by Lombard Odier

Is this a new era for old goods? How the second-hand market can promote a circular economy

In 2011, Julie Wainwright had an idea. The US e-commerce entrepreneur got to work at her kitchen table to set about creating an online marketplace for high-end fashion brands, but with a twist: all the items she helped to sell were second hand.

Since then, the consignment business known as The RealReal has grown from strength to strength, promoting a circular economy by offering luxury brands of used clothing, jewellery, watches, furniture and even art.

The company, which aims to be carbon neutral this year, is part of a growing movement that is trying to encourage sustainability through second-hand shopping.

“Unlike the traditional linear economy of make, use and dispose, the circular economy is restorative and regenerative by design,” says The RealReal. “With the help of our shoppers and consignors, we’re contributing to a more sustainable fashion industry.”

Fashion can be both fun and creative. But fast fashion, in which a garment is often transported thousands of miles for sale only to be thrown away after a handful of uses, is an expression of the wasteful, idle, lopsided and dirty (WILD) economy.

The global apparel industry produces an estimated 80 billion garments every year. A 2015 study by Barnardo’s, a UK charity, found that garments are worn approximately seven times, on average, before being thrown away. In China, that figure is closer to three times, according to Y Closet, the Chinese fashion-rental platform.

Moreover, the fashion industry is ranked fourth in terms of its negative environmental impact after housing, transport and food, according to Wrap, the UK charity. The Global Fashion Agenda and Boston Consulting Group estimate that the clothing industry’s CO2 emissions are set to climb to almost 2.8 billion tonnes a year within a decade. That is the equivalent of the emissions produced by roughly 230m cars driven for a year.

When it comes to water use, the United Nations Conference on Trade and Development (Unctad) estimates that the fashion industry consumes 93 billion cubic metres of water every year – enough to meet the needs of 5 million people. The UN estimates that it takes about 7,500 litres of water to make just one pair of jeans, which is the equivalent of what the average person drinks in seven years.

Clothing even contributes to the problem of plastic, with the Ellen MacArthur Foundation estimating that half a million tonnes of plastic microfibres end up in the world’s oceans each year from the washing of synthetic textiles such as nylon and polyester.

This WILD economy permeates many other sectors. In 2018, Americans threw out more than 12 million tons of furniture and furnishings, according to the country’s Environmental Protection Agency (EPA). And because of the large mix of materials involved, only about 40,000 tons of it was recycled. The result? In excess of 9.6 million tons metal, wood, leather, fabric, foam and other materials ended up going to landfill.

By helping to prolong the life of garments, furniture and other items through second-hand shopping, The RealReal is, helping the transition towards a Circular, Lean, Inclusive and Clean (CLIC™) economy. But it is not the only one.

In France, Vestiaire Collective, a fashion start-up that has grown to more than nine million users across dozens of countries, provides an online marketplace from second-hand clothing from luxury fashion brands. The company raised €59 million in funding last year, including from Asian investors. Altogether, it has raised more than €200 million in funding since it was founded in 2009.

In the UK, Thrift+ is a social venture that is trying to make buying second-hand items online from charities up and down the country easier and more attractive. The company, established in 2014, allows charities to raise additional funds by selling clothes online that are donated by their supporters. At the same time, it aims to promote the circular economy by providing an engaging and transparent experience for buying second-hand clothes.

Second-hand shopping has been growing as consumers become more aware about sustainability related issues. A 2018 study by the Global Fashion Agenda and Boston Consulting Group estimated that extending the life of clothes by an extra nine months reduces their carbon, water, and waste footprint by about 20 per cent to 30 per cent. It also reduces the cost of resources employed in supplying, washing and disposing of clothing by about one-fifth.

It has also received a significant boost with the outbreak of Covid-19. A survey last year by McKinsey & Company, the consultancy, found that two-thirds of surveyed consumers in the UK and Germany said that it had become even more important to limit impacts on climate change. It also found that 65 per cent of respondents were planning to purchase more durable fashion items, with 71 per cent planning to keep the items they already had for longer.

All of that has spurred online sales of used fashion and other items. Etsy, the online marketplace for handmade and vintage items, saw sales boom last year – in part through sales of face coverings but also because of people’s interest in the second-hand market.

Sustainability is the sum of many contributing factors. But encouraging second-hand shopping as a way of changing consumption patterns is an important step in the transition towards the CLIC™ economy. The companies that contribute to that shift today could well emerge as the champions of tomorrow.

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FT Rethink series focuses on the people, technology, strategies and systems moving us from an economy that is wasteful, idle, lopsided and dirty towards one that is circular, lean, inclusive and clean. The channel alternates between independent reporting from FT journalists and business perspectives from Lombard Odier