The Future is Circular: How Startups Power Sustainability
At Victress Capital, we are building a portfolio that addresses the needs of the evolving consumer. That’s why we wanted to dive into the recommerce ecosystem. In this piece, we explore why it is critical for brands to adopt more circular strategies and how early-stage startups can help satiate a growing appetite for more sustainable commerce.
TLDR: It’s worth keeping high-priority tabs on this market.
Recommerce has flourished in recent years as more consumers embrace secondhand shopping habits including resale and thrifting. Emerging technology and innovation will fuel the next wave of recommerce to enable even more pervasive adoption. Secondhand markets currently represent a $35 billion industry, expected to more than double to $82 billion by 2030.
So what exactly is fashion’s problem? Have you ever stared into your closet with desperation wishing you had Marie Kondo on speed dial to help rationalize your messy heaps of clothing and yet still complain about having nothing to wear? On average, today’s consumer discards clothing after only seven wears, 9 billion garments sit unused in consumers’ closets, and 36 billion garments are tossed out each year in the U.S., despite 95% of them being reusable. Fashion’s harmful linear model drives an estimated 8–10% of global greenhouse gas (GHG) emissions, more than all international flights and maritime shipping combined.
Up to now, it has been difficult for consumers to easily escape this take-make-waste ecosystem. However, consumers are increasingly diagnosing these problems and prioritizing sustainability when making purchasing decisions:
- Nearly 2 in 3 consumers believe their individual consumption habits have a significant impact on the planet.
- In 2021, 244 million consumers said they have or are open to shopping secondhand products.
- Nearly half of Gen Z and Millennials are spending a larger proportion of their apparel budget on secondhand compared to 5 years ago.
The bottom line for brands is that recommerce is here to stay. As consumer demands evolve and policymakers set increasingly ambitious climate goals, the table stakes for retailers are being redefined:
- Resale is expected to grow 16x faster than the broader retail market by 2026.
- 78% of retail executives say their customers are already participating in resale, up 16% from 2020.
- 45% of Gen Z and Millennials say they’re more inclined to shop with brands that offer secondhand alongside new clothing, an increase of 11% from 2020.
Unfortunately, recommerce can introduce logistical complexity, full-price product cannibalization, and brand identity issues. This is why, for example, luxury brands have been slower to adopt it. However, all brands should be hard-pressed to invest in this growing trend in order to avoid obsolescence. Gabriela Hearst, Chloé’s creative director, warns that in the transition to a circular fashion economy participation equals survival.
The idea of “circularizing” fashion is certainly not novel. There are plenty of existing archetypes challenging the status quo of this perennial industry (Rent the Runway, The RealReal, ThredUp, Poshmark, & Depop, to name a few). But we believe this set of trailblazers only scratches the surface: there remains a $500 billion economic opportunity to fully transform how clothing is designed, sold, and consumed. Below are some technology categories within recommerce that we believe will drive continued adoption of circular consumption habits:
Resale & Upcycling Enablement: Adding resale and upcycling to a brand’s repertoire should facilitate customer retention and long-term brand relevance. Recurate, part of the Victress Capital portfolio, is tackling this issue head-on by providing integrated white-label resale marketplaces on brands’ eCommerce stores to allow consumers to buy and sell pre-loved items under the same familiar banner. Co-founder and CEO Adam Siegel recognized that retailers have been missing a monetization opportunity to third-party resale platforms. By owning this aspect of the value chain, brands can bolster stronger customer relationships and profit beyond the original point of sale.
Authentication Enablement: No one has fully solved the authentication problem that is needed to facilitate the habitual buying and selling of pre-loved items. In order to shift consumers away from fast fashion to resale at scale, alternative shopping needs to provide the same level of trust that firsthand shopping does. Rebag is streamlining the luxury handbag resale market with their proprietary technology Clair AI which uses image referencing to instantly identify and deliver resale value for handbags across 50 brands. Consulting with Clair allows consumers to make more educated decisions about their possessions. We are keeping our eyes on other innovative technologies that enhance and automate trust-building in consumer-to-consumer and brand-to-consumer interactions.
Digitized Wardrobes & Garment Sharing: We believe there is a tailwind for connected wardrobes that will make clothing more accessible, shareable, and ripe for resale (thank you for the inspiration, Cher Horowitz!). Storey allows users to seamlessly digitize their wardrobes, without the tedious task of manual photographing. Founded in 2020 by two ex-Googlers, Storey envisions digitized closets as a gateway to a more sustainable fashion future where clothing is worn longer, shared regularly, and resold often. Tulerie, a new type of peer-to-peer luxury closet, enables users to borrow the pieces they want without having to buy anything at all (whether new or resale). These new types of platforms are likely to be well received by Gen Z who values expression and sustainability in equal parts.
Design & Material Innovation: The fashion industry’s problems don’t stop at downstream consumer behavior. In order to shift from linear to circular, every part of the value chain needs to do its part. Evrnu, one champion of material circularity, converts garment waste into reusable fibers using a proprietary liquification process. Evrnu has collaborated with Levi Strauss, Target, and adidas by Stella McCartney to create a new standard for fashion that attempts to alleviate some of the negative impacts of production. Upstream innovation that matches downstream trends should be poised for upside.
Fashion in the Metaverse: Recommerce also doesn’t end with the physical product. As the metaverse grows, so too does digital fashion. The Dematerialised, a British startup, helps brands and creators set up digital fashion marketplaces using NFTs. Co-founders Karinna Nobbs and Marjorie Hernandez are disrupting the traditional fashion business models of production, consumption, and ownership with a more efficient and equitable paradigm. We are paying attention to companies that are ahead of the curve in bringing consumers exciting ways to explore the world of fashion while curbing harm to the environment.
A combination of social, environmental, and technological factors is fueling our continued interest in innovative business models that can push forward a more circular fashion economy with consumers at the forefront. The fervent commitment of younger generations will be a critical driver in remedying one of the largest consumer-facing industries on the planet.
Are you interested in new ways of thinking about recommerce? Reach out to us — we’d love to hear from you.