How Could Radical Transparency Impact Retail?

Affirm was first to enter the pay-over-time space in the U.S. and remains the category leader with a network of more than 5.3m customers and 4,000+ retailers. Affirm enables retailers to grow sales, providing flexible and transparent financing — including a commitment to no late or hidden fees. Affirm merchants typically see an 85 percent increase in average order value.

LONDON, United Kingdom — A consumer report shared by Affirm found that 76 percent of consumers say it is important that the fashion item they purchase is sustainable. As consumers demand more social responsibility, transparent communication is becoming more mainstream. Even brands that do not put transparency at the centre of their messaging still need to consider an approach.

Nearly 20 percent of executives surveyed for The State of Fashion 2020 said radical transparency ranked among the top three themes impacting their business last year.

“The more [of the industry that gets] on board, the more consumers expect that information [about their manufacturing process], and when they don’t find it, they question why. […] You can only hide for so long,” says Sarah Ditty, policy director at Fashion Revolution in BoF’s case study Lessons From Fashion’s Journey to Radical Transparency.

Indeed, alongside shifting consumer demands, advocacy groups like Fashion Revolution are pushing for brands to disclose emissions statistics, welfare in supply chains and the ecological impact of how materials are sourced, for example — and publicly identifying those that do not.

Additionally, social media has opened up new avenues of communication and with that, new channels for critique. A growing expectation exists for brands to share more of who they are and how they operate.

“If anything has been made clear from this crisis, it is that the kind of 'greenwashing' or 'clearwashing' marketing to sell product is not going to work,” says Maxine Bédat of the New Standards Institute, a company seeking to unify the industry behind consistent metrics to achieve critical, science-based environmental and social objectives.

Maxine Bédat, founder and director of New Standards Institute | Source: Courtesy

As a result, it may not only be manufacturers that have to respond to emerging responsible purchasing behaviour. An opportunity may be emerging to gain competitive advantage by appealing to the ethical and environmental considerations increasingly influencing consumers' purchase decisions. Innovators in the space are considering the impact of not just what they sell, in terms of its production, but how they sell it at retail.

From ethical packaging to sustainable delivery, responsible store construction and circular economy initiatives — retail as well as production is, in piecemeal form, heeding demands for greater transparency.

Partnering with Affirm in a four-part series, BoF will assess the forces transforming the retail industry, empowering companies to better understand the seismic shifts created by continuous technological advancement and the pandemic-impacted global trading environment.

Communications: Radical Honesty Required

Consumers increasingly expect retailers and brands to be transparent about their operations and activities. What's more, across industries from finance and technology to hospitality, new businesses and early adopters are placing transparency at the heart of their company values and product or service offerings, building customer awareness and engagement with the issue.

Due to the complexity of the retail business, operations can touch upon almost every substantive issue, making how a business is run internally applicable to almost all external communications: be that energy saving measures in stores, which are not reflected in factories, or celebrating women in marketing campaigns yet perpetuating a gender pay gap in leadership.

As brands come under increasing scrutiny, even those willing to share more information are struggling to discern what consumers actually want to know and what is just information overload. Educating consumers is important to maintain a competitive and differentiated advantage in a crowded market.

In a recent case study, BoF highlights that the brands doing this best seem to be engaging in “radical honesty” rather than radical transparency. That means being open about failures and limitations as well as successes, and not making claims that cannot be backed up, which is more important than ever as an increasing number of brands start to talk about the way they operate.

You have to be completely honest with people. You can't hold your hands up and say 'we're sustainable, aren't we awesome?' — unless you are.

From a sales and marketing perspective, how companies share their positive impact initiatives is as important as the initiative itself. In a call-out culture context, the need to communicate transparently may be a pre-requisite for sharing positive impact initiatives while successfully avoiding accusations of greenwashing or clearwashing, made by a consumer base that is more informed and vocal than ever before.

With numerous brands adopting positive impact messaging into their marketing and retail strategies, the importance of adopting rigorous and meticulous processes to ensure the veracity of any statements or facts relied upon is crucial.

What is clear is the need to strike a delicate balance: promise too much and risk a backlash that undercuts any good work that might be underway. On the other hand, if brands fail to really educate consumers, rivals doing less may benefit from a halo of greenwashing from which it is difficult to stand out.

Marcus Wainwright, Rag & Bone founder and chief brand officer |
Source: Courtesy

“In times like these, you just want to have one voice to go out with and be consistent with that,” says Daniel Marks, chief creative officer of The Communications Store. “The very overused word of authenticity is real and the data is showing you cannot try and be someone you aren’t because it won’t land.”

Since 2017, Rag & Bone has partnered with Cotton’s Blue Jeans Go Green denim recycling programme, offering consumers a 20 percent discount if they hand in an old pair of jeans from any brand. Marcus Wainwright, founder and chief brand officer of Rag & Bone, said at the time, “Now, more so than ever, each and every one of us has a responsibility to do our part to protect our environment.”

In his experience, since the launch of the programme, he has recognised that radical honesty is inherent to future communication strategies. “Depending on your definition of sustainable, I don’t think any of us are truly sustainable [and] you have to be careful. There are a lot of people out there that want to take down everything they see," says Wainwright.

Supply: Redefining Retailers' Responsibility

To date, the narrative around increasing transparency in the fashion industry has focused on production methods and waste management — largely criticisms of the traditional fast-fashion model based on economies of scale, leading to widespread over-production and discounting.

However, transparency around environmental and social impact does not end with the production process. As consumer preferences evolve, the methods used by sellers, including wholesale retail and e-commerce businesses, will no longer be exempt from scrutiny.

“If the consumer is looking for more responsible products then, of course, they're going to be looking for platforms that can represent that,” says Dio Kurazawa, founder of sustainability consultancy The Bear Scouts. “If the consumer is looking to support an entity who's supporting the things that are helping our environment, it's going be those who have a better rating than others.”

In the status quo established prior to the outbreak of Covid-19, consumers ultimately still prioritised price, quality and style over anything else when making purchasing decisions, resulting in many industry players avoiding the additional measures required to increase transparency. But that may change, believes Kurazawa. Indeed, according to consumer report shared by Affirm, 78 percent say they are willing to pay more for an item that is "sustainable."

We need critical organisational thinking — not marketing-led initiatives to answer the difficult questions.

Bédat believes there is an interesting parallel with the food industry, and the decision by American mass-retailer Walmart to create a carbon emission standard its food suppliers have to meet. “It was Walmart as a retailer, not a producer themselves, that imposed carbon benchmarking on a number of food brands. I think large retailers could play a very similar role to say, 'If you want to be on our platform and can set performance benchmarks, this is what you're going to have to do.' That is the courage that all these companies need to take in order to not return to business as usual in which we're just colliding with planetary bounds,” she explains.

“Sustainability in these companies has to be in the sourcing and buying teams. Otherwise, it is just marketing. We need critical organisational thinking — not marketing-led initiatives to answer the difficult questions,” says Bédat.

Dio Kurazawa, founder of The Bear Scouts | Source: Courtesy

But assessing supply chains to guarantee provenance of product and create lasting change would require a systemic overhaul. On average, even vertically integrated retailers only visit their supply chain four times a year. “Four times a year is an impossible amount of time for you to truly understand how goods are moving from one place to the next,” says Kurazawa.

However, Kurazawa believes there is opportunity in the challenge “for multi-brand retailers: what brands are really sourcing, where they're sourcing from, that could be a great tool to assess who they should and shouldn’t be selling, and attracting customers by doing so.”

Distribution: Demand and Delivery

“I think there's a massive opportunity for the industry now to look at what this reset means around consumer expectation. This on-demand cycle has become inherently unsustainable in every sense of the word.” says Rebecca Robins, global chief learning and culture officer at brand consultancy Interbrand.

By any measure, the standards of service and levels of customer convenience offered by retailers have become inherently unsustainable. “When we talk about ‘on-demand’, what is this cycle of expectation we have created?” adds Robbins.

Indeed, the intricacy and density of distribution channels has grown exponentially, as more and more delivery options and free returns schemes have been launched. Routes are increasingly residential and atomised through more stops and multiple delivery attempts required for some orders.

Bain & Company found that by doubling the average number of items purchased per e-commerce transaction and avoiding split shipments, retailers can reduce average per-item emissions by 30 percent.

Already in the market, there are some signs of positive change. The Financial Times reports that in Europe, Ikea aims to make 100 percent of its delivery vehicles electric by 2025. Walmart is turning to user-journey messaging to identify what products are available from the same central fulfilment centres and offering free next day delivery to customers that group their orders from one location.

“Consumers want to shop ethically. Why they're still shopping in ways that don't match that [sentiment] concerns their not-knowing the implications of having one-hour delivery. When they do — that will change,” says Bédat.

Mapping Impact Through Metrics

Positive change can only be achieved by industry-wide adherence to metrics that consumers can both digest and assess comparatively. But, even those willing to share more information are struggling to discern what consumers actually want to know and what is just information overload. For brands that have taken a stand on transparency, it’s important to keep pushing forward to maintain credibility and market leadership.

If the consumer is looking for more responsible products, they're looking for platforms that can represent that.

Indeed, educating consumers is important to maintain a competitive and differentiated advantage in a crowded market. “Our clients have told us for years that the sustainability element is one of the biggest motivators for buying or consigning with us, but for the first time, we really wanted to be able to quantify exactly how positive consigning is for the environment,” says Allison Sommer, director of strategic initiatives at The RealReal.

The RealReal is educating consumers through dedicated email reports which outline the exact environmental impact of each customer’s unique expenditure and consignment patterns, across greenhouse emissions, water usage and other metrics. “This is our first and biggest effort to translate what the circular economy means in a tangible way to consignors.”

The brands that are doing it best seem to be engaging in “radical honesty” rather than simply radical transparency, suggests Interbrand’s Robins.

“I think metrics is the appropriate term from here,” says Bédat. “There is a tendency to make it more complicated than it is. What we've been focusing on is simply carbon benchmarking at the start, so that a company actually knows their impact. Disclosing what their impact is right now, disclosing what their targets are, and what they're doing to achieve those targets — that's going to be the way we don’t just talk about things. Not just a move towards action — we have action,” she continues.

“Today consumers expect more from financial institutions. They want gimmicks like fine print removed and replaced with transparent terms to enable responsible spending,” said Silvija Martincevic, chief commercial officer at Affirm. “Affirm’s business was built to do just that — whether it’s the latest runway style or a new pair of sneakers — because we show customers upfront exactly what they’ll pay each month — they can shop with confidence knowing they’ll never be charged a late or hidden fee.”

Sign up to hear Martincevic discuss How Shifting Consumer Values Are Changing Online Payments on Thursday, June 4th on the BoF LIVE schedule. 

Editor's Note: This article was revised on June 2, 2020. An earlier version of this article misstated that Marcus Wainwright was co-founder, chief executive and creative director of Rag & Bone. This is incorrect; he is founder and chief brand officer.