adapting their business model towards sustainability. This is an example from H&M annual report 2019, p. 5;
“To help customers achieve a sustainable lifestyle our brands offer several circular services.”
22
Nevertheless, most companies do both argue that they raise awareness as well as offering solutions to the consumer at the same time.
4.1.2 Meeting consumer demands
The second purpose is likewise the first one is concerning the fashion consumers and the brands customers. Consumers have the need for fashion products to be sustainable which has initiated a driving factor for fashion industry to act on their customers’ demands (Filippa K, 2018). One way of meeting consumer demands is to adapt the business model to more circular models and to offer products that aligns with them. H&M states in their annual report 2019, p. 12;
“In response to customers’ growing interest in circular fashion the group is also offering new services such as clothes rental, garment repair and second-hand items…”
In the interest of understanding the consumers interest and opinion for circular and sustainable fashion the empirical data presents that it is crucial to have an understanding of the consumer expectations and to be closer connected to all stakeholders. Peak performance presents in their future approach to sustainability expectations in the Sustainability report 2018, p.17;
“We will connect more closely with our stakeholders to learn more about their sustainability expectations.”
4.1.3 Communication to consumers
Communication within sustainability work is presented in the empirical data to have great importance for fashion companies. One frequently used term is transparency, transparency towards stakeholders in supply chain and the overall journey towards sustainable solutions is mentioned in all reports. Transparency in the supply chain is a stated success factor in order to succeed with sustainable supply chain. Nevertheless, the companies are presenting an increased focus to work on this communication. One example on how companies are setting communications objectives is from Peak performance sustainability report 2018, p. 11;
“One of this report’s goals is to inform our business-to business partners and end consumers about our sustainability work.”
23
4.2 Rental business models opportunities and threats
The findings show that fashion producers are adapting to circular business models to different extent and for different reasons. drivers for using rental fashion as a strategy in sustainable fashion is described in the data as (1) reasons why to adapt to circular business models, (2) the opportunities in rental sales, (3) enabling factors to succeed with rental sales (4) some driving customer factor and (5) threats on the fashion market in terms of competition and new entrance.
These themes are presented in the table 4.2 below together with the data sources.
24 Rental business models
opportunities and threats
Data source
Adapting to circular business models
H&M Group Sustainability Performance Report 2019, Extended Sustainability Report Ellos Group 2018, 2018 Sustainability Report Peak Performance, Filippa K Sustainability Report 2018,
Sustainability Report 2018 Gina Tricot,
Acne Studios Sustainability Report Financial year 2018–19, H&M Annual Report 2019,
Opportunities in rental sales H&M Group Sustainability Performance Report 2019, Extended Sustainability Report Ellos Group 2018, Filippa K Sustainability Report 2018,
H&M Annual Report 2019, Femina
Dagens Industri
Enabling factors Femina,
Filippa K Sustainability Report 2018,
Extended Sustainability Report Ellos Group 2018, Driving consuming factors H&M Group Sustainability Performance Report 2019,
Extended Sustainability Report Ellos Group 2018, Filippa K Sustainability Report 2018,
Sustainability Report 2018 Gina Tricot, H&M Annual Report 2019,
Damernas värld
Threats in rental market Extended Sustainability Report Ellos Group 2018, Dagens industri
Something borrowed Baam.se
Dagens Handel Elle
Damernas värld Femina
Dagens Industri Table 4.2, Summary of findings for category two.
4.2.1 Adapting to circular business models
The attitude towards sustainable supply chain and closed loop business models are one main enabler for the rental business model. Circular economy is a priority over all of this study’s participants. Different models are and have been tested (Ellos, 2018). The approach is in unison, in the data there are quotes like:
Peak performance sustainability report 2018, p. 16;
“Linear business models are a thing of the past.”
25 H&M Sustainability report 2019, p. 33.
“Moving towards a fully circular business is a key contributor to our climate positive goal.”
Even though, the majority of the companies included in this study are focusing and prioritizing reuse of clothing in 2019. In the empirical data presents different approaches towards changing business models and focusing on rental, some companies want to lead the change while others will not focus on rental sales. H&M states in the sustainability report 2019, p. 50 that they are exploring models that are profitable;
“We explore models for product reuse that are commercially viable and that enable a single product to have multiple lives — including rental and recommence.”
Filippa K present a tentative approach in the sustainability report 2018, p.52;
“We made a strategic decision, however, not to focus on Lease during the coming 5 years”
4.2.2 Opportunities in rental sales
The empirical data presents that business opportunities in rental sales as an enabling factor for rental fashion as a part of the sustainable supply chain. The data presents that the most commonly used argument is an identified opportunity to increase the value to consumer, providing the consumers with a sustainability sur plus value (Femina, 2020). Where the consumer is not only offered fashion products, but sustainable awareness as well. Even though more value to consumer usually provides the opportunity for increased prices and income, the data do not present any profitability within rental H&M states in their annual report 2019, p.49;
“There is a growing business opportunity to offer customers new ways of enjoying fashion – also resulting in reduced climate impact and increased customer loyalty”
Neither do the reports present any prices for rental services nor estimated product lifetime for rental. Services within fashion must be launched, rather than today's situation of mainly testing rental services, for the market to interpret and understand the revenue and sales opportunities in rental sales. Nevertheless, the empirical data presents that companies in the US has over a billion in turnover 2018 (Dagens Industri, 2018).
26 4.2.3 Enabling factors
Several enabling factors for rental service model to succeed is found in the empirical data.
Enabling factors for rental fashion are in summary; Quality, Products need to be trendy, designer products, Overall demand from the market.
One important factor regarding the products that are leased is concerning the quality of the products. High quality standards of the products facilitate reuse (Ellos, 2018). Further enabling factors for products to be rented is that the clothes have to be up to date according to latest trends (Filippa K, 2018). Furthermore, it is presented that designer clothing is highly advantageous (Femina, 2020).
However, the main enabling factor for the rental consumption is the demand from the customer base (Filippa K, 2018). The demand for rental sales is not investigate enough in the empirical data sources and is therefore uncertain whether the rental approach is suitable to all consumer bases. There is one example although, from the empirical data where Filippa K rental service was shot down due to lack of consumer demand. Filippa K sustainability report 2018, p. 52;
“During 2018 we had an all-time low, decreasing the numbers by 78%.”
4.2.4 Driving factors of consuming rental fashion
In terms of driving factors from consumers the data presents several different factors that are driving fashion consumers to rental fashion. Consumer driving factors are in summary;
Sustainable shopping, financially beneficial way of being up to date, Designer shopping has democratized and Consumption for one occasion.
The main reason is to keep the closet up to date without damaging environment and at the same time the consumption is cost effective (Femina, 2020), (Dagens Industri, 2018). Further financial reasons are that consumer can afford to rent clothes and brands that no not afford to buy (Femina, 2020). Which creates an increase availability for expensive brands as well.
Moreover, the rental fashion is a way to consume fashion products for one occasion (Femina, 2019). An example mentioned is to rent shoes from Tiamo and a dress from Gina Tricot to wear for one party (Damernas värld, 2019).
27 4.2.5 Threats in rental service market
The final driving factor for fashion producers to start working with rental fashion as a part of the sustainable supply chain is found to be threats from external actors in the data from newspapers and webpages. Threats for fashion producers in rental service market are in summary; Other actors leasing the fashion producers’ products, Changing consumption habits and Threats of new entrance.
In despite of the uncertain demand for rental service for the fashion producers in this study there are competitors in the Swedish market. Rental companies that rent fashion products of different brands for a single amount or subscription. Some of the actors are Something Borrowed, Sabina & Friends and Gemme (Dagens Industri, 2018). In interviews customers to the rental service agencies say that they have almost stopped with normal shopping (Dagens Industri, 2019). The fashion consumers trend is to have less clothes in the wardrobe and traditional consumption has decreased (Dagens Industri, 2019). There are brands that cooperates with the rental service actors in Sweden, Ellos and Something Borrowed is one example (SomethingBorrowed, 2018). Although globally where the rental services in fashion are more established the competition between the brands and rental companies are tougher.
One example of an actor in USA is Rent the Runway with 8 million customers, the customers love shopping and before they started using rental fashion had a much higher budget (Dagens Industri, 2018). The CEO of USA biggest actor Rent the Runway has expressed her ambition towards the competition to Bloomberg. Translated from Dagens industri, 2018;
“‘I want to put H&M and Zara in bankruptcy’
‘I don't want it,’ she then corrected, ‘I’m planning to do it.’"
The threat of new entrants in fashion service market to take over the fashion consumption can be a driving motivating factor for fashion producers to offer their own rental service.
28
5. Analysis
From the empirical findings of the data collection, the themes will be analyzed under each section, firstly by comparing and generalizing the empirical findings alone and secondly analyzing the results with the results of previous research. With the purpose to investigate the future of rental fashion as an approach within sustainable supply chain.
5.1 Purpose to offer rental based sales
All the participating brands in this study are aware of the negative environmental impact on their production have and argue that the purpose to the sustainability work is from good will.
In the fashion producer’s sustainability reports the approach towards working sustainable in the entire supply chain and are unison that circular economy principles need to be applied in the business models. Although the methods to achieve a more circular supply chain differs according to the reports. There is some clear discrepancy in terms of short-term strategies and investments for rental based sales and rental fashion offers. While, H&M are according to the empirical data exploring, among other sustainable strategic methods, different models for offering clothes to rental. Filippa K states the strategic decision not to focus on rental based sales their report, but rather to focus on recycling and other concepts for sustainable supply chain. Thus, the different targets in rental fashion, both of these approaches are gathering used clothing for recycle.
According to Geissdoerfer et al (2016) for resources to be utilized efficiently there are seven attributes that needs to be fulfilled; (1) design, (3) maintenance, (3) repair, (4) reuse, (5) remanufacturing, (6) refurbishing, and (7) recycling. Filippa K, amongst other brands, are not focusing on the rental fashion are not considered as circular business model according Geissdoerfer. Pal et al (2019) both confirms some of Geissdoerfer’s attributes, but also points out that recycling is yesterday's circular concept. This would confirm the strategic decisions for the fashion producers that put focus and explore reuse to a higher extent than only recycling of material. Five principles for circularity is presented by Pal et. al. (2019): (1) circular supplies, (2) resource recovery, (3) product life extension, (4) sharing or collaborative economies, (5) and product-as-service. This updated version of attributes to a circular business model presents an even clearer view that brands that are not focusing on products-as-service, rental based- sales, are not working towards full circularity yet. Further on, studies by Hu et. al (2014)
29
presents that recycling is challenging and has barriers, reusing garments on the other hand can be beneficial if it leads to less production.
Further in the data presents that a purpose to invest in rental sales are to give an increased value to the customers but there are uncertainties about the profitability of rental sales. Even though working sustainable for the purpose itself sounds honorable the approach needs to be driven from the self-interest. Agency theory is described by Jensen & Meckling (1976) that every actor makes decisions that are made from everyone's self-interest. Which is confirmed in the data as well, Filippa K did not choose to continue with the rental fashion initiative. Although, there are studies that emphasizes that sustainability investments are profitable in the long perspective. Several studies in sustainability have presented a positive correlation between three components in TBL, which means that its sustainability increases so will also the economic issues (Cruz, 2009; Margolis & Walsh, 2003). Li et. al. (2014) argues that the cost of sustainability activities will be regained and can be used as a method to strengthen competitiveness.
5.2 Drivers to offer rental based sales
In terms of driving factors from the fashion producers’ point of view the data presents that motivating factors for the market actors are both to help fashion consumers and/or to need customer demands. Helping or assisting customers in sustainable fashion consumption is a commonly used description in the reports, seven of the seven reports mention this as a reason.
Raising awareness among the customer base, is mentioned by for example Ellos, on how to be more sustainable in the fashion consumption. Another identified driving factors in the empirical data is that customers have become more aware of sustainability and therefore are demanding certain attributes. Fashion producers are changing the business models in response to customers growing interest in sustainability. Do consumers need help or are the customers demanding change?
Despite the contradiction in these two driving factors, there are companies that claims both these two reasons for offering Sustainable fashion; H&M, Peak Performance and Filippa K.
The commonality of these two identified driving factors are however that the environmental awareness, from one way or another, is driving sustainable fashion consumption. Common awareness of climate change is a driver for working with sustainability as well as awareness of energy consumption is a main enabler for sustainable improvements in supply and demand
30
(Carter & Easton, 2011). Shen (2014) argues that consumers have increased their environmental interest and awareness which has initiated a change in people approach to consumption and sustainable fashion. This new environment in fashion market requires fast respondents to customer demands and have become more demanding (Hu et. al, 2014).
According to these studies the consumers have taken a great part of driving this change. The consumers drive and fashion producers acting upon that changes in the market demand are the general explanation in the literature. In accordance to this Carter & Easton (2011) states that companies that develops consumer products are generally early adopters to sustainability initiatives. This as well confirms the stated driving factor for sustainable fashion is consumer demands.
There are however other factors that can explain the drive to communicate to consumers. The empirical data presents that transparency in the supply chain and generally reporting to customers about sustainability work is crucial. Previous studies present the same, Haenlein (2014) argues that SSCM is critical in especially fast fashion, and therefore the companies are giving their sustainability reporting attention. Further on, this manner is described by Li et. al.
(2014) as “green marketing”, which is a strategy to attract customers.
With the assumption that fashion companies are adapting to consumer demands, the empirical data presents changing consumption habits. It is presented that these changing fashion habits includes a general approach to less clothing in the wardrobe. For consumers that are using fashion consumption though rental service, the traditional shopping has almost stopped. The existing rental service agencies are benefitting from this change of attitude and there is new entrance that want to compete with fast fashion.
Driving factors for fashion producers to follow customer demands for rental fashion could be crucial in order to not lose customers to other actors. Li et. al. (2014) states that the competitiveness in the fashion market can only maintain by meeting customer needs. The new entrance is a threat to both fast fashion as well as exclusive brand if the market trend of less consumption becomes a norm. The change in awareness from the customer base have according to some data changed the consumption habits by both less products in closet as well as using rental. In effect to this the speed of fashion is slowing down. Pal et. al. (2019) aligned with the data regarding the consumption habits and claims that customers are slowing down the fashion mechanism with the purpose to create longer lifetime for each fashion product. The combination of losing business opportunities to other rental service actors and that fashion as
31
a mechanism are slowing down could be a threat for the future of fashion producers. Whereby the threat of losing customers because of changing market and missing out business opportunities to new entrance.
5.3 Drivers to consume rental based sales
In order for a market to exist it needs a demand from the customer base and understanding the customer demand is previously discussed to be crucial in rental fashion as well. The empirical data presents driving factors that motivates consumer to utilize rental services in their fashion consumption. The identified factors are; keep closet up to date without damaging environment, more financially beneficial, designer brands are more accessible and the simplicity in consuming fashion for single occasions.
In the interest of keep the closet up to date without damaging the environment, is the driver to be ethical towards the society as well as being trendy. To care about our clothes and styling is previously described as the driving mechanism of fashion. The constant drive to recreate our style with the purpose to diversify and imitate, is what creates fashion according to Simmel (1957). Consumers drive to consume new clothes are described in terms of fashion as a mechanism and the drive to consume sustainable are the awareness of sustainability. These two driving factors are two of three factors described by Pal et. al. (2019) (2) critical – ecological and ethical, and (3) hedonic/recreational. The first driver presented by Pal et. al. (2019) is the economic aspect which is also identified in the empirical data as financially beneficial. It includes both consumers utilization to a higher quantitative of garments and to buy designer clothing. This driver for consumer to afford to buy clothes they otherwise can't afford. It is described in the literature how the democratization of fashion affected the industry; with rental based sales the fashion market has become more democratized. Further, the drivers in found in the economic aspects are for consumers to consume fashion for one occasion only. According to Samsioe (2017) the impulse consumption and shorter life cycles, that are a consequence of consuming for one occasion, are driving the increased pace of changes in fashion and stimulus for fast fashion. In case where the rental based sales are a substitute for fast fashion consumption this will affect the demand for fast fashion and future of fast fashion industry.
Samsioe (2017) argues that fast fashion companies are built abound consumers constant new desires for clothing and consuming new trends. Therefore, the industry is dependent on constantly creating new trends. All these possible consequences of the drivers; fashion becomes
