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Innovation in Fashion to Transform the Fashion Industry at $20 Billion to $30 Billion Annually

January 22, 2020 By Analysis.org

Innovations emerging in the fashion industry in response to sustainability pressures present unprecedented investment opportunities, which Boston Consulting Group (BCG) and Fashion for Good estimate at $20 billion to $30 billion annually, according to their new report, Financing the Transformation in the Fashion Industry: Unlocking Investment to Scale Innovation, which is being released today.

Sustainability is at the top of the fashion industry’s agenda, as leaders recognize the urgent need to move toward responsible practices under growing consumer and regulatory pressures. The question is how the industry will transform to achieve a sustainable operating model. A step change requires disruptive innovation in the form of new materials, processes, technologies, and business models.

The fashion industry has historically engaged in a cost-driven race to the bottom, giving little attention to radical new technologies. However, a perfect storm of innovation and opportunity is now forming, and investors and companies that can capitalize on sustainability and impact-driven innovation will transform the industry. The study calculates that transitioning toward sustainability yields a $20 billion to $30 billion financing opportunity per year to develop and scale disruptive innovations. The latter case requires innovation to emerge at a faster pace before 2030, which in turn calls for investments to increase by a factor of three or more over their current levels.

With its $2 trillion market size, the fashion industry offers major untapped opportunities for investors and companies. But to bring the necessary solutions to scale, all players—fashion brands, supply chain partners, investors, and others—need to step up to accelerate innovation. The clock is ticking for the industry to advance, and companies and investors that act boldly and rapidly will lead the transformation and ultimately win.

“While the first steps have been taken, fashion needs to embrace and accelerate innovation to future-proof the industry. Doing so opens up major untapped returns for those who can capitalize on the upcoming technological disruption,” said Sebastian Boger, a BCG managing director and partner.

“Disruptive solutions that can offer major leaps forward toward circularity exist today, and the opportunities to invest and scale them within the industry are vast. This seminal study provides powerful insights and a clear call to action for all players to collaboratively drive innovation,” said Katrin Ley, managing director of Fashion for Good.

The report includes the following key findings:

Only a fraction of all available capital has been invested in fashion and textile technology, leaving many innovators stuck in a financing gap that hinders their ability to develop and scale their innovations.
In fashion, nearly half of the $20 billion to $30 billion annual financing opportunity lies at the beginning and the end of the value chain, where raw materials and end-of-use solutions have the highest impact potential.
Innovators struggle to bridge the “missing middle” of finance between early venture capital and late-stage funding.
Orchestration and consortiums are essential to help innovators find the right support and financing, give brands faster access to scalable technologies, and offer investors better opportunities.
In return for helping innovators develop and increase their chances of commercialization, brands benefit through offtake agreements, pilot projects, and direct investment.
Financing will flow into the fashion space if all actors involved build toward conditions that promote attractive returns and measurable impact with manageable risk.

A copy of the report can be downloaded here.

Source: Boston Consulting Group

Filed Under: Briefing Tagged With: fashion market, fashion technology

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