Circular value chains in fashion: Strengthening trust in second hand markets

In a world where appearances matter, slipping into a new dress or pair of jeans or showing off a new purse can be a big confidence booster. However, clothes that are new to you do not necessarily have to be brand new – they might have been pre-loved.

The World Economic Forum, Ralph Lauren, Vestiaire Collective and Global Innovator EVRYTHNG, in collaboration with Bain & Company, have launched a pilot to ensure the authentication of fashion products in second hand markets. This will reinforce the fashion circular business model, which is enabled by a technology platform able to perform authentication through a unique digital ID installed on each garment or accessory.

Several brands have shown a strong commitment to sustainability. One of the historical challenges for brands has been to promote the resale market because they cannot control whether branded products are fake and cannot risk being associated with poor quality counterfeits. This pilot has established the foundation for a global collaboration between manufacturers and brand owners, suppliers, consumers representatives and regulators. It leverages new digital traceability and authentication technologies to drive circularity and sustainability, creating new value for all stakeholders in the fashion value chain.

What fashion consumption habits have been generating in terms of waste is alarming. The global clothing and textile industry is responsible for nearly 100 million tonnes of waste every year – a figure that could jump by at least 50% by 2030.

One of the most relevant channels to further extend a product’s life, the second hand market grew to €33 billion in 2021. At the same time, the global counterfeiting industry is expected to hit $4.2 trillion by the end of 2022, driven by the sale of counterfeit clothing and followed by cosmetics and personal care, watches and jewellery, handbags and luggage.

According to a 2021 survey by Bain & Company, 87% of online shoppers worry about the authenticity of the products available on second hand marketplaces. They also say they would be willing to pay extra to ensure authenticity, up to 43% for a $50 item and 70% for items over $600.

Additionally, growing numbers of consumers require that brands ensure their fashion value chains are ethical, environmentally friendly and reliable. New authentication and digital traceability tools are needed to meet these sustainability requirements.

Furthermore, no standard technology currently exists to pursue product authentication, making the process more costly for each company.

Marketplaces often use costly in-person brand experts to inspect items by hand and determine authenticity based on “reasonable efforts”. Vestiaire Collective, for example, has trained a team of 60 authentication experts with backgrounds in luxury brands and auction houses.

The Forum, Ralph Lauren, resale platform Vestiaire Collective, and technology provider EVRYTHNG, in collaboration with Bain & Company, have launched a pilot to test a circular business model. A digital product authentication technology platform enables this: during production, each item is identified via a digital ID that stores data related to the garment’s journey every time the product tag is scanned. This process enables consumers and marketplaces to use the digital ID to authenticate products directly with the originating brand owner.

The first pilot of the new authentication platform has shown that companies like Ralph Lauren can have a direct connection to secondary-market consumers while gaining insight into the lifespan of its clothes. The digital traceability application helps discourage the sale of counterfeit clothing in resale marketplaces, protecting consumers, brands and marketplaces alike.

By using the authentication platform, brand owners can drive much needed circularity and sustainability in the industry, while participating in the resale process and maintain their brand image in the second hand market. They can access insights to inform their customer relationships and product development plans and tap into new revenue streams in collaboration with resale platforms. From the resale marketplace perspective, the digital authentication platform will increase consumer and brand trust in the secondary market and grow overall demand for resale.

This pilot is part of the Circular Operations and Value Chains through Traceability initiative led by the Forum’s Centre for Advanced Manufacturing and Supply Chains and the Circular Economy and Value Chains team.

We are looking for partners to scale this initiative and further expand the alliance. Manufacturing companies, brands and resale marketplaces are invited to join our movement. Contact us to learn more.