Saying that the fashion industry has a waste and pollution problem is putting it mildly. In our sustainability focus last month, we looked at how microplastics are flooding the oceans, how over-production and offshore manufacturing have created a complex pattern of risk that’s proving difficult to unpick, and how even a single step towards more sustainable sourcing can make a big difference.
This month we’re tying that focus and our new examination of blockchain together, by spending some time with Stephanie Benedetto, who co-founded Queen of Raw, a marketplace and enterprise software solution designed to solve the problem of material over-ordering, waste, and disposal. With elements of blockchain at its heart, Queen of Raw is both a timely initiative and a smart application of a new technology to solve a longstanding issue.
The Interline: How serious a problem is fabric over-ordering and dead stock? And do you have any indication of which segments of fashion and textiles are the main contributors to it?
Stephanie Benedetto: Every single year, $120 billion’s worth of unused textiles are either left in a warehouse to gather dust, burned, or sent to landfill. We know that for sure, and we know from speaking to suppliers, brands, and retailers around the world where it comes from: approximately 15% of every single step, of every production run, ends up as waste. So this isn’t a problem that’s confined to any particular business model – it’s occurring globally, within every supply chain.
Now, there’s a certain percentage of that waste material that is actually fine for reuse, as well as the material that was ordered and never used in the first place, or excess sample yardage. But historically there was no real avenue to resell it, so it wound up being indefinitely warehoused, or burned.
It’s also important to say that this waste comes from every tier of the supply chain, down to a tier 14 supplier. So for a large brand or retailer we’re not just talking about scraps off the cutting room floor, and we’re not talking about 250 yards. This can be millions of yards of perfectly good fabric and thousands of SKUs around the world.
The Interline: So it’s not a case of improving material yield by doing better nesting, for example? We’re looking at a more systemic issue.
Stephanie Benedetto: Absolutely. This is clear overproduction, plain and simple. And it stems from businesses forecasting using the old-school calendar, churning through new styles to make more, faster. That’s what has led to the sheer volume of waste.
What’s really telling, though, is that for a long time this was considered fine. The economy was booming, and most of what they were making was being consumed. But fast forward to COVID and we’re in a crisis of supply and fundamental uncertainty, so having 15% of your bottom line eaten up by waste is something that brands can’t afford to do any more.
And it’s also not just the cost of the material ordered and not used that ends up sitting on the books; it’s the cost of warehousing or disposal that means that for every dollar’s worth of unused fabric they’re paying another dollar and a half in storage costs.
The Interline: In that context, what are the primary pressures that are bearing down on brands and retailers right now and encouraging them to change?
Stephanie Benedetto: Money, money, money. I would love to say it was people and planet, but we lead with the impact this is having on brands’ profitability for a reason, and then follow with the fact that fixing the problem also happens to be good for people and planet, so it’s seen as a win-win.
Don’t get me wrong: I know a lot of businesses are trying incredibly hard to become more sustainable, but they also need to answer to stakeholders and investors, so it’s vital that we get the economics right. And from that point of view, you can resell waste to free up costly warehouse space, recoup up to 15% of your bottom line, and also get a better sustainability story to tell, that should also improve your top-line sales.
The Interline: Like a lot of things, this seems to come down to a lack of visibility. A lot of brands are going to lack real insights into material sourcing and utilisation, so a lot of this waste is likely to be happening invisibly. How much of that is down to technology – or the lack thereof – and how much of it is cultural?
Stephanie Benedetto: Fashion is one of the most powerful industries in the world, and it’s still doing things the way my great-grandfather did in the late 1800s when he was in fashion and textiles in the original garment district of New York City. Some brands and retailers have adopted ERP, or inventory management systems, of course, but they tend to be older systems, and they don’t talk to each other – and that’s what creates these blind spots and inefficiencies. That’s the technology side of the problem.
Then you also have the cultural side that you’re talking about, and that’s where it becomes so important that you frame change in the right way, and in a way that makes financial sense. If we were to go into a brand and tell them we were going to digitise their supply chain, end-to-end, and make them 100% sustainable by 2030, they’d be paralysed because it would seem like too much, too fast. But if we start by explaining that they can understand and centralise their material waste, then either reuse it themselves or sell it to others to save money and become more efficient, that’s a clear step one.
There’s also a lot that’s changing, culturally at the moment. Sometimes it takes these kinds of cataclysmic events to really reshape how people think about the future, and I think right now we’re at the start of a move away from sustainability being a separate part of the business – it’s becoming just the way good business is done. That’s why we find ourselves talking to the CIOs, CEOs and CFOs today, rather than just the sustainability team – because this touches everyone.
The Interline: Before we get too deep into the enterprise side of all this, you also run a B2C marketplace where anyone can buy end of roll or unused fabrics. That feels as though it might be indicative of the way people’s attitudes are changing towards re-using and repurposing in fashion. Who is your typical customer for that side of the business?
Stephanie: Students, emerging designers, independent designers, and right up to small and medium-sized brands who can’t meet minimum quantities to place their own orders with suppliers. We’ve tried to open a door to high quality materials that they can access at a steep discount, with confidence that they’re sourcing in a sustainable way. We have more than 235,000 users, that’s growing month on month, and I think that speaks to the demand that’s out there.
The Interline: Moving on to the B2B service, what Queen Of Raw is offering isn’t, strictly speaking, a new business model. If you were to abstract it, and remove the technology portion, you’re filling a very similar role to that of a clearing house or an agent. So the technology really is where your vision differs. Tell us about how tackling this issue with an enterprise software solution is a different prospect.
Stephanie Benedetto: There were absolutely middlemen in the old school way of doing business – people who would literally come and pick up material you didn’t need, and pay you pennies for it. Not pennies on the dollar – literal pennies. The other key difference there is that this was all dark data; as a brand you didn’t know what happened to your excess material and where it went, and crucially you didn’t know why you had it in the first place. And that’s why this entire problem was never solved and only got compounded over time, because it remained invisible.
That’s also a problem that only technology could solve. It needed to act as a bridge, matchmaking buyers and sellers globally – it used to only be possible locally – and providing the right level of insight into why you had so much material waste to begin with, as well as indicating what a fair price point could be for selling it on the secondary market.
The way we think about the B2B marketplace is like Uber or Airbnb. We’re taking underutilised resources – just like a car or an apartment – and we’re putting them back into the chain of supply and demand. But what’s really awesome is that by doing that you’re also bringing a worldwide community together that couldn’t have been brought together in any other way, and that can lead to the creation of all sorts of shadow markets and additional solutions. Those are things that only an enterprise solution could do.
The Interline: Our focus is currently on blockchain, which as a topic is treated with quite a bit of scepticism – not just in fashion, but across industries. Those concerns usually boil down to a simple question, so we’re going to ask it here: why does Queen Of Raw’s marketplace need to run on a blockchain? What is preventing it from being done with a centralised database with a service layer on top?
Stephanie Benedetto: We are not a blockchain technology company. We are very specific about how, when and why we use blockchain, and our service could clearly operate without it. But when you start to grasp the scale of this problem, and you realise that you’re trying to connect the dots between a tier 1 supplier and a tier 14 supplier, and trying to keep track of who changed what, and when, and why… that’s why so much of this issue has stayed buried for so long. A centralised database isn’t going to fix that.
I know that blockchain means a lot of different things to a lot of people. To some of them it means nothing; to others it’s just cryptocurrency. But when it comes to securing the integrity of the supply data you’re collecting and creating a story around, I think it’s a game changer. So we run on the Ethereum blockchain right now, and we’re using some smart contracts that we’ve developed, but we could easily port it to Hyperledger or another alternative; the important part is that we’re building a system of record that can add real accountability and traceability to the history of a roll of fabric. And that’s something the industry has never had before, so it’s fitting that we’re doing it in an entirely new way.
The Interline: Blockchain as a system of record makes sense, but that record is only ever going to be as good as the information that’s added to it in the first place. Having integrity of data from tier 14 all the way downstream is only valuable if the data added at tier 14 is accurate, and that far upstream the incentives for improving data are thin on the ground. Is that something you’re trying to tackle?
Stephanie Benedetto: When we first started, the question of incentives came up a lot. We were asked by some major enterprise companies – from fast fashion to luxury – whether we thought their suppliers needed an incentive to buy into the vision and make sure that transparency and data integrity started from square one. And at the time we said maybe, but we thought it was best to wait and see. And over time we’ve found that the sheer value of a supplier keeping their contract with the customer, combined with the fact that we’re automating a lot of the process, meant that an extra incentive hasn’t been needed.
Now that might not apply in every case, so could we incentivise suppliers by tokenising what we’re doing? Absolutely we could, but I think that’s something that’s going to emerge organically from the brands and the suppliers. We’re open to doing it if it’s going to deliver better buy-in and better results, but so far it hasn’t been necessary.
The Interline: And how about the consumer face of blockchain? How open have you found the industry to be when it comes to opening their books, so to speak, to shoppers?
Stephanie Benedetto: I think it’s critical for businesses to capture the right data, analyse it and act on it, knowing that they can stand by their actions. But it’s equally important that they share that confidence publicly, because it’s already the case that businesses are doing great things but keeping them close to their chests. They’re afraid of being too bold, or getting in trouble with customers or the press, if their sustainability initiatives turn out to have been based on faulty information.
Well, now they can have proof, and they can stand by their statements on things like water usage, dye toxins, energy consumption and so on. To me it makes no sense to collect that information, make sure it’s transported from tier 14 all the way downstream, and then not talk about it. If you do that, you’re missing a chance to improve your brand reputation, customer loyalty, and top-line sales at the same time as cutting your costs and waste. I just don’t see a downside!
The Interline: What’s next? What trends are you observing that you think you can define the way that this whole conversation around blockchain and material waste evolves from here?
Stephanie Benedetto: I think the biggest thing COVID has taught us is what doesn’t work. It feels so dark right now, but there’s also a lot of light and a lot of opportunity for brands that start thinking about the future. Because we know the next generation supply chain is going to be on-demand, more local, more sustainable, and more digital, and if fashion businesses can get ahead of that they’ll be able to survive and thrive.
We’re at a real turning point right now, and the possibility space is massive for everyone from the startup to the big business that’s willing to push itself and challenge itself to do things differently. Our world is literally crying out for change, and the question for brands and retailers is how they can be a part of it, rather than ending up as a dinosaur. And for me, dead stock material is probably the most powerful untapped sourcing mechanism there is, so ignoring it is ignoring an easy way to start moving towards the future the fashion industry and the world needs.