Amidst talk of an approaching global recession, businesses are wondering how they can pivot priorities to ensure they make it through an economic downturn. “As businesses start to reopen, they face potential shortages of their own as well as an unprecedented economic meltdown. The European Union is expecting the deepest recession in its history while, in the United States, roughly one in four people who had jobs in February were unemployed by the end of April” (GreenBiz).
When the 2008 financial crisis hit, sustainability in fashion was seen as a budding trend and priority, so those efforts got slashed for many businesses looking to pinch dollars where they could. However, that might not have been the best financial decision seeing that “[d]uring the 2008 financial crisis, B Corps were 64% more likely than other businesses of a similar size to make it through the downturn” (Forbes).
Heading into uncertain economic waters means brands need to double down on transparency and sustainability, in addition to looking towards money-saving tactics. According to industry experts, “[b]rands that are able to maintain their efforts to operate more sustainably, communicate transparently about why they may need to make compromises and offer an accessible price point will have a particularly powerful proposition,” as consumers value transparency about the items they’re purchasing (Business of Fashion).
While recessions do tend to highlight concerns around price sensitivity, what we’ve learned about consumer behavior throughout the last few years is that ethical and conscious consumerism is here to stay—and on a global scale.
“In a survey of consumers in the U.S., U.K. and Germany, UBS found that more than half are aware of people who have changed their shopping behavior over environmental concerns. And they found a willingness to change, in that while 58% said they were previously unaware of apparel’s environmental impact, 20% to 25% of those consumers would buy less clothing now that they are, and 28% to 31% said they’d “seek out sustainably manufactured clothing” (Retail Dive).
With buying preferences skewing towards values-driven consumption, consumers will still prioritize brands that align with their values—even if that means purchasing fewer items, shifting from trend-based impulse purchases to basics with more longevity, or looking to secondhand and resale outlets to attain the goods they want (GreenBiz). “[Circular] business models were relevant prior to the current environment that we find ourselves in, but I think they’re going to become more and more relevant…as consumers factor price as well as sustainability into their shopping choices” (Business of Fashion).
In fact, “[t]he secondhand apparel market is expected to be worth $53.2 billion by 2023, according to research firm GlobalData”, with price-sensitive and sustainability-focused customers driving much of that growth (Business of Fashion). While the resale market has already been on the rise, new consumer segments will likely be turning to resale and circular business models amidst an economic downturn.
“A recession is also likely to fortify the rise of resale and rental, already fast-growing markets that play into the desire for value and bargains that usually accompany a downturn.”Business of Fashion
The rising consumer class of Gen Z is driving much of the recent investment in circularity. While some millennials turned to fast fashion amidst the 2008 downturn, “fast fashion has sustainability problems that Gen Z cares a lot about…The sustainable fashion industry grew in response, with rental fashion companies, thrifting, and ethically made clothing brands becoming more popular. It’s a shift that the coronavirus recession accelerated.” (Insider).
As we continue to navigate new territory in this post-pandemic world we’re operating in, it’s clear that investments with long-term payout, and that align with the values held by the majority of the rising consumer base, are worth honing in on. When we look at brands that have prioritized sustainability over decades, the payoff is clear.
“A 2014 study, The Impact of Corporate Sustainability on Organizational Processes and Performance, showed that a $1 investment in 1992, in a portfolio consisting of 90 “High Sustainability” companies would have grown to $22.60 by 2010. A $1 investment in a portfolio of “Low Sustainability” companies would have grown to only $15.40 during the same time period. What’s more, the High Sustainability portfolio would have hit a low of just $14.39 while the Low Sustainability portfolio would have bottomed out at $8.14.”EcoEnclose
Fashion is a volatile industry, with consumer trends shifting suddenly. However, sustainable practices, transparency, and investing in circular models are all areas of clear growth, and show no signs of slowing down in importance. “In fact, brands that increased their commitment to sustainable goals and initiatives during previous recessions weathered downturns better than their counterparts and recovered more quickly and successfully” (GreenBiz).
Need some help weathering the storm with agility? Vi3’s suite of tools provide transparency throughout your supply chain, equip you with the data you need to implement circular business at each level, and the means to communicate these efforts with consumers—thereby building brand reputation and loyalty along the way. A downturn doesn’t need to mean abandoning ship on the efforts you’ve made thus far, because further investment just might make the difference between a thriving business and a struggling one.