A Circular Business Model for the Clothing Industry.

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One of the biggest challenges facing industry around the world today is how to adapt and evolve from a linear economy to a circular economy.

In our current linear economy and business models, we extract materials from Earth, process them, ship them long distances, manufacture goods from those materials, ship the goods long distances, use those goods, and then dispose of those goods, whether in a landfill, thrown along the side of the road, or floating down a river and ultimately ending up in the ocean. A few products get reused, and even fewer get recycled, but overall it’s generally a one way trip from raw material extraction to disposal.

The idea of a circular economy is that we find ways to repair and reuse products much more, and at their end of life they become the raw material inputs for some other manufacturing process. They get remade into something else.

The fashion industry is currently one of the most wasteful and polluting industries in the world. People are buying far more clothing than ever, wearing each piece less, and almost all of that clothing eventually ends up in landfills. Manufacturers know that each piece will be worn less, and they want each person to buy more and more, so they are making them cheaper and less durable. In addition, they tend to overproduce to ensure that they have enough stock to meet each season’s possible orders, so a large amount ends up not being sold at all, and just goes directly to a landfill. Also, one of the biggest sources of microplastics in our oceans is from the washing of clothing. Many fabrics are hybrid materials that contain some types of plastics, and every time you wash them tiny pieces break off and end up in our water. Fish in every ocean around the world have been found to have these microplastics contaminating their bodies, and eventually our bodies when we eat them.

I started thinking about all of this, and was trying to imagine a way that the fashion and clothing industry might be changed from a linear one where everything gets used very little and ultimately ends up in a landfill, to one where clothing gets used much more, and at its end of life gets recycled back into the next generation of clothing, or other products. That last part is the key to making it truly circular. In a circular economy everything, at the end of its useful life, needs to be broken down, recycled, and/or remade into something new. In case you didn’t know (I didn’t), fabric can be broken down and remade back into thread which can be made into the next generation of clothing, and there are already a few fabric recyclers. How could the clothing industry be re-imagined and re-structured so that’s just what happens with clothing when nobody wants it anymore? To me that’s the biggest challenge.

Consumer-based recycling has never really caught on with everyone, and while it might result in a decent amount, it would never result in all, and not-likely even a majority of clothing ending up getting recycled. People hardly even recycle cans and bottles, much less old jeans and t-shirts. If post-consumer recycling isn’t that reliable, then I started wondering how a company might end up with the clothing at end-of-life, and why they would want to.

One obvious example that came to mind was when I’ve had to rent a tux for a wedding or other formal occasion. Tux rental companies buy tuxedos, rent them out for a certain amount of time, and then when they are worn out or too out of fashion, they then dispose of them in some way. Since they still own the garment, it is possible that they could send/sell it to a fabric recycler to be recycled at that point. That business model seemed like a good step, but obviously isn’t a perfect model for everyday clothing.

Could that be changed or adapted for the kind of clothes that people actually wear on a regular basis?

Lots of things in the world are switching to a service or subscription based model. A very common example being streaming services. You subscribe to Netflix, and can watch anything you want that is available on there as long as you keep paying your subscription. A good physical example in many companies are the large printers and copy machines. Most large companies don’t actually buy copiers anymore. They contract with a printer company, the printer company owns the machines, and they keep them in good repair, fix them when they’re not, provide the toner, etc. The original company doesn’t have to worry about anything except paying the bill for the service. They’re buying the service of printing and copying, not buying hardware. I started wondering if some kind of subscription service could be used with clothing. I wasn’t sure, but it seemed worth thinking about. If it could be made to work, then the subscription company would end up with the clothing at the end of its usable life, and so then could sell it to a fabric recycling company.

I started thinking along those lines, and trying to figure out why a consumer would want to have a clothing subscription, and why the company would want to offer such a subscription. Obviously it has to benefit both, plus it also should benefit the manufacturer if possible. Well, what’s the benefit of having Netflix? Having access to a large library of movies, shows, and documentaries that you can watch whenever you want. As long as you continue to pay your subscription then you can continue to watch their content.

What is the benefit to Netflix? They have millions of paying subscribers sending them money every month. This large regular income that could be counted on month after month was a game changer and virtually remade the entire film and television industry in a decade. Lots of other companies joined in and now there are many streaming services to subscribe to.

Of course a subscription for clothing would have to work a little differently than a streaming subscription. With a streaming subscription they can deliver whatever program you want to watch instantly to your device. With a clothing subscription they would have to physically send you clothing. How much clothing can you get at one time? Would it be a set number of pieces of clothing? Could you pay more to get more? What if one piece is much more expensive than another? What happens when things are no longer in fashion? Or don’t fit you anymore? I started trying to work out a model that might be able to deal with all of those things. Is it possible to make a model for the fashion industry that is sustainable, makes the manufacturer and subscription companies more money, makes the designers more money, gets clothing used far more, and would have enough advantages for consumers that they would want to use it?

Here’s what I eventually came up with. Let’s say a large clothing company offers subscriptions for a certain number of points, like 50 for example. What does 50 points even mean? Now let’s say that each piece of clothing would be worth a certain number of points. Let’s say this shirt is 5 points, these jeans are 10 points, this jacket is 15 points, these shoes are 10 points, this belt is 2 points. With a 50-point subscription, you can order up to 50 points of clothes from the “retailer” or subscription company. A couple pairs of jeans, a jacket, a few shirts, whatever. They ship you the clothes, or if they have a physical store nearby you can simply go pick them out and try them on at the store and take them home.

It’s a subscription, so you can keep the clothes as long as you keep paying your subscription, and more importantly, you can exchange the clothes anytime you want. Let’s say you receive those 10-point jeans and they don’t fit quite right, you just don’t like them as much as you thought, or you just don’t wear them as often as you thought you would. You simply go onto their site or app, select what you want to return which immediately frees up those points, and then select what you want to order instead. They send your new item(s) to you, and when the shipment arrives, you just put your returns into the bag, reseal it, slap the return label on, and send it back. If a person gains weight, or loses weight, or gets pregnant, they simply mark for return the clothes that aren’t fitting and order new ones in new sizes with those points. If it is fall now and I don’t need my summer clothes anymore, I can just swap them out for some fall clothes instead with those points. As long as I keep paying my subscription, then I can swap out the clothes whenever I want. I could completely change my wardrobe every month if I wanted. Have growing kids and are tired of constantly having to buy them new clothes only for them to outgrow them in 6 months or a year? Just use a subscription and swap the out for larger sizes whenever they get too tight or short. We all know that we have clothes sitting in our closets that we’ve only worn a couple times. Under this model, if you aren’t wearing them you’ll just send them back and use those points to order something that you will wear. Since you’re always paying a little bit for everything you have out on the subscription, you’re going to be far less likely to accumulate a closet full of clothes that you aren’t wearing. Send them back and someone else will get the clothes that you didn’t want or need.

Now the thought may come up that you might feel weird about wearing something that others might have worn, or wondering whether these particular articles of clothing are truly new or used. When a man goes to rent a tux, he simply doesn’t ask whether anyone has rented that particular tux before. As long as the tuxedo is in a very nice condition he doesn’t care. All he cares about is finding the right tux in the right size. These companies would have to work to change those kinds of perceptions, but eventually under this model, people would simply stop caring or being interested in whether a particular article of clothing had been worn before or not.

Another benefit of this model, imagine never needing to pack clothes for traveling again. Instead, you simply order clothes from the retailer and have them delivered to your hotel. You pick up your shipment at the front desk and when you are done, you simply throw everything back in the box/bag, put on the return label, and drop it back off with the front desk. No need to carry suitcases into the airport or through security. No need to worry about the airline losing your luggage because without clothes, you would only need a small carry-on bag. You arrive at the hotel and your wardrobe for the week is already there waiting for you, whether that is business attire, or vacation clothes such as beachwear, hiking clothes, ski outfits, etc. Retailers could offer special vacation subscription additions, where the customer could get an extra 100 points (for example) for the week or two of the customer’s travel. That way they don’t need to send the clothes back that they already have, and they don’t need to spend a huge amount of money to buy a whole new wardrobe for a week-long vacation. Now, the argument comes up that some people would be worried about the clothes they order not fitting them. For that eventuality, perhaps the retailer could have a physical location in the airports of popular destinations. You arrive in Hawaii, once you come out past security you stop at the store location, pick out a bunch of clothes for the week, and go off and enjoy yourself. Then when you’re done and you come back to the airport to go home, you simply drop the clothes back off before you go through security. In addition, since these clothes don’t need to travel on the plane and so can travel by far more efficient shipment methods such as train, cargo ship, or other standard delivery systems, and only travel there once. The subscription company can just have a warehouse in Hawaii that stores/cleans/repairs the clothing without needing to ship them back to the mainland. They can eliminate a lot of the weight of a plane, and therefore can save on fuel and emissions from the plane, which are much higher.

Okay, so what about the side of the subscription company. How does it benefit them? Let’s say the subscription is $1 per point. So a 50 point subscription is $50 a month. The subscriber can order anything they want up to 50 points. They can spend all 50 on one expensive item, or they can be frugal and get a bunch of items. Most clothing is shipped in simple plastic mailers and the company can go ahead and include return mailers in the bag to make returns easier. Let’s say the customer orders a pair of jeans for 10 points. That’s $10 per month that is being brought in by that one pair of jeans. I have jeans that I’ve had for a few years. Each year that these jeans are out on subscriptions is $120 for the company. The first customer doesn’t keep them long and sends them back, okay send them out to the next one who orders that size. In this new model, the longer something lasts, the more revenue it will generate for the company. The buyers for the subscription company will start prioritizing quality over just cost. They will start looking for clothing that lasts longer and cleans and repairs easier, to always be looking in new condition. Yes, the company will need staff to process returns, and have places to keep inventory that isn’t out on a subscription right now, but just imagine having a few million subscribers paying $50, $100, or even $200 a month. That adds up really fast.

Also, when there is inevitable wear and tear, those articles of clothing might be moved to a section of bargains with much lower point values because they are in a lower quality condition. There are always going to be people who would like to make their subscription points stretch further, and don’t mind a little wear as long as the clothes still look decent. Also, since fashion trends move so quickly, the points on any one item wouldn’t stay the same forever regardless of the condition. The point values would have to be re-evaluated at least once a year/season. Next season the current clothes might drop in value because they aren’t as popular. Those jeans are now only 7 or 8 points instead of 10. If a consumer keeps those jeans that entire time, they will suddenly find themselves with 2 or 3 freed up points that they can use to order something else.

Perhaps each clothing subscription service can have lots of different levels of quality. Each might have a super exclusive brand, a few lower luxury brands, and other decreasing levels of brands and styles available for all types of consumers. Just as each streaming service has lots of different shows, or even specializes in certain genres, each clothing subscription service could have lots of different brands under their umbrella. For instance, a large one might want to try to get a very prestigious brand or two, like Gucci or Versace, and then larger selections of progressively lower cost/point value options cascading in ever-lower tiers below that. Maybe clothes simply travel down through the different levels as they age, fall out of fashion, or become worn. How much more use would each piece of clothing get in a model like this? People order things they want to wear, and when they are tired of them they return them for something else that they will wear, and those returns go to someone else to use. People can have one consistent cost for clothing, and yet always be wearing the latest fashions.

In this model clothing belongs to the subscription company, and so that’s where it will be at its end of life, whether that is because they are too worn out, or too out of fashion for anyone to want them anymore. The subscription company can determine where those clothes go from there, and the clothes can be sold to a clothing/fabric recycler (manufacturer) to be shredded back down, remade into thread, and manufactured into the next generation of clothes, which will be sold back to the subscription company. Also, when there is excess inventory and no retailer wants it, just sell it straight to the recycling facility to be turned back into thread. No need to send it straight to the landfill. This constant flow of recycled material would become a major consistent and reliable source of raw materials for clothing manufacturers, and another source of revenue for the subscription companies. This is another major key to making the clothing industry sustainable.

This also brings up the question of how easily recycled something is. Things that are all of one material, such as cotton or wool, are easily recycled back into thread. When something is made of mixed materials it is much more difficult to separate and therefore much more difficult to recycle. Since selling the clothes back to a fabric recycler at the end of life would be an important revenue and material stream in this model, purchasers would not only start prioritizing quality in their purchasing, but recyclability. How easily this material can be broken down and remade into the next generation of fashion will largely determine its sell-back price at the end of its life, and is hugely important for making this industry circular and sustainable. The retailer could have contracts with different fabric recyclers to take different kinds of materials. They could even have contracts with companies who might take the mixed-material fabrics, and do something else with them such as make insulation or some other completely different type of product. That’s the goal of a circular economy, to make everything at its end of life an input in the making of the next generation of stuff.

While making sure that everything is recycled at the end of its usable life is an essential part of this model, recycling is the last resort, once no more use can be gotten out of them. Keeping clothing in use longer will always be more efficient than recycling, so another thing the subscription company will want to do is have a repair department. When there are small tears or damage in the clothing, they can simply be fixed up in the repair department and readied to go out on a subscription again. This will become even more important as clothing is gradually redesigned to be higher quality to last longer, and therefore more expensive. They will want to keep their investments making a profit for them as long as possible. They could even have agreements with the manufacturers to supply them with spare buttons/zippers/fabrics with lines of clothing so that repairs can be made.

Another thing that needs to be accounted for in a strategy aiming for sustainability is the other thing that gets shipped to the customer, the packaging. First off, the number of shipments will at least double, because everything that gets shipped to the customer will eventually be shipped back to the retailer. Because customers can exchange clothes whenever they like, it is very likely that there will be many more shipments. Perhaps 5 times more, perhaps 10 times more. Who knows? Now, just as the clothing can be recycled because it ends up back at the subscription company, at least half of the packaging will end up back with the subscription company as well from the return shipments. Most clothing, anymore, is shipped in plastic mailer bags. Now plastic isn’t generally a good element of a sustainable model, but because a large portion of these will end up back at the retailer, and because mailer bags are easily recyclable, and easily made from that recycled material, the retailer can have a contract with the supplier to return/sell all of those mailer bags back to the supplier/manufacturer of the packaging. Also, because they know the clothes will ultimately get returned to them, they can include return mailer bags with the original shipments. They can also encourage their customers to keep the original mailer bag and send it back inside the return mailer bag along with the clothes they are sending back. In that way perhaps a very large percentage of the mailer bags could be recycled. Ultimately it would be nice if the mailer bags were also biodegradable, for whatever percentage doesn’t get returned and gets thrown out, but that is a fairly difficult challenge, and may not be available in the beginning. Also, another option is to have the mailer bags be reusable. So, your new clothes get shipped to you, you open the bag, take out your new clothes, put in your returns, reseal the bag, slap the return label on it, and send it back.

Obviously this is a very different model for the clothing industry, and many changes would need to take place for this to be realized. For one, there would have to be partnerships between different companies in different industries. For example, a large retailer with a wide array of brands could try out this model, but they would need to partner with a professional cleaning service. Just as tuxedos need professionally cleaned when they are returned, all of the clothing returned would need to be professionally cleaned, evaluated, and possibly repaired before being sent out again. In addition, a fabric recycling facility would need to be partnered with to accept the clothing that is too damaged or out of fashion to be used anymore. Also, they would have a partnership with the supplier of the mailer bags to not only supply them but ensure that the returned bags get recycled.

Overall this model has a lot of benefits for the consumers, and the retailers/subscription companies, and the manufacturers. Profit margins can be increased for manufacturers as they can make much higher quality and longer lasting clothing and sell at higher prices. Profit margins can be increased for the retailers/subscription companies as they will have regular income coming in from large numbers of subscribers, and much more money per piece of clothing can be made. And consumers get the benefit of being able to wear all of the latest fashions they would like with a much lower upfront cost, and the freedom to exchange whatever they want whenever they want. And all of these benefits can be realized while making the fashion industry considerably more sustainable and circular.

I have talked over this model with quite a few friends, and I can tell you that just about all of them looked at me with wide eyes and told me they would sign up for a subscription like this right now if it existed. I really think it could work, and I really do think it solves a large number of the problems facing the clothing industry today. Not only does it provide possible solutions, it also provides huge financial benefits, and therefore motivations for companies to undertake the move to circularity. Why move towards sustainability? Because ultimately you can make a heck of a lot more money if you do!

After I came up with this model I did start looking around and actually there already are a few clothing rental and subscription services out there (armoire, vestiairy, nuuly, Rent the Runway, etc). I love that these services exist, as they are getting much more use out of clothing, but so far they seem to be a bit limited in how they work, what you can get with your subscription, and at the end they are often just selling off their old pieces, which means they won’t get recycled and still might ultimately end up in landfills. They are a great step in the right direction, but the ones I’ve looked at fall a bit short of a true circular business model. Try them out and see how they work for you, and show the fashion industry that people are interested in subscription services for clothing. If you have friends, family, or colleagues in the clothing industry, or just interested in a circular fashion industry send this over to them and see what they think of it. I’m really just trying to put this business model out there, and see what happens with it.

by Eric Sparks, 2023