Utilising data in retail to improve sustainability.

 Olof Hoverfält, Principle Consultant, Strategy and Business Design at technology consultancy Reaktor, has worked with a wide range of major brands such as Adidas and Tommy Hilfiger. In this article, he shares the different ways that retailers can ensure sustainability, as well as the valuable uses of data in retail.

1. How can retailers make sure they work with sustainable and responsible suppliers? What should they look out for when choosing new suppliers and partners?

Look at what the brands do, not what they say they will do. Look particularly at the degree to which they are incorporating sustainability and responsibility into their business model. At the end of the day, the business model – the equation of value creation, capture, and delivery – is what makes or breaks true sustainability and responsibility in the long run.

In my own work, I see a rather clear distinction between brands that have already adopted sustainability as an integral part of their business model, and those that haven’t. The brands that have done so tend to benefit from the debate around sustainability in fashion, while the laggards easily find themselves on the defensive.

One progressive example is Patagonia’s Worn Wear recommerce program launched in 2017. It takes a proactive role in helping consumers repair, share and recycle their outdoor gear. Another example is Swedish sustainable outdoor clothing brand Houdini Sportswear’s Rental program. In addition to being proactive in research and promotion of regenerative lifestyles, they started offering a renting business model back in 2012 to avoid contributing to filling wardrobes with unused clothes. These are examples of suppliers that have not only been raising awareness and transparency in their products and operations, but actually pushed their business model in a sustainable direction. They are validating that sustainability and profitability need not be at odds. This, to me, is one of the best indicators when evaluating the sustainability and responsibility of suppliers.

2. Which ideas can fashion retailers implement to become more sustainable?

While fashion retailers continue to be challenged by digitalisation and the redrawing of their role between brands and consumers, sustainability brings many opportunities to create new value. Consumers increasingly demand honesty and transparency, but they are struggling in trying to figure out which brands and products are actually sustainable and which are merely greenwashed. This brings about new opportunities for retailers as normalisers and curators of such information across brands.

There are large differences in digital maturity across retailers and brands alike. Ideas and opportunities in sustainability are largely dependent on the organisation’s maturity and underlying digital capabilities. So, I’ll make a brief run-through from the basics to the advanced within my domain of using digital technology to build better and more sustainable business.

Firstly, the obvious opportunity is to add value through making it easier for consumers to make choices that are better aligned with their values. At its simplest, this can take the form of contextual and convenient access to the right information, but it could go deeper into normalising sustainability data in retail to make it easier to compare brands, and products across brands. This is essentially a supply-side data play of aggregating, normalising, and presenting information for the benefit of customers.

Secondly, this supplier information can be combined with customer insight as the other side of the equation. Many brands, particularly those with a strong direct-to-consumer model, are doing a very good job of building direct and meaningful relationships with their customers, including nuanced preference data. Retailers are also successfully building similar consumer relationships. While brands may have a strong but narrow affinity relationship, retailers may build a broader preference profile through a wider selection and a larger “share of wardrobe”, provided that they can synthesise the data in retail across brands. This is essentially a demand-side information play that, when done right, also benefits the customer.

Thirdly, the real opportunity lies in combining demand-side and supply-side insights to truly add value as an intermediary between consumers and brands. This is a position that is unique to retailers and something they would be wise to capitalise on. Some fashion retailers I have worked with have successfully used their unique position to turn cross-brand consumer data into a distinctive business asset. This is nothing extraordinary, but rather a natural and evolving part of the digitalization of the fashion retail industry. It is by no means easy to do, but the rewards may be substantial, or even a prerequisite for survival in the long run.

Finally, one advanced frontier in sustainability and data in retail is going beyond merely understanding consumers’ existing consumption behaviour, and into helping them understand themselves better. This is something I have gained some significant insight into through my open Wardrobe Diary project. My free service allows consumers to track everything they own and wear and thus learn what garments they actually use and what they don’t. It shows the real cost and sustainability performance of their garments over time – something many have never thought about, but most find really insightful. This data-driven perspective is new to consumers, brands and retailers alike, but it has already opened wide avenues of opportunities for betterment.

So I would say one idea that any fashion retailer can implement in some form is to start looking at sustainability from the perspective of the clothing utility they help provide, in addition to their supply chain.

3. What role does data in retail play in unlocking fashion sustainability?

Data is valuable in many ways and on many levels of abstraction, from shaping business strategy to optimising daily operations. The use of data in retail to build better business is no longer an add-on but is quickly becoming a must-have business capability. In my business and data strategy work with large clients, including fashion brands and retailers, one key theme is timely and common to all: the role of data. The need is no longer for evangelising the opportunity, but for figuring out how to tap it.

As a general note, unlocking value is not about what data to collect or what technologies to use to process it, but how aggressively to exploit these resources to build better or more sustainable business. This is a business issue, not one of technology or information processing. It belongs with the CEO, not the CIO or CTO. This is the first thing to understand about the role of data in retail. It is a crucially important topic to have a shared understanding about. For this reason, my work typically starts with top management about the current and potential role of data in retail from a strict business perspective. Business in this regard includes sustainability as that is similarly not a technical issue but a holistic business issue.

Regarding the role of data in retail, to unlock sustainability in fashion, it can be useful to make a distinction between efforts to improve the sustainability of one’s own operations, be it retail or product design and production, and efforts to improve the sustainability through the impact outside one’s own operations. This thinking is common in other industries such as equipment manufacturing, where the environmental impact of the production of the product is miniscule in comparison to its impact over its lifetime in use. This is particularly interesting for retailers, as their own operations are but a small part of the overall sustainability impact of the goods they sell. It is one thing to have carbon-neutral retail operations, but there might be a much bigger potential impact in getting the right product to the right customer at the right time. By this I don’t mean the conventional sales-driven marketing approach, but a true effort to deliver value over time as opposed to merely driving transactions.

My Wardrobe Diary project is one example in this domain as it precisely helps uncover what happens to the garments after they are sold, i.e. once they supposedly and hopefully start producing the value they were created to deliver. From a sustainability perspective, the Wardrobe Diary rather brutally shows consumers all the garments they never use, and which subsequently perhaps should not have been purchased in the first place. We all have them, and they all have their sustainability impact. A product that is produced and delivered but never used is about as unsustainable as it gets. This is where data in retail can have an enormous role in unlocking sustainability in fashion at the system level. Reducing the supply chain footprint of a product by, say 25%, is great. Reducing our wardrobes by just as much is a different and complementary opportunity. The former is mainly in the domain of progressive brands, the latter is an opportunity for both brands and retailers.

One issue with this perspective on sustainability is that it is at odds with the conventional product and retail business of optimising sales rather than continuous value. But it doesn’t have to be, and progressive companies know this and are ensuring that they stay profitable by potentially selling less but better. The ones who take an outside-in view to seeking to understand the value they deliver, and change their business model accordingly are likely to be the winners in the long run. Data plays a crucial role in uncovering and exploiting the positive opportunities the sustainability pressures in fashion keep bringing about. And that is why the role of data is first and foremost a business issue.

4. Tell us more about how the industry must capitalise on data-driven insights to make real change

First of all and as I mentioned before, using data-driven insights to make real change is a business issue and needs to be owned by the business. Data capabilities may be owned and developed by some form of centralised centre of excellence, but data-driven insights are only useful if they inform or drive daily decision-making across the organisation and throughout operations. It is good to remember that decisions are made every day regardless of the extent to which they are data-informed. Any attempt to bring in the use of data entails changing something that already exists. So in order for real change to happen, a data-driven mindset and culture needs to be infused into the very fabric of business operations, from top leadership to the store floor.

Capitalising on data-driven insights is no easy feat, but its rewards can be substantial, even existential. Industries are typically transformed by progressive companies that push themselves to renew well before it is inevitable. Few industries at the moment face so much consumer pressure to improve sustainability as fashion. Given the complex nature of the problems that need to be solved, companies that have built the capabilities to efficiently use data for both exploration and execution are likely to be the ones that come out ahead.

At the industry level, capitalising on data-driven insights to make real change means looking at the current problems at a system level. This goes beyond the single company, and also includes consumers as key actors in the equation. I’m coming back to the topic of the use of clothes again as that has both been largely overlooked until recently, and because it carries enormous potential for improvement when taking a data-driven approach to analysing it. Let’s take renting, and Swedish Hack Your Closet as an example. They offer curated preloved clothes as a subscription service. What is brilliant about the concept is that it unbundles ownership and use, which very efficiently solves the problem of need for variety combined with need for lots of uses for a single garment. Looking at data on how consumers actually use their own clothes, and how they use such access-based services sheds light on the opportunities at the system level. It might be that fashion as an industry could produce less but better, earn a higher price with fewer items, and still serve the same amount of customers but in a far more sustainable way. Time and progressive companies will tell.

5. What would be your top tips for retailers that want to become more sustainable but struggle to invest significant sums of money to implement big changes?

My top tips in such a common situation would be for retailers to:

1. Take a good look at how your customers use the products they buy. The famous Jobs To Be Done quote by Clayton Christensen that “people don’t need a quarter-inch drill, but a quarter-inch hole” holds true in fashion too. Understanding consumers’ various and evolving fashion jobs to be done at greater depth does not necessarily entail big changes, but is primarily about sensing and understanding the shifts in consumer behaviour. This is particularly relevant as the industry is expanding into service-based models, i.e. towards providing continuous value rather than selling a product. This is a well-known access-over-ownership pattern that is transforming other industries. Staying tuned with this change in how customers use and relate to the products they have bought as it is likely to pay off.

2. Think about how you could have a meaningful relationship with your customers while they are using the products they have bought. Pursuing such opportunities does not necessarily require implementing big changes either. It may start with offering maintenance or repair at certain intervals, or recycling or resale when no longer used. The point should not be to seek opportunities to sell more, but to make sure that customers have what they need, and only what they need, and get the most out of what they have. The difference between this and an ordinary loyalty program may seem small, but the underlying mindset shift towards continuous value over transactions makes all the difference.

3. Build a capability to experiment and learn. This is required in order to pursue either of the previous two. Disciplined experimentation is not only the sensible way to innovate, but typically also the most cost-efficient way to figure out what to bet on next, be it customer value, business development, or sustainability, or ideally a combination. This is essentially a mindset and culture change which doesn’t necessarily include significant sums of money nor big changes. The nice thing about digital technology is that it tends to democratise the pursuit of betterment. Opportunities to become more sustainable are increasingly open to all, regardless of resources.