eco-friendly fashion production and distribution
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Eco-Friendly Fashion Production and DistributionEMERGE2016
May 31, 2016
John Harmon, Senior Analyst
Fung Global Retail & Technology
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Agenda
• About Fung Global Retail & Technology• Addressing the Issues• Potential Solutions: The 3 Rs• What Li & Fung Is Doing…• Steps Forward
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About Fung Global Retail & Technology
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About the Fung Group
TRADING
LOGISTICS
DISTRIBUTION
RETAILING
Li & Fung LimitedListed on SEHK
Global Brands Group
Listed on SEHK
Fung Retailing Limited
Privately Held Entity
Convenience Retail
Asia LimitedListed on SEHKTrinity LimitedListed on SEHK
Branded Lifestyle Holdings Limited
LiFung Kids (Holdings) LimitedToys “R” Us (Asia)Suhyang Networks
UCCAL Fashion GroupPrivately Held Entities
Fung Holdings (1937) Ltd. A privately held entity and major shareholder of the Fung Group
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About Fung Global Retail & Technology
• The knowledge bank for the Fung Group• Focuses on emerging retail and tech trends,
specializing in retail and technology intersections, and building collaborative communities.
• Based in New York, London and Hong Kong• Publishes thematic and global market research
on topics such as the Internet of Things, digital payments, omni-channel retail, luxury and fashion trends and disruptive technologies.
FUNGTHINKTANK
RETAILTECH
MICRO MACRO
RETAIL REAL
ESTATE
THEMATIC RESEARCHVR
AI
IOT
DIGITALDIGITALDIGITALDIGITAL
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Our Expertise: A Unique Combination of Retail, Fashion and Tech• Fung Global Retail & Technology advises retailers, real estate developers and tech companies on
projects situated at the intersection of retail, tech and/or fashion.
• Our team offers a robust knowledge bank and significant experience in the retail, fashion and tech fields. We are involved in many areas of the business and believe this allows us to offer a unique perspective by focusing on the future and where the sector is heading.
FASHION TECHRETAIL
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Our Partnerships With Accelerators
ENTREPRENEURS
ROUNDTABLEACCELERATOR
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Addressing the Issues
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Environmental and Social Challenges from Apparel
• 80 billion pieces of clothing purchased worldwide each year
• Up 400% from 2 decades ago• ¾ garments end up in landfills or
are incinerated after short lifespan
• 1/6 of people worldwide work in garment industry
• Bangladesh is #2 country for fast fashion– Garment workers average $3/day
Source: The True Cost (2015)
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Current Climate
• Americans throw out average of 82 pounds of textiles per year
• Only 10% of clothing donated to thrift stores get sold– Rest ends up in landfills or flood
foreign markets
• Used garments account for over 50% of clothing sector by volume in many sub-Saharan African countries
• Average pair of jeans takes 7,000 liters to produce
• Average t-shirt takes 2,700 liters
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Fast Fashion• Produces products in a cost-efficient manner in
order to respond to fast-changing consumer tastes
• Uses concepts from electronics manufacturing to control production and inventory
• Clothing stays on the shelves a couple of weeks
• A model for the broader apparel industry?– Responds to changes in consumer preferences
– Better aligns production with demand
– Less discounting
• But… higher social cost and waste
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Potential Solutions: The 3 Rs
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Back to the 1970s—The 3 Rs
Reduce
• Reduce the amount of garments on the market, and the materials used to make them
Reuse
• Give already used goods a second lifeRecycle
• Find a new purpose for the raw materials of used goods
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1. Reduce
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Ways to Reduce…• New manufacturing technologies have been
developed that enable more on-demand creation of apparel
• Some also reduce the amount of water or other raw material used in the manufacturing
• When goods are made on-demand, there is no need for excess inventory to go unsold
• New manufacturing technologies and techniques include:– DPOL
– Electroloom
– Robotic Knitting
– 3D Printing
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Direct Panel on Loom (DPOL)• Loom attached to computer
• Weaving, cutting, patterning in one step
• Reduce lead times by 50 %
• Save 70-80% of water
• No fabric waste
• Every piece made to fit
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Electroloom• Mold designed using CAD
• Internal electric field
• Fibers guided in 3D shape around mold
• Fibers bind together
• Seamless fabric items on demand
• Only one step after design
• Raw material converted directly to finished garment
• Still in early development
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Robotic Knitting• Replaces human seamstresses
• Lower production costs
• Transform raw yarn directly into a final product or near-final product
• Shima Seiki
– Maximum knitting speed of 1.6 meters per second
– Partnered with Drexel University: Advanced Functional Fabrics of America
• Thursday Finest
– Manufactures colored and fitted knitted ties using a Shima Seiki flat knitting machine
– A dress takes 60 minutes to make, a tie takes only 30 minutes
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3D Printing—Examples in Consumer Goods
Orbitrec• world’s first 3D-printed
bike unveiled at CES
Normal• Custom-fit 3D-printed
earphones• Partnered with Rebecca
Minkoff on limited-edition products
• More sustainable
Mink Makeup Printer • Sub-$200 desktop printer
can print makeup
Shoes of Prey• Design your own
perfect shoes• Design studios in 6
Nordstrom stores
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2. Reuse
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Ways to Reuse…Used goods can be given second lives or repurposed with new marketplaces that are available
• Consignment economy
• Rental economy
• Sharing economy
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ConsignmentOnline Fashion Resale Marketplaces Show Explosive Growth
• thredUP, Tradesy, The RealReal, Poshmark, and Vestiaire Collective, reKindness
• Reasons for success– Heavy venture capital investment in online
consignment industry (over $300 million)
– Retail brands’ resale programs encouraged consumers’ sustainable consumption habits
– Consumers are convinced by great quality of secondhand apparel bought via online platforms
– Societal shift toward less ownership—the art of decluttering
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Online Consignment and Rental Marketplaces• thredUP—Buy like new clothing, and send in
your old clothing to get paid for every item that is sold
• Tradesy—Snap a photo and sell clothing and accessories with free shipping
• The RealReal—Online luxury consignment marketplace
• Poshmark—Shop from other people’s closets and sell what’s in yours
• Rent the Runway—Rent rather than buy new clothing to wear something new for any occasion
• reKindness—Take an item to give an item in the community closet
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Sharing Economy• Millennials Like Sharing Plans, but Want to Own
a Car
• 20% of millennials take public transit once a week or more, compared with just 7% of Gen Xers and 10% of baby boomers
• 35% of millennials indicated that they plan to purchase a vehicle in the next 12 months, compared to 25% of all US adults surveyed
• Millennials lease cars more than any other generation, and are leasing 50% more often today than they were five years ago
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Sharing Economy—“Uberifying” Virtually Every Industry • Disruptors:
– Uber, Airbnb, Lending Club, WeWork
• Valuations of sharing-economy companies have skyrocketed
• Revenues are projected to catch up to aggressive valuations
• Sharing-economy market:
$15 Billion2013
$335 Billion2025
CAGR: 29.5%
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3. Recycle
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Ways to Recycle…Take waste material and turn it into something new and usable
• Adidas making recycled shoes
• H&M “closing the loop”
• New startups on the scene to assist with recycling
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Adidas: Recovering Plastics
Material source: fishing nets, easier-to-reach beach trash and marine plastic waste
"Knitting in general eliminates waste, because you don't have to cut out the patterns like on traditional footwear… We use what we need for the shoe and waste nothing.“- Eric Liedtke, Head of Global Brands and Member of Executive Board at Adidas
Sneaker Prototype made of recycling
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H&M: “Closing the Loop”
H&M encourages customers to recycle clothing, which is then reused or turned into new clothes
2013– Customers can to drop off garments from any brand, no
matter the condition, to any H&M location and receive a discount.
2014– 38 million t-shirts worth of material was donated– H&M launched the “Close the Loop” clothing line, made using
recycled fibers2015
– “Recycling a t-shirt saves 2,100 liters of water.”— H&M’s 5 million-views “Close The Loop” Video
• “We have set the vision of becoming 100% circular.” --Anna Gedda, Head of Sustainability at H&M
2016• — H&M says it has recycled 25,000 tons of unwanted clothing since
2013
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Startups Engaged in Recycling
• Optoro works with retailers and manufacturers to manage and resell their returned /excess merchandise to achieve sustainable commerce
• Worn Again creates goods from recycled materials to solve challenges of textile waste
• RecycleBank rewards people for taking everyday green actions with discounts and deals from local and national businesses
• Bionic Yarn is making fabric from recycled ocean plastic
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What Li & Fung Is Doing…
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Sustainability Is Integral to our Business
“The Li & Fung approach is to work with customers, suppliers and industry partners to further the adoption of standards and best practices. We’ve met customer requests for sustainable sourcing across our different verticals.”
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Our Sustainability Strategy: Four Pillars
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Household• Household items, furniture and packaging
made from FSC or PEFC certified wooden/paper materials
• Household items made from natural materials:– Bamboo, roots, spent rubber trees
– Items made of recycled plastics
Household
Certified
PET
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Apparel• Sourcing organic cotton meeting GOTS
standards
• Using recycled yarn, polymers, leather and shearing
Apparel
Standards met
Partner
Campaign participator
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Beauty• Biodegradable items
• Silicone, sulphate, paraben and colorant free
• Items not tested on animals
• Toothpaste was first to be organic certified
Beauty
First toothpaste certified as organic in the world
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Steps Forward
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Steps Forward• Work on more sustainable packaging and
production
• Balance consumer desires for brand vs. sustainability
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Sustainable Packaging—Hot Trends
Coca-Cola introduced the world’s 1st 100% bio-based PlantBottle in June 2015
Edible Packaging
100 % Bio-Based PET Novel Bioplastics
LumiLid by Toray includes greater than 50 % renewable feedstock content
WikiCells has developed self-contained edible packaging with chocolate, dried fruit, nuts and seeds
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Brands vs. SustainabilitySources of Pressure
• Global consumers willing to make personal sacrifices to address environmental issues (Cone Communications and Ebiquity)
• Celebrities are more invested in environment campaign: Leonardo DiCaprio
• Millennials are environment-conscious: 88% of UK and US Millennials and Generation Xers believe brands need to do more good, not just ‘less bad.’” (Positive Luxury)
• “Clean Label” trend
• Answer to stockholders: in 2015, a Morgan Stanley analyst raised the price target on Nike based on its sustainability performance.
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Summary
• Consumerism and fast fashion pose challenges for society and the environment• There are new companies and new solutions to reduce, reuse and recycle, including
– New manufacturing technologies
– Consignment
– Sharing economy
• Several large companies are engaged in recycling• Li & Fung has a well-developed sustainability strategy• Brands are developing new packaging methods• Citizens are uniting to further environmental concerns
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Thank You!
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