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Eco-Friendly Fashion Production and Distribution
EMERGE2016
May 31, 2016
John Harmon, Senior Analyst
Fung Global Retail & Technology
2
Agenda
• About Fung Global Retail & Technology
• Addressing the Issues
• Potential Solutions: The 3 Rs
• What Li & Fung Is Doing…
• Steps Forward
3
About Fung Global Retail & Technology
4
About the Fung Group
TRADING LOGISTIC
S
DISTRIBUTIO
N
RETAILING
Li & Fung Limited
Listed on SEHK
Global Brands Group
Listed on SEHK
Fung Retailing Limited
Privately Held Entity
Convenience Retail
Asia Limited
Listed on SEHK
Trinity Limited
Listed on SEHK
Branded Lifestyle Holdings Limited
LiFung Kids (Holdings) Limited
Toys “R” Us (Asia)
Suhyang Networks
UCCAL Fashion Group
Privately Held Entities
Fung Holdings (1937) Ltd.
A privately held entity and major shareholder of the Fung Group
5
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.
FUNG
THINK
TANK
RETAIL
TECH
MICRO
MACRO
RETAIL
REAL
ESTATE
THEMATIC
RESEARCH
VR
AI
IOT
DIGITAL
DIGITAL
DIGITAL
DIGITAL
6
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
7
Our Partnerships With Accelerators
ENTREPRENEUR
S
ROUNDTABLE
ACCELERATOR
8
Addressing the Issues
9
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)
10
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
11
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
12
Potential Solutions: The 3 Rs
13
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 life
Recycle
• Find a new purpose for the raw materials of used
goods
14
1. Reduce
15
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
16
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
17
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
18
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
19
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
20
2. Reuse
21
Ways to Reuse…
Used goods can be given second lives or repurposed
with new marketplaces that are available
• Consignment economy
• Rental economy
• Sharing economy
22
Consignment
Online 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
23
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
24
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
25
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 Billion
2013
$335 Billion
2025
CAGR: 29.5%
26
3. Recycle
27
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
28
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
29
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
fibers
2015
– “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
30
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
31
What Li & Fung Is Doing…
32
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.”
33
Our Sustainability Strategy: Four Pillars
34
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
PE
T
35
Apparel
• Sourcing organic cotton meeting GOTS
standards
• Using recycled yarn, polymers, leather and
shearing
Apparel
Standards met
Partner
Campaign participator
36
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
37
Steps Forward
38
Steps Forward
• Work on more sustainable packaging and production
• Balance consumer desires for brand vs. sustainability
39
Sustainable Packaging—Hot Trends
Coca-Cola introduced the world’s
1st 100% bio-based PlantBottle in
June 2015
Edible Packaging100 % 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
40
Brands vs. Sustainability
Sources 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.
41
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
42
Thank You!

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Emerge 2016—Eco-Friendly Fashion Production and Distribution

  • 1. 1 Eco-Friendly Fashion Production and Distribution EMERGE2016 May 31, 2016 John Harmon, Senior Analyst Fung Global Retail & Technology
  • 2. 2 Agenda • About Fung Global Retail & Technology • Addressing the Issues • Potential Solutions: The 3 Rs • What Li & Fung Is Doing… • Steps Forward
  • 3. 3 About Fung Global Retail & Technology
  • 4. 4 About the Fung Group TRADING LOGISTIC S DISTRIBUTIO N RETAILING Li & Fung Limited Listed on SEHK Global Brands Group Listed on SEHK Fung Retailing Limited Privately Held Entity Convenience Retail Asia Limited Listed on SEHK Trinity Limited Listed on SEHK Branded Lifestyle Holdings Limited LiFung Kids (Holdings) Limited Toys “R” Us (Asia) Suhyang Networks UCCAL Fashion Group Privately Held Entities Fung Holdings (1937) Ltd. A privately held entity and major shareholder of the Fung Group
  • 5. 5 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. FUNG THINK TANK RETAIL TECH MICRO MACRO RETAIL REAL ESTATE THEMATIC RESEARCH VR AI IOT DIGITAL DIGITAL DIGITAL DIGITAL
  • 6. 6 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
  • 7. 7 Our Partnerships With Accelerators ENTREPRENEUR S ROUNDTABLE ACCELERATOR
  • 9. 9 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)
  • 10. 10 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
  • 11. 11 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
  • 13. 13 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 life Recycle • Find a new purpose for the raw materials of used goods
  • 15. 15 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
  • 16. 16 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
  • 17. 17 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
  • 18. 18 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
  • 19. 19 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
  • 21. 21 Ways to Reuse… Used goods can be given second lives or repurposed with new marketplaces that are available • Consignment economy • Rental economy • Sharing economy
  • 22. 22 Consignment Online 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
  • 23. 23 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
  • 24. 24 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
  • 25. 25 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 Billion 2013 $335 Billion 2025 CAGR: 29.5%
  • 27. 27 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
  • 28. 28 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
  • 29. 29 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 fibers 2015 – “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
  • 30. 30 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
  • 31. 31 What Li & Fung Is Doing…
  • 32. 32 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.”
  • 34. 34 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 PE T
  • 35. 35 Apparel • Sourcing organic cotton meeting GOTS standards • Using recycled yarn, polymers, leather and shearing Apparel Standards met Partner Campaign participator
  • 36. 36 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
  • 38. 38 Steps Forward • Work on more sustainable packaging and production • Balance consumer desires for brand vs. sustainability
  • 39. 39 Sustainable Packaging—Hot Trends Coca-Cola introduced the world’s 1st 100% bio-based PlantBottle in June 2015 Edible Packaging100 % 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
  • 40. 40 Brands vs. Sustainability Sources 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.
  • 41. 41 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