The Future of Fashion-Tech: A More Sustainable and Transparent Industry
The Fashion Industry is responsible for 10% of the world’s carbon emission and is the second-biggest consumer of water, but today with the rise of new innovative technologies and consumer demand for more eco-friendly practices, there are new investment opportunities shaping the future of fashion.
With a global market of more than $2T and worldwide online apparel and accessories sales forecasted to reach $765B in 2022, the fashion tech industry has concrete investment opportunities from its diverse market of B2B and B2C startups.
The fashion industry has already been under pressure to be digital-first and fully leverage new technologies, it must now adapt to the consumer demand of environmentally sustainable practices. Indeed, 75% of millennials are willing to change consumption habits for more sustainable offerings. Similarly, 73% of Generation Z consumers are willing to pay more for sustainable items.
Sustainability in fashion can be described as manufacturing, marketing and usage of products like clothes and accessories done in the most sustainable way. Innovation opportunities can be seen throughout the entire product life cycle — from the production of raw material and supply chain to marketing and sales.
Five Trends to Watch in the Fashion Tech Industry
Novel Fabrics: Brands are finding innovative alternatives to resource intensive materials such as cotton by creating biodegradable fabrics from agricultural waste products such as leaves and seaweed to create eco-friendly textile alternatives.
Companies: Kintra Fibers, Orange Fiber , Pinatex, Dyecoo
Supply Chain: Fashion tech startups are building digital supply chains that are more efficient, transparent, and predictive. Blockchain technology is becoming increasingly relevant as a potential tool to address this shift.
Companies: SourceMap
AI Powered Personalization Tools: The next era of fashion is all about personalization and prediction; brands are leveraging AI to decipher real-time fashion industry trends, gauge customer sentiments around new products, and provide custom-tailored style recommendations.
Companies: Findmine, Lilyai, Intelistyle
Circular Fashion: In order to reduce waste from surplus of unsold products, brands are shifting away from the “take-make-waste” linear system to a restorative one that designs out waste, keeps materials and products in use for as long as possible, and allows for the material to be repurposed at the end of its lifecycle.
Companies: Circular Systems, Thousand Fell, Oh Seven Days, Mud Jeans
Clothing Rental: “End of Ownership” is the mantra adopted by brands that will only become increasingly prominent. Renting is a more sustainable alternative to buying that emphasizes access rather than ownership and capitalizes on the sharing economy.
Companies: Wardrobe, Nuw, Madthread
What worries investors? Uncertainty on potential ROIs and navigating current risks including:
The Commercialization Gap: Sustainability focused fashion tech startups can often be more capital intensive in order to achieve scale and thus market-viable price points that lead to meaningful revenue. This puts more rigor on the part of investors in assessing a startup’s ability to grow from a pilot to full commercial scale.
Challenges to Equitable Valuation: Sustainability adds a new dimension that makes traditional approach to valuation more complex. Questions remain on how to take into account variables such as carbon emission, and how to benchmark novel materials and manufacturing processes.
While adapting to any change is not easy, the current state of fashion is going through a fundamental shift. We are inevitably moving away from the “wear-once and dispose” mantra to a “sustainability first” life style. These changing dynamics create new opportunities and investors will benefit from embracing sustainability as one of the core pillars of fashion tech going forward.
Even big corporations are making amends to transform their practices as consumer demand for sustainable practices and values is growing. Adidas, for example, has historically received negative publicity regarding unethical labor practices and material waste. Most recently, they launched their first mass-produced line of shoes made from plastic waste from the ocean.
This is an exciting time for the fashion industry and we’re just at the cusp of this evolution with a whole new generation of sustainability-first consumers leading the way.
