Green Issue: Retailers and Apparel Companies Moving Forward

Industry insiders say the economic crisis will cause adjustments to, but won’t derail, the drive to green business practices.

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Special Issue
WWD Green issue 10/28/2008

It isn’t easy being green — especially when there’s less green around. Experts in organic textiles and the environmental movement warn that cutbacks in corporate social responsibility are likely to be part of belt-tightening measures undertaken by manufacturers as the recession takes hold. Participants at the Organic Exchange Global Conference and Marketplace held in Porto, Portugal, this month suggested the apparel industry’s drive to sustainability can still bloom in today’s harsh economic climate.

This story first appeared in the October 28, 2008 issue of WWD.  Subscribe Today.

Still, the organic industry’s time-old conundrum — how to achieve price parity with conventional goods — has never been more critical. Goods with a price premium may remain highly niche, warned Nick Chiarelli, director of consumer trends at GfK Roper Consulting, which, in a study conducted six months ago, found that apparel is one of the first things Americans will spend less on.

The key is to make green products financially as well as morally compelling, he said, suggesting retailers may have to take a hit on margins.

“Our market research says our customer is very happy to play a part in helping the environment, but they’re not prepared to pay additionally for that — especially in the current market climate,” said Phil Chamberlain, head of sourcing for price-conscious retailer C&A Europe, which sells organic and conventional products with similar price tags.

A case in point: Luxury apparel line Edun has taken a 25 percent hit in department store sales, whereas its lower-priced secondary line Edun Live is up 29 percent, according to chief executive officer Christian Kemp-Griffin.

To ride out the helter-skelter economy, Edun is diversifying its approach to retail. E-commerce sites like the U.K.’s Adili are increasingly important for the brand. It’s also testing innovative retail concepts to shift leftover inventory. It introduced a pop-up concept — one opening in San Francisco with a second slated for Los Angeles in November. “It’s an interesting financial move, for us, it limits our risk,” Kemp-Griffin said.

Likewise, luxury fashion label Noir has diversified with a diffusion line dubbed Bllack Noir, which was picked up by Harvey Nichols and Seibu this season. That collection, which is in a lower price bracket than Noir, has helped boost the Danish company’s business 145 percent over last year.

“When it comes to Bllack Noir, newness is the key driver for retailers and consumers, so we have had a good start,” said Peter Ingwersen, Noir’s founder and ceo.

Indeed, many remain confident sustainable textiles offer apparel the added value to tempt consumers to part with their dwindling supply of cash.

“Consumers are looking for reasons not to buy,” said Marci Zaroff, founder and president of organic fashion and home label Under the Canopy, whose sales have doubled to an estimated $10 million this year. “The whole organic movement makes the consumer feel good about what they’re buying.”

In the lower market, organic and ethical labels are proving popular as means for supermarkets and high street retailers to lure reluctant consumers to open their pocketbooks.

“High street retailers with falling sales are finding ways to innovate and they’re finding an organic collection is new and topical and relevant,” said Sarah Compson, business development officer at the U.K.’s organic certifier The Soil Association, which has seen a 58 percent rise in applicants for organic textile certification so far this year. “In some ways the credit crunch is working in organic’s favor.”

At New Look, sales of organic cotton, plus knitwear, denim, linen and twill, which are new to the U.K. retailer this season, have beaten targets.

“It’s rare to have a product left in the [organic] section,” said Xavier Wilmes, New Look’s director of France and Belgium.

“Customer feedback [suggests] they want to buy into organic product, but that the easier we make it the more likely they are going to buy,” added Anna Greig, the chain’s organic and eco-buyer.

It’s a similar story at fast-fashion behemoth H&M. The chain more than doubled its use of organic cotton this year to 3,000 tons. It also introduced organic and recycled wool as well as recycled polyester this fall. Though organic garments sell at a premium, they are still within H&M price levels. “It makes it possible for customers to buy green fashion even during an economic slowdown,” a spokeswoman said.

Independent fashion boutiques are likewise weathering the storm. Though growth has slowed slightly this year at Sweden’s House of Organic, strong sales of stalwarts such as France’s Veja sneakers, Norway’s Fin and Sweden’s Righteous drove business up between 6 and 7 percent over 2007. “I think the fact that this economic slowdown makes people think more before they spend is resulting in better choices all over,” said owner Johanna Hofring. “A lot of pure impulse buying doesn’t happen.”

The retailer, which has stores in Stockholm and New York, will open a Parisian unit in 2009 while across the channel in London, Love Life Story, a concept combining an eco-fashion store, restaurant and beauty salon, will open next year.

At the marketplace in Porto, however, several suppliers said demand, particularly from high-end players, is slowing down. “We hear from [potential customers], ‘the market is slow, we have to think about it, we will come back, let’s see and calculate,’” said Paul Schnepf, managing director of Swiss high-end yarn manufacturer Hermann Bühler AG, whose organic yarn deliveries have dropped by 50 percent in the last few months.

Swiss organic cotton supplier Remei AG said orders had fallen from clients like French mass retailer Monoprix this year.

Others were upbeat. “Two customers have asked that we move out deliveries by a few weeks, but that’s been the extent of it,” said David Basson, president of Seattle-based organic garment supplier Greensource, whose clients, which include Macy’s Inc. and Wal-Mart Stores Inc., haven’t reduced their orders.

Recalling that many environmental departments were disbanded during the Eighties recession, consultant John Elkington, co-founder of Volans Ventures and SustainAbility, warned that as the recession deepens, some firms may drop CSR efforts altogether. “With the squeeze companies are facing, we’ll see cutbacks,” he predicted. In a time of great economic volatility, however, nobody wants surprises, declared Rebecca Calahan-Klein, director of programs at the Organic Exchange, pointing to brand image and sales losses due to environmental or social scandals.

“What you will see is the companies who are taking a very organized, strategic approach [to sustainability] will continue while those who have looked at it as a seasonal fad or just a marketing thing will drop out,” said Esther Verburg, Benelux general manager at the Dutch consultancy Made-By.

Take H&M, which has pledged to use 50 percent more organic materials every year for the next five years, and has questioned the sustainability of using 12.5 percent more raw materials on average every year. “The challenge is how to decouple the growth of the company with the growth of raw materials,” said Henrik Lampa, environmental supply chain manager.

The crisis will bring about fundamental changes in consumption that will benefit those companies that have invested in green or sustainable, said Edun’s Kemp-Griffin.

Such investment may prove vital for those who are in the enviable position of already being seen to be green. Some 76 percent of shoppers at Recreational Equipment Inc., for instance, rated the outdoor retailer as having a “very good” CSR performance, yet a full two-thirds couldn’t name a single environmental or social initiative. “We’re the outdoor industry so we must be green,” quipped REI’s director of product integrity, Kevin Myette. The move to sustainability is what people are already expecting, said Simonetta Carbonaro, a partner at Real-Ise business consultants, whose clients include Ikea and Migros. After all the hullabaloo of too many, too tempting bargains and ad messages aiming always at their wallets, consumers are now asking for time out, calling on fashion design to act as a driving force for change, she said.

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