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The Business Model for Sustainable Fashion



Let’s be honest, as young teenagers we all have drooled over the fashion statements made at Sex and The City since it aired in 1998.In the recent reboot of the show in 2022, to dress the ultimate shopaholics of the show, the costume designers have decided to collaborate not with multinational fashion brands but Thread-Up, a firm that sells second hand clothes from the wardrobes of all of us. Today’s generation don’t look for the durability of the clothes they wear but for Trends since desirability can be fleeting.


The Fashion industry is changing fast. Even though it generated 2.5 trillion dollars in revenue, it has been backlashed on the grounds of environmental reckoning. At the same time, an industry has been seen growing which challenges the traditional business model where consumers can get the same clothes as the high fashioned ones at 15% of the real price. The consumers have become more climate conscious to make sure that the things they purchase is a part of the circular economy.


80 Billion pieces of clothing are sold each year which is 400% more than what it used to be in the last 40 years. Data suggests that America alone is buying 5 times more clothing than what they did in 1980. But as always, it has a price-tag. For every 1kg of clothing produced, 23kg of Greenhouse gases are emitted. Textile production generates more CO2 than all International flights combined. Francheska Mustain, senior analyst at WGSN, The biggest forecasting firm in fashion industry reports that there exists over-production in the fashion industry because of various inefficiencies.


However, of all the clothing pieces bought, half of them are discarded within an year. Infact, Fashion is considered the second most polluting industry in the world after oil. The impact is huge on the environment. Fashion industry alone contributes to about 4-10% of global carbon emissions. By 2050, clothing sales can reach 175 million tonnes.


We all remember the pre-internet days when people would have garage sales at their place where they would put up things they no longer need for others to buy at cheap rates. With the onset of the internet, E-Bay has made it possible to spread it and create a thicker market for the same. In our generation, various other firms have grown up where they sell thrifted or second-hand clothing at cheap prices. Thread-Up is one of those start-up firms established in 2010 which is helping to dress up the cast of Sex and the City.


ThredUp CEO James Reinhart observed a huge market failure occurring in this side of the fashion industry which motivated him to start an online thrift store. He realized this loss might lead to a deadweight loss for the society if not used efficiently.


CEO of Thread-up believes that the waste of clothes worn only once is a big market failure especially because there are many others who are ready to purchase the same clothing.

The Business Model followed by Thread-Up is that they collect unique pieces of clothing from people’s wardrobes and price tag them on different stipulations. For brands like Gucci they pay 80% of the MRP and for cheaper fast fashion brands, they pay 5% of the MRP.


This kind of circular economy can not only change the Fashion game and make it cheaper and accessible for the upcoming generations but also pave the way for a sustainable environment. It is as follows as shown in the diagram below :

The real challenge posed for this model is Consumer Behaviour. Economists however are of the opinion that the mindsets of the people are fast changing towards thrifting. Not only so, acknowledgement towards environmental degradation is making the new generation make smarter choices. It wouldn’t be very long when our local stores are gonna have a separate consignment section for people to shop from.

However, the responsibility of the effects of Fast Fashion towards climate change shouldn’t only be on the consumers. It’s high time for the governments to wake up and understand that it is also one of their dirigisme responsibilities. It has to create enough green nudges for the citizens to align to. It’s important to recognize that the elite informed crowd isn’t ubiquitous to make such smart choices.