Fashion E-commerce Crisis: Is sustainability the judging factor of its future?

Analyzing e-commerce within the fashion industry requires a close examination of the key players shaping current trends. These players include luxury brand platforms, fast-fashion platforms, and second-hand platforms, each presenting its own set of challenges and opportunities.

According to Business of Fashion, multi-brand luxury retailers have been experiencing issues with e-commerce for a considerable time. Moreover, there seems to be no silver lining to the situation, as it may be worsening over time. Luxury multi-brand retailers, such as Farfetch and Matchesfashion, face distinctive challenges in the ecommerce landscape. Given the top-down approach luxury brands typically take in customer interactions, the democratic nature of digital platforms may present itself as challenging. For instance, they struggle to maintain exclusivity and brand image when moving to the digital landscape. Unlike fast-fashion counterparts, many luxury brands have traditionally prioritized in-store and tailor-made shopping experiences, posing a challenge when adapting to online platforms. Moreover, there are considerable operating costs associated with maintaining digital e-commerce infrastructure for luxury brands. These expenses encompass transportation, information technology, and ensuring authenticity, all of which contribute to the overall operational overhead. The latter makes it more challenging for luxury brand platforms to make a profit and stay competitive in the industry.

According to Financial Times, in mid-December 2023, Farfetch was acquired by the Korean e-commerce group Coupang in $500 million deal, that marked a significant downfall for a company once valued at $24.9 billion in New York. In the same month, UK-based competitor Matchesfashion was sold to Mike Ashley's Frasers Group for ￡52 million, leading to substantial losses for its private equity owner Apax Partners, which acquired the company in 2017 for $1 billion. Tom Chapman, co-founder of Matchesfashion, emphasized: “It has always been clear to us that a fashion marketplace business would struggle to be profitable. You can’t operate an ecommerce luxury fashion business on those margins.’’ However, after two months of the acquisition, Frasers Group announced the closure of Matchesfashion due to challenges associated with restructuring and stabilising thebusiness and failing to meet their business plan targets.

Furthermore, consumer behavior has undergone significant shifts, particularly in response to the COVID-19 pandemic. The crisis has accelerated the adoption of online shopping, enhancing the need for luxury brands to adapt their strategies to meet evolving consumer preferences and expectations. Adding to that, trends show a growing demand for enhanced exclusivity and personalized shopping experiences among luxury shoppers. Ultimately, shopping is no longer merely about making a purchase; consumers seek to create lasting memories associated with the product, the purchasing process, and the emotions evoked by the experience.

SHEIN : Is Its Rise Truly Inevitable?

Interestingly, SHEIN, the Chinese-owned largest fast-fashion retailer by sales in the US and one of the world's most popular shopping apps, encompasses a new era in the fast-fashion industry. The SHEIN app had over 261.9 million downloads in 2023, compared to 195.8 million downloads in 2022 (Statista, 2024). According to the figures by Daxue Consulting, this number has been increasing since 2019. The Guardian claims that In a recent one-year period, while fashion brands like Gap, H&M, and Zara listed 12,000 to 35,000 new items on their websites, SHEIN listed 1.3 million.

To explain the success behind SHEIN, it’s important to take a look at its business model, which thrives on the following core principles:

- Fast Fashion and Trend Agility: SHEIN quickly turns runway trends into affordable and accessible pieces for consumers.

- Vertical Integration: SHEIN controls its entire supply chain, from design to retail. Digital-First Approach: SHEIN is primarily an online brand, focusing on e-commerce.

- Large Inventory and Product Diversity: SHEIN offers a wide range of products, including clothing, accessories, footwear, and lifestyle items.

- Pricing Strategy: SHEIN provides fashion-forward items at low prices, making them affordable for many consumers.

- Data-Driven Decision-Making: SHEIN uses data analytics and consumer insights to make decisions.

SHEIN has recently introduced a new feature: a third-party marketplace, offering significant incentives to booming businesses to sell their items on its platform. According to The Wall Street Journal, to sell items on SHEIN, third-party brands must have annual sales of $2 million on Amazon. For those that meet this requirement, SHEIN provides additional incentives, including free advertising and no commission for the first three months.

However, SHEIN's domination in fast fashion comes at a significant cost to our sustainable future. According to Eco-Stylist, t’s estimated that around 85% of textiles end up in landfills each year, with SHEIN being one of the primary contributors to this issue. Furthermore, a test conducted by Greenpeace in Germany revealed hazardous chemicals exceeding EU regulatory limits in several items purchased from the SHEIN website and a pop-up store, including garments and shoes for men, women, and children.

Second-Hand Platforms: A New Player Emerging in E-Commerce?

In the era of conscious consumerism and sustainability, the fashion industry is witnessing a paradigm shift. Faircado, a revolutionary platform co-founded by a Belgian based in Berlin, Evoléna de Wilde d’Estmael, is leading the change towards a more sustainable future by reducing the waste and fighting overconsumption. Faircado is an AI-powered browser plugin which automatically finds cheaper second-hand alternatives when consumers are shopping online. Therefore, simplifying the process of buying second-hand products. The potential of this initiative was recognised at the Slush 100 Startup Competition in 2023, where Faircado won a one million euro investment.

At the core of Faircado's mission is the belief that second-hand should be the consumer's first choice. Evoléna de Wilde d’Estmael states: ‘’We’re on a mission to protect the planet by turning ecommerce into recommerce – one second-hand find at a time.’’ By promoting second-hand shopping as customers’ first option, Faircado empowers consumers to make environmentally conscious choices without compromising on quality or convenience. In doing so, Faircado not only revolutionizes the way we shop but also contributes significantly to reducing our environmental footprint.

However, second-hand platforms face the challenge that a significant portion of goods cannot be thrifted, such as underwear, sportswear, etc. Additionally, there is a generational gap, with differences in age categories and their willingness to shop secondhand.

For instance, the data shows that while 42% of consumers aged between 18-24 are willing to buy second-hand clothes, the number decreases to 32% in the age category of 38-55 and further declines for the boomer generation (56-65+) to only 16%.

What about the future of e-commerce in fashion industry?

In the era of conscious consumerism and sustainability, the fashion industry is experiencing a paradigm shift. It's evident that every sector, whether it's fast fashion, luxury brands, or second-hand markets, is dealing with sustainability challenges to varying degrees. According to the Statista 2024, the global e-commerce industry used approximately 2.1 billion pounds of plastic packaging in 2019 and it is projected that the latter will increase and reach an estimated 4.5 billion pounds by 2025.

Our journey towards a sustainable future isn't merely in the hands of corporations, brands, or the retail industry. It's a collaborative and joint effort, where consumers play a significant role. According to the Nosto (commerce experience platform) survey of consumers from the UK and the US, 61% of them prioritize price over sustainability when shopping for fashion.

Sustainability must evolve from being an option to a fundamental prerequisite for a resilient fashion industry. To achieve this, we must reimagine, rethink and redefine our approach to consumption. Yet, sustainability alone isn't enough to reshape our future. We must also consider the transformative power of shifting consumer behaviors. We need new narratives, creative stories, and inspiring visions, to enhance belief in a brighter and more sustainable future. We must let people understand that they possess power to drive the change and to shift the process towards a more sustainable tomorrow, not just for the fashion industry, but beyond.

The future of fashion is now and its upon us to make it more resilient. Through demanding more sustainable practices, adjusting our shopping behaviour, making informed choices, and supporting ethical production, we are shaping tomorrow - a tomorrow that once seemed so hopeless.