9 Reasons Why Sustainable, Eco and Ethical Fashion Businesses Close and Finish Up (AKA Fail)

9 Reasons Why Sustainable, Eco and Ethical Fashion Businesses Close and Finish Up (AKA Fail)

Since launching Eco Warrior Princess in 2010, I have had the privilege of meeting, befriending, collaborating and working with many emerging fashion designers, entrepreneurs, fashion businesses and organisations from all over the world. They’ve started their own ethical labels, e-commerce stores, online marketplaces and apps.

I have seen these passionate people burst on to the scene with great business ideas, all gung-ho and ready to change the world “one wardrobe at a time” only to learn that they’re shutting those proverbial doors not too long after launching.

These business owners have invested time, money, energy and resources so what gives? Why do so many sustainable and ethical fashion labels fail to make continuous operating profits?

Here are the most common reasons why ethical businesses don’t succeed past the five-year mark, and why so many don’t even make it to their third birthday.

1. Not knowing the target customer.

The profitable ethical businesses are the ones who know their customers inside out, back to front. They design collections with this customer in mind. They know how to market to this customer. They anticipate their customers wants and needs. They know how to communicate and engage this customer.

I am always taken aback when an ethical fashion business has only a vague idea of who it is they’re trying to target. I am equally taken aback when a fashion business tries to target everyone. Both approaches just don’t work. You need to have an intimate understanding of the person who is buying your product, and you need to know them well, otherwise, you waste money producing collections that no one buys because you hadn’t worked out who it is that actually wants to buy your product!

But then again, if you have a bottomless pit of funds at your disposal and are happy to risk losing it, pay no mind to my paragraphs here. It’s a peculiar way to run a business, but hey, it’s your money right?

Reasons Why Sustainable, Eco & Ethical Fashion Businesses Fail

2. Entering an oversaturated market.

If we, here at Eco Warrior Princess, are approached one more time by an entrepreneur launching an ethical multi-brand e-commerce store “to make it easier for customers to shop ethical and sustainable fashion”, I personally will scream. Okay, that was a bit dramatic but you get the picture. It’s been done, done, DONE. I’ve been writing about eco-fashion for years so trust me when I tell you that starting an online shop to sell ethical items is not a new idea. In fact, it’s the oldest idea there is. I actually had the same idea maybe five years ago, started to put together a marketplace when I decided: “What the eff am I doing? I don’t want to be an online marketplace owner! I’m much better off focussing on communications and media because these are my areas of strength!” so I decided to put all my eggs in the media basket and here we are.

Now it’s fair to say that in fashion, every category is completely saturated. T-shirts, pants, jeans, tops, dresses, underwear, you name it, the market is flooded with it. So naturally one would think that because ethical and sustainable fashion is a new and ‘innovative’ trend, that it isn’t saturated yet.

Wrong.

We don’t need any more ethical t-shirt businesses. We definitely do not need any more organic cotton and bamboo ‘basic wear’. And we certainly do not need any more ethical marketplaces. The businesses in the space aren’t exactly thriving; don’t be fooled by how pretty their Instagram feed is. Unless you have the cash to penetrate a saturated market, take market share from an existing competitor or find ways of opening up the market so that there are more customers (conscious fashion is still ‘niche’ after all), you’re better off focussing on an ethical business idea that serves the needs of an underserved or untapped market.

Related Post: Not Another Ethical Fashion Brand, Please

3. No unique value proposition or market differentiation.

If you can’t answer convincingly what your unique value proposition is and why customers would choose to shop with you over your competitors, then you have a huge problem.

Now let’s take Everlane for example. The brand offers classic, minimalist-style clothing and undergarments that are ethically-made and sells at a very reasonable price point. Its clean, crisp, minimalist aesthetic extends to the use of styling, photography, and branding. One quick glance at Everlane’s value proposition and it’s obvious why they are dominant in the ‘ethical’ marketplace. They have differentiated themselves in pretty much all the categories that matter: design, branding and competitive pricing.

9 Reasons Why Sustainable, Eco and Ethical Fashion Businesses Fail and Everlane Isn't One of Them
Everlane

Related Post: Just How Sustainable is American ‘Ethical’ Fashion Label Everlane Anyway?

You would be hard-pressed to find another ethical brand that competes as well as Everlane in these key areas. Throw in their returns policy, customer service, brilliant photography and advertising and marketing and it makes complete sense why they are a market leader. That they’ve just opened several bricks and mortars stores in New York City and San Francisco speaks volumes of their rapid business success. It’s for all the reasons listed above that conscious customers know who they are and why many ethical fashion influencers sing their praises.

So that brings us back to you and your business. What’s your unique value proposition and how are you different? Answer these questions confidently and provide answers that are better than your competitors’ and you will likely reap the rewards.

4. Poor grasp of business fundamentals.

Designers and entrepreneurs who love the fashion industry are drawn to beautiful design and imagery, but it takes more than glitz, glamour and stylish branding to make an ethical fashion business successful. They may be strong on the ‘creative’ side but an underdeveloped ‘business operations’ side is a huge risk.

A solid understanding of business fundamentals is essential to running a successful business. Here are the areas you should have a firm grasp on if you want your brand to succeed:

  • sales strategy
  • cash flow
  • product development
  • marketing
  • pricing strategy
  • performance monitoring
  • strategic planning

If you aren’t strong in these areas, start learning. Read business sites, read business books, go to business events, listen to business podcasts, network with other entrepreneurs.

Related Post: An Insider’s Take on Eco Fashion Blogging and Ethical Fashion Influencers

It may also be worthwhile finding a business partner who brings these strengths to the table but make sure to tread carefully, business partnerships can be a minefield if not handled carefully. Problems in a business relationship can be costly and can also end in migraines, tears, or worse, legal action. So be sure to find someone who has a skill set that complements yours, someone you can trust, who shares the same values and vision, who you can work with for long stretches of time and that you actually like.

The other course of action you can take is to hire a business consultant or get a mentor.

Gillian Stoddard, founder of Sustainable Made Simple, an online sustainability platform offering ethical resources and guides to help customers shop better has taken this route. “I don’t have an official mentor, however, my dad has recently agreed to be my accountability partner,” she shares. “We have meetings to discuss my goals and set realistic deadlines for them, which I’m then accountable for. It’s very helpful since I’m otherwise on my own. I would love to have a business partner, but I haven’t yet met anyone who shares my passion and willingness to start a new sustainable company. I’ve been researching official mentors, but to be honest it’s not at the top of my priority list at the moment, though I know it’s important.”

5. Systems inefficiency.

Basic economic theory tells us that businesses aim to produce products as cheaply as possible and then charge a price higher than the cost of production in order to make a profit. In order to achieve this, businesses have to operate efficiently. Successful ethical fashion businesses implement processes, procedures and utilise automation to reduce manufacturing, labour and other input costs in order to achieve the maximum profit possible (which gives them the best chance of business survival).

Since ethical brands usually pay higher costs for inputs (fair wages for example), implementing protocols to reduce business inefficiencies is crucial.

Here are some examples of systems inefficiency that you should be mindful of and aim to minimise as much as possible:

  • Production issues
  • Transport and logistics problems
  • Website issues
  • Uncontrolled contract labour costs
  • Invoicing errors
  • Staff performance issues

Reasons Why Sustainable, Eco and Ethical Fashion Businesses Close and Finish Up (AKA Fail)

Related Post: What Launching an Ethical Fashion Brand Really Looks Like

6. Bad photography.

One of the biggest mistakes I’ve seen many ethical brands make is that they spend way too much money on marketing and advertising but not enough on their fashion and product photography. Fashion is about inspiring customers, as well as encouraging them to aspire. In fashion, photography is everything and particularly if your focus is on making online sales. If your photography is seriously shite, why would anyone want to purchase your products?

The purpose of photography is to make your products appealing to your target audience, not make potential customers dry retch. In a competitive marketplace, brilliant photography captures people’s attention and helps them to remember your brand. If you haven’t got your imagery sorted, then instead of spending (wasting) money on Facebook ads or Google Adwords, use that money to hire a professional fashion or product photographer. Trust me when I say that the return on investment will be much higher in the long run.

7. Lack of financing.

There will come a point in your business journey when you will have exhausted your savings and available pool of funds, maxed out your credit cards, and basically run out of cash. There are long lead times in the fashion industry and it can be hard to manage cash flow (refer to point #4) and unexpected opportunities like a big wholesale order from a new retailer can also stretch your financial capabilities. To keep the business afloat and to ensure it continues growing, you will need access to more funds.

Now some entrepreneurs will go the traditional route and approach their banks for business loans, but for many, particularly new businesses that have no proven track record or cannot show their ability to pay back loans, this is not an option. Some will ask friends and family for funds, but this may be out of the question if you’ve already tapped into these ‘personal’ financial reserves.

Crowdfunding offers an alternative route to accessing investment funds and is becoming increasingly popular with ethical fashion brands. Check out crowdfunding platforms StartSomeGood, Indiegogo and Kickstarter if you’re looking to launch a campaign.

9 Reasons Why Sustainable, Eco and Ethical Fashion Businesses Fail

Now if you’re able to raise funds and can keep your business going, learn from this situation and put contingency plans in place in case unforeseen events happen again.

Erica Gadsby, co-founder of ReCreate, a New Zealand ethical, organic and sustainable boutique and streetwear brand, is open and transparent about the struggles (thank goodness!):

We have an up-front commitment every month to cover the wages and running costs of our sewing centre in Cambodia, regardless of if we sell anything or not. And now, as we are growing in the area of wholesaling, there is another huge lot of up-front costs when it comes to purchasing bulk fabric up front, rather than buying little-by-little as we make sales. Cashflow keeps me up at night!”

8. Not working smart.

There is no doubt that ethical fashion entrepreneurs work hard. Those launching their businesses or new collections will easily clock 80 hours per week at a minimum. But working hard and working smart are not the same thing. Or put another way, being busy does not equal being productive.

Related Post: It’s Time to Stop the Glorification of Busy

Many ethical fashion businesses flounder because the owners work too many hours for too long, make poor business decisions because they’re tired and aren’t thinking straight, burn out, take a break to recover, assess the situation and incorrectly decide that the business is unsustainable. However, the issue often lies with them not freeing up the time to work on their business and spend too much time and money focussing on the wrong areas of their business.

For example, many business owners invest too many resources in creating fancy marketing campaigns and videos when the product itself is badly designed or the website is difficult for shoppers to navigate. Some ethical business owners also spend a disproportionate amount of time focussing on how their brand is perceived in the marketplace and not nearly as much time on the things that matter; things such as product development, pricing strategy and customer service.

Furthermore, business owners tend to want to do too much, too soon, which means that they spread themselves too thinly across too many areas. The key is to focus on those tasks that will have the greatest impact on increasing the bottom line. Work smarter, not harder. Repeat after me…

9. No clear vision.

Being an entrepreneur is trendy at the moment, have you noticed? The hash tags #entrepreneur #entrepreneurlife #girlboss litter our social media feeds. And just about anyone with an internet connection can start a business. Since there are low barriers to entry, online businesses are all the rage. Low risk means high interest, and therefore, lots of competition in the marketplace.

Ask a conscious fashion business owner what they’re trying to achieve with their business and the answers will range from “offering affordable eco-friendly alternatives” to “being part of the fashion revolution”. As more fashion labels jump on the ‘ethical’ and ‘sustainable’ bandwagons, brands will need to hone their vision and work harder to explain their ‘why’.

'Stop with the lovey-dovey stories and smiling artisan women photos. What is your brand really doing for the world?' - Sarah Jean Harrison, co-founder, Peace House FlagClick To Tweet

9 Reasons Why Sustainable, Eco & Ethical Fashion Businesses Fail

Related Post: How 40-Year-Old Sustainable Fashion Brand Hessnatur Defied the Odds and Survived

Nowadays it’s just not enough to be a sustainable or ethical brand and splash photos of Fair Trade handicrafts in the hope that it tugs at the customer heartstrings. Sustainability business practices and responsible manufacturing are now an expectation, particularly within conscious consumer circles. And many customers, millennials especially, are well-travelled and are likely to have seen those intricate handmade wares before. So, I’ll ask again: Why does your brand exist? What is it trying to achieve? What is its purpose? 

Sarah Jean Harrison, co-founder and Creative Director at Peace Flag House, a creative agency based in Canada, is a sustainability communications expert who offers, what she refers to as “tough (green) love”, for ethical fashion entrepreneurs and aspiring business owners:

Stop with the lovey-dovey stories and smiling artisan women photos. What is your brand really doing for the world? You have to show us your real impact in real, hard numbers. How much C02 are you pulling out of the atmosphere? How much drinking water are you saving? Is your production child labour free? Prove it! Yes, pretty is important and stories are powerful but it must be backed up with real data. Why, you ask? Because buying from you is expensive and we need to know why a better world costs more. Get specific. Get detailed. Tell us what we’re getting for our money.”

Running a business isn’t easy, no matter how other business owners make it appear on social media. There are long hours involved, competition is fierce, customer expectations are annoying, cash flow worries are persistent and business strategy constantly needs tweaking.

I hope this list gives you the confidence to work on issues you may be sweeping under the rug and helps to keep your doors open. If it does, make sure to leave a comment below and let me know!

P.S. If you need help on the advertising side of things, make sure to get in touch!

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