Role of Circular Business Models in India

By Trina Roy
25 August, 2021
4 mins read

Project Circular+ aimed to build an evidence base for inclusive circular business models that can be mainstreamed within the textile and apparel sector. During the course of the project, some key learnings emerged that have been shaped by global best practices and specific industry input regarding the readiness India to adopt such circular business models.

Deliberations and research showed that the role of circular business models in India stands at a unique juncture to expand customer inclusion and influence responsible consumption.

Circular business models in India represent the opportunity to evolve fashion from being just aspirational to being accessible.

India, in addition to being a major manufacturing and recycling hub, is a significant and growing consumption hub. Unlike other manufacturing economies (in South Asia and SE Asia), India also boasts of established home-grown brands, manufacturers, and retailers. According to McKinsey’s Fashion Scope, the Indian apparel market is estimated to be worth USD 59.3 billion in 2022, making it the sixth-largest in the world. The Indian consumer, particularly the bulging middle class, is the key driving force behind such growth. The aggregate income of individuals in this segment of the population (with over USD 9,500 in annual income) is expected to triple between now and 2025.

This growing middle class, especially in tier 2 and tier 3 cities, is highly aspirational. Increased digitization, influencer marketing, heightened information about fashion trends and the growth of popular cultures, are key factors fueling this aspiration. Given this backdrop, circular business models such as rental and resale as emerging alternatives to the retail purchase, have significant potential to fashion from being just aspirational to being within reach for this consumer segment.

Marking a shift from the traditional ownership model, such models delivering fashion as a service are gaining consumer interest in India. Enterprises such as Flyrobe and Stage 3, pioneers in introducing such models in India, point out that high street fashion is now garnering increasing interest, particularly from middle-class consumers. Interestingly, half of such demand is emerging from non-metro tier 2 and 3 cities in India.

Circular business models are allowing for experimentation on ‘fashion as a service’ to not just offer new services to existing consumers but also expand the consumer base (through accessibility)

Several circular business model experiments are unfolding in India to cater to the needs of existing and new customers through more sustainable approaches. Leasing or subscription-based models by enterprises such as Stylenook and Krate for example, are seeing demand from consumers who aspire to keep up with fashion trends. Krate for instance introduced India’s first Men’s Clothing subscription box allowing consumers to use 2-3 items with branded apparel items at a monthly subscription of approximately USD 20.

Similarly, resale models offering the options to purchase and sell second-hand clothing are also gradually gaining acceptance, particularly among young shoppers (under 35 years of age) who exhibit greater buying frequencies and environmental consciousness. Start-ups such as Kiabza, Stylflip, Etashee for instance allow customers to both buy and sell branded apparel on their platform. While some of the re-commerce enterprises like Rewear and Ziniosa have created platforms for luxury wear, others like Saltscout are adopting approaches to the mainstream resale of fashion. Saltscout for instance focuses on the resale of garments from celebrity wardrobes to cater to the quintessential aspirational Indian customer.

Embedding technology into circular business models not just empowers consumers but also influences responsible consumption in the long run.

A key common characteristic of circular business models is the fact that they are designed to empower consumers by providing them with alternate and more responsible choices and in effect, influence a shift towards conscious consumption. Deploying technology to enhance transparency and generate product awareness is a popular approach being adopted by brands that focus on sustainable fashion and circular practices. For instance, By Rotation a UK based peer to peer rental fashion startup provides customers an ‘Impact Scale’ feature that allows them to track the ‘positive savings made by renting rather than buying’. With detailed research on the environmental impact of different items including clothing and accessories, users can use the data to make their own fashion choices.

On similar lines, Saltscout, an Indian social enterprise recently launched its new brand ‘Dolce Vee’ – ‘pre-owned’ or ‘pre-loved’ fashion brand with its own Environmental Footprint Calculator. Embedding technology QR Codes or Product IDs within products, brands to make consumers aware of the product’s journey. Such on-product technology enables the digitization of wardrobes and has high potential to influence the adoption of circular business models.

Additionally, transparency regarding pricing compositions is another interesting strategy that brands are turning towards to establish openness and connect with their customers. Flourish, a new ecommerce platform (currently in its beta stage) for instance provides customers a detailed insight into the price of their products. Customers on the product page get information about how much of the final price is towards raw materials, artisan wages, profits, among other factors.

Circular business models engender stronger consumer loyalty through mass personalization through digital and technology solutions.

With the proliferation of digital fashion and online retail, product differentiation and the adoption of innovative customer retention strategies have become paramount. Brands are increasingly working towards developing intimate relationships with customers by delivering personalized product experiences. Offering such bespoke experiences is a key characteristic of circular business models as they aspire to change consumer behaviour and help them transition to responsible consumption. Circular business models are experimenting with several approaches to deliver personalized buying experiences and secure customer loyalty. Enterprises like Bare Anatomy, Better India and Sirohi use subscription models to deliver bespoke experiences like capsule launches to develop a loyal customer base. Some enterprises focus on high touch consumer engagement through initiatives like video unboxing, personalized stylists’ tips and in cart follow-ups. Few of them also leverage technologies like Virtual Reality and Augmented Reality to deliver a virtual, yet seamless trial room experience.

For more information on the inclusive circular business models in India, please read our report here : Building Evidence for Inclusive Circular Business Models in the Indian Fashion Industry

Trina Roy
Trina Roy

Trina Roy is a Senior Associate with CAIF with a focus on Gender, Social and Inclusive Circular Business Models