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EP18: Talking Re-Commerce and Fashion Industry Transformation with Geri Cupi of MonoChain

Transcript

Participants:

Michael Young

Geri Cupi, co-founder and CEO of MonoChain

Michael Young:

Welcome to the Purpose, Inc., the podcast where we discuss corporate purpose and stakeholder capitalism. I'm your host, Michael Young.

Earlier this season, I did an episode on the circular economy and recommerce with Tom Szaky of TerraCycle where we focused on consumer packaged goods. And circular economy is a big topic that I've wanted to return to for some time and in particular, fashion and retail. It's an area that is growing. It's booming. To say the least, fashion and retail have been dramatically transformed by COVID and the recommerce trend was going on. COVID just pulled a lot of things forward with retail and the fashion industry largely being shut down globally and brands have pivoted to new channels to reach consumers through e-commerce. But one of the things that has accelerated is the attention that brands are now placing on reducing waste and creating more sustainable processes. Those have been on the radar but they're really top of mind now for fashion and retail executives. And my guest today is uniquely positioned to talk about this topic. Geri Cupi is the CEO and founder of MonoChain based in London. MonoChain is a blockchain platform that empowers brands and retailers to build their own recommerce platform and engage in circular economy driven practices. Geri is a serial entrepreneur. He's built a couple of startups, Jook and Social DNA which he sold to Levi's. He's the co-author of a book on commercializing blockchain. And today Geri and I talked about why sustainability is such a hot topic in retail and fashion right now especially in the age of COVID and how brands are responding to the growing trend of recommerce. Geri lays out the case for recommerce and why it's so key to transforming fashion and retail broadly and in particular, how technology can help brands deal with authenticity, with counterfeiting, with reducing excess production but also with finding new revenue streams and new sources of consumers especially Gen Z consumers. And Geri's got a really finely tuned sense of Gen Z's role in how they think about fashion from owning, renting, buying, selling, reselling clothing and products. And so, we talk about how MonoChain helps companies do that. We get into distributed ledger technology for a little bit. It's not a super technical conversation but a really broad based and fascinating and eye-opening conversation about how fashion and retail are being revolutionized through blockchain and e-commerce and recommerce. So, without further ado, my conversation with Geri Cupi, the CEO of MonoChain. Geri, thanks so much for coming on the podcast.

Geri Cupi:

Thanks for the invitation, Michael.

Michael Young:

All right. So, clothing, accessories, fashion brands are taking and have taken a lot of heat for their environmental impact. So, give us your take on what drives that, how brands are responding and then maybe a related follow-on question is fashion dead?

Geri Cupi:

Thanks for the question. It's a very good question. As you might be aware, fashion industry is one of the world's largest polluters. In some sources and studies is the second largest polluter. This is not new news. this has been happening for a while but what's happening right now is that consumers are becoming more environmentally aware and they are seeing the whole climate change movement is there and consumers are having the big trend right now that they are auditing like brand social responsibility and how the brand is reacting to the environment. And they see it, a huge percentage of consumers, they see it as the brand’s responsibility to be more ethical and also to produce their items in a more sustainable manner. What you've seen in fashion in particular in the last few years has been a massive growth of sustainability driven companies like Allbirds and a few others. And the big brands are seeing this and they are seeing this major shift on consumer behavior is already happening. In a few countries like in France, this is led by new legislation as well. I don't know if you are aware but starting next year, there is a new law coming to power in France which forces brands to have a circular economy approach in fashion meaning that they cannot burn items anymore but also when they produce an item they have to start with thinking how we can repurpose this item at the end of life which might mean recycling, upcycling and so on.

Michael Young:

Got it. And before we get into the case for recommerce, can you just talk a little bit more about the generational move in behavior change and what's driving awareness and motivation? I've heard you talk about Gen Z's different relation to their closet and their wardrobe. So, bring us into that.

Geri Cupi:

Yeah, absolutely. So, we're seeing this movement is driven mainly by Gen Z but also Millennials are a big participator in this and it is driven because it's a change in the mindset where Gen Z and Millennials, they prefer access rather than ownership of items but also they're driven by two big trends because they live their life in social media, they live their life in Instagram, TikTok and they're actually big need to be seen wearing kind of new outfits. But also they are driven by sustainable behavior. So, it seem cool for Gen Z to buy second hand items which is a very different mindset from Boomers or her older generations. What we're seeing nowadays and this is some data from Boston Consulting Group that 54% of Gen Z and 48% of Millennials have participated [inaudible 00:07:56] in the resale market and what isn't more interesting for me it is that when they buy, it's a very different customer journey. So, when they buy an item, 57% of Gen Z, they already consider the value of that item on the resale market whereas 50% of Millennials do the same. So, already when they buy an item, they're thinking I'm going to wear this item once or twice and after that, I’ll sell this item and they use some of this cash to financing purchases but also it's a better behavior rather than throwing away a piece of clothing after a while. Just to give you an idea, McKinsey ran the numbers few years ago and currently in a year, $460 billion worth of clothes get thrown away and these are clothes that can be used and one of the main reason people throw it away is that they don’t understand their value which this trend is seen as not cool by Gen Z. So, rather than sale an item or donate it than throw it away. So, and what's happening on the other side is brands and retailers are taking notice of this and they are reacting to the consumer mindset and today they are trying to get more of them to become their clients. So, they are changing how they do retail as well.

Michael Young:

Great. So, let's get into the case for recommerce and just lay it out there in terms of the players, where the incentives are. Talk about authenticity I think is a big issue and the role that brands play and the role of consumers there.

Geri Cupi:

Yeah. So, in the last 10 years, we have seen many resale marketplaces have emerged and some of them, they are already valued over a billion dollars. They're unicorn level companies like RealReal, StockX. So, we are seeing many marketplaces growing very fast. What is actually interesting, Michael, is that during the lockdown period where all retail from talking even e-comm was not growing massively. It’s the resale has had a massive growth. Companies like Depop in Europe, RealReal, Vestiaire, StockX had a massive growth during this period. So, on the other side is that we are seeing brands and retailers starting to emerge some interest. More particularly, we noticed a huge shift happened in 2019 in companies like Farfetch, Galeries Lafayette, Nordstrom, even Burberry started to participate on the resale market and they did it in many forms. But one of the key forms is to open their white label solution. The reasons they do it is that for starters it’s a revenue boost but also it helps them to become more sustainable. So, currently one out of six items goes to resale. Even if you just increase that to two out of six, can have a massive impact in the fashion environmental impact. But also one of the reasons that some luxury players have shown interest in this new market is that it helps them to recruit new consumers. Just taking myself as an example, my first Louis Vuitton item that I bought, I bought it on the resale market, I bought it from Vestiaire Collective and then like three and a half years later, I bought my first Louis Vuitton item in a Louis Vuitton store. So, for them, it is a way to know where consumers enter their world and make it easier for them to convert them from secondhand consumer once the disposable income of that consumer increases to a primary market consumer. But also, the key it is that monitoring and mitigating the brand reputation risk which goes to the authentication issue that you mentioned and you see companies like Chanel or Dior back in the days suing resale marketplaces and authenticity and counterfeit still remain a big problem for the resale market. So, we were seeing kind of for brands, for luxury brands in particular, to be ready to join this market, any solutions given has to have an element of verifying the authenticity of the item which makes it much more important.

Michael Young:

And so, you mentioned a number of motivations there: reduced production, reduced environmental impact, ability to access new consumers, track authenticity. Give us a quick snapshot of what MonoChain is doing in this space and also, just having spent a fair amount of time myself in blockchain, in DLT, why blockchain and DLT, distributed ledger technology, to solve the problem?

Geri Cupi:

Yeah. So, MonoChain, we are a blockchain platform. We make it very easy for fashion brands and retailers to start their own white label resell solution and the way the journey starts, it is we make sure that the item is authenticated and we connect that with a blockchain certificate. And we do that in different manners but we believe that authenticity plays a very, very important role and blockchain and DLT in general can help to increase the confidence of the consumer that what they're buying is authentic but also from a brand perspective is the defensive play. So, that way they reduce the available counterfeits already in the market and essentially can help with like reducing the reputational damage they can have from counterfeits as well. One other key element of MonoChain, it is the ability to value an item on the secondary market. So, from a consumer perspective, if you have a MonoChain wallet, you know how much your items are worth right now in real time. As consumers, we buy a lot of things but we don't know how much is the worth of the things we have and if you don't know how much is their worth, it makes it more likely for us to dismiss them and throw them away. So, by increasing transparency and price transparency, how much your items are worth, you make it easier and also we can show to the consumers where is the best place to sell these items. We make it much easier for them to behave in a way that also benefits them but also the environment.

Michael Young:

Got it. And just go back to the fashion brands in particular. So, end of season merchandise is a particularly big issue for luxury brands as is authenticity. And so, you're able to help those kinds of brands manage those issues, correct, through blockchain?

Geri Cupi:

Yes. Are you talking about overstock in particular?

Michael Young:

Yeah, end of season, overstock merchandise that they don't want that kind of getting discounted dramatically, right?

Geri Cupi:

Yes, yes. For sure. So, we have a solution which we call it MC Access which enables brands to see how certain items do on the secondary market but more importantly is that they can start selling these items to archived sales because they might have very old collections which consumers might be looking to buy them but they cannot find them anywhere. But brands might have them somewhere in their warehouses. So, they can release these collections and it is a very easy way for brands and retailers to do it. Essentially, just basically they just have to upload an Excel spreadsheet and that's how the whole process starts.

Michael Young:

Got it. Geri, I'd love your thoughts on some of the impact of COVID it and obviously retail is under extreme pressure right now. What are you seeing in terms of the recommerce market relative to COVID, post-COVID, etc.? How do you think about that? What are you seeing?

Geri Cupi:

Yeah. It's a very, very good question. During the lockdown period, the recommerce, resale in particular has been doing amazingly well. From what we're seeing from different marketplaces, they are growing 2x, 3x of the anticipated speed they had. But what drives this behavior is that consumers now they have a lot of time on their homes and they are looking into the items and they're seeing things that they never wear and it makes sense for them to try to monetize these items. But what you're seeing as a general trend which already start happening in Hong Kong, so Financial Times had an article about this, when it comes to post-COVID-19 behaviors, sometimes China and Hong Kong can give us better insights what's going to happen in the West. And what we're seeing in Hong Kong in particular, we've seen a massive offloading of items. So, consumers that they are impacted by reduced, some of them they lost their jobs, some of them, they now are paid less than before, some of them were furloughed for a couple of months. So, they need cash and one way they're trying to get cash is by offloading items they bought in the past which brings more supply in the secondary market and which in other words means that because of the extra supply, prices will go lower and essentially items that were not affordable anymore for someone, now they might be affordable. So, we are expecting recommerce to grow at much faster pace than it is been growing so far and it's already growing at 20x speed of general retail. So, we think that the recommerce and resale in more particular will be growing at much faster pace. And it's a very big opportunity for brands as well to capture because this is how the consumers are behaving and they need to be in line with what consumer wants.

Michael Young:

Yeah. I think your point about meeting consumers where they are in their journey is hugely important for any business. But I think your point about the generational change that's taken place and you left out the important Gen X generation when you said, you went from Gen Z and Millennial to Boomer. Don't forget about us. We're here in between looking at both sides. So, but I think conceptually that's a very interesting move, the generational shift and then stack COVID on top of that, right? So that people are going through their wardrobe, looking at it, what can I do with this, I'm not going to be wearing that. So, then the meta question to you is what ultimate impact will this have on the fashion industry, on brands? We've seen carbon emissions drop dramatically. Do you think this is the moment in time for fashion to pivot to more sustainable practices and policies? How do you think about that?

Geri Cupi:

Absolutely. I think you already two or three months from the conversations we had with brands before and after the lockdown is that they used this time to re-evaluate everything. They're seeing kind of the way things were before, the old normal, it's not a good reflection of what the normal or the new normal should be and they already have started to kind of look into their supply chain, trying to increase digitalization as much as possible but at the same time, it's about different processes than they have done in the past. One of the worries was that because of all this loss in revenue at least for 2020 is that it might have made them believe that some long term projects which include sustainability related projects are not as important anymore because the focus is just to survive right now. What has been a big surprise for us running back to them and we’ve been Zoom calls recently is that it has been the opposite effect. Now they're saying sustainability is a key priority mostly because they have realized that the future consumers, they're a big spender, the future big spenders pay much more attention to sustainability credentials of a brand than the older generations. So, what we're seeing is that this can be a big opportunity for companies to reinvent themselves around more sustainability driven mission and [inaudible 00:23:53] mission during the lockdown has dropped massively which is being great for the world, for the environment and we wanted to see kind of that shift in behavior to have like a long-term impact rather than a temporary impact. And from the conversation we’re having so far, Michael, we are noticing that there’s been a shift in mindset during this period for the good.

Michael Young:

That's great. That's what we were talking about right before the podcast, about let's not go back to the normal. Let's build it better.

Geri Cupi:

Absolutely. I think now is the time to reflect of anything that because I think this lockdown period served as a pause in many activities and the executives had a time to look into their business and trying to figure out when this is over, how we can become stronger as a business.

Michael Young:

Fantastic. Geri, we're going to have to leave it there but I want to thank you for coming on the podcast and talking with us about this important topic. And we'll keep a close eye on you and MonoChain as a very exciting startup in this category.

Geri Cupi:

Thanks for the invitation. I really enjoyed it.

Michael Young:

The Purpose, Inc. Podcast is a production of Actual Agency, helping innovators communicate in a changing world. More at www.Actual.Agency.