Finlatics Investment Banking Experience Program Project 2
Sustainable Fashion Company
Sustainable fashion is a movement fostering eco-friendly textiles and fashion products, also
addressing the environment, human and animal welfare exploitation. It has garnered enough
attention to be a cool fashion revolution. The fashion industry is no stranger to the advent of
innovation. The very nature of both the business and artistry of fashion lies in its ability to
transform with time.
I believe Sustainable fashion is in ideation stage in this stage, a problem is identified and a
corresponding solution is formulated. Sustainable fashion solves a problem by using old
clothes and creating totally new fashion from that it helps to reduce the waste created in
fashion industry.
Sustainable fashion is in trend which can be converted to intellectual property and can be
mass marketable, driving forces include the realisation of environment damaging practices,
and the strong desire to make eco-friendly choices. Further, millennials and Gen Z consumers
have taken the sustainable fashion movement forward by being ecologically conscious. The
new generation looks for fashion that is sustainable, fair and circular without limiting the
preference to latest trends. Sustainable and responsible consumers are encouraging brands to
demonstrate transparency and sustainability in their supply chains. With customers becoming
more conscious of the impact of the brands they buy on the Earth, brands are expediting their
attempts to appeal to the ever-growing and evolving market.
STRENGHT WEAKNESS
Use of 3 R Reduce, Recycle and Economy of scale Only local market
Repair Uncompetitive Price Profitability
Government Support Marketing potential
Flexible production reducing SCM Only local raw materials Slow-
cost production
Individualism unique and exclusive
Ethics aspects
OPPORTUNITIES THREAT
Small niche market Subvention Fast Fashion
New research Materials more Education for sustainability
resistant Consume Paradigm Crisis
Reduce pollution for SCM Lack of legal framework
(emissions, Waste water) Difficult application Interests of
Improving normative Support global multinational
agencies
Challenges Faced
Engaging Consumers
Sustainability practises should not be limited to the end product but should also be followed
for sourcing and manufacturing processes. Brands can encourage consumers to be a part of
the sustainability movement through their product offerings, use of non-polluting raw
materials, zero-waste production facilities and transparency in the sourcing and
manufacturing process. Further, with the widespread support for the Vocal for Local
campaign, brands have the opportunity to work towards the development of local craftsmen
and communities by collaborating with them for sustainable collections.
Educate customers on the point that sustainability is about a better product in the end.
Fashion supply chains have been built on the back of the cheapest price, which results in
many short cuts throughout the chain. This most often leads to a subpar product. Embracing
sustainability gives us an opportunity to correct that approach and ensure that the customer
receives the best product possible for their hard-earned money.
factors that affect sustainable clothing behaviour include the role of clothing in self-
expression, changes in technology, rising affluence and lower prices, while barriers include
competing consumer motivations, lack of information, consumption and obsolescence
pressures created by the clothing industry and the limited range of sustainable clothing on
offer. Barriers were revealed at an individual level, at a social and cultural level and within
the clothing industry.
Mainstreaming sustainable clothing
Another key challenge is mainstreaming sustainable clothing: moving it out of its niche and
on to the high street, However, key barriers to the mainstreaming of sustainable clothing are
the stigma and stereotypes associated with its design. Unfortunately, ‘people still have the
perception of ethical clothing as not looking like normal fashion. Just being environmentally
friendly will not make people buy sustainable clothing, because ‘that’s not a primary
purchasing motivation.
Changing consumers’ mind-sets
Improving sustainable behaviour involves changing consumers’ mindsets away from
following fashion and buying lots of new clothes, to investing in clothes that will suit them
and will last. Academics and consultants recognised that reducing consumption was
necessary, improving sustainable behaviour involves changing consumers’ mindsets away
from following fashion and buying lots of new clothes, to investing in clothes that will suit
them and will last. Academics and consultants recognised that reducing consumption was
necessary.
Changing consumers’ habits
There are challenges in changing consumers’ habits as well as their mindsets. Consumers
need to alter their habits to reduce the frequency, temperature and size of washing loads.
Although ‘companies are beginning to realise that influencing their consumers on how they
wash their clothes can have a big impact on the energy use a retailer acknowledged that
consumers were unlikely to wash at lower temperatures just because they were told to by the
retailer. Social norms represent a major barrier to changing behaviour. A prevailing norm is
the belief clothes have to be washed frequently at high temperatures.
Milestone
Revenue generated by the company is depend on how many customers buys the unit, so it
operates on a 360-degree view as it looks into everything from designing and merchandising
to warehousing; the end-to-end production is taken care of in-house and brand marketing is
done online. The Mumbai-based venture is a single-brand firm which produces and markets
its products while targeting the youth, unlike other e-commerce portals that just market
products manufactured by someone else.
Investment (In Rs) Sales of Cloths Note conversion Rate (%)
50,00,000 5000 5%
50,00,000 15000 8%
50,00,000 25000 13%
50,00,000 50000 20%
A company that has raised Rs.50L as a convertible note for a four period. As per the
convertible note, the defined milestone for the company is the number of users that it can on-
board. As a result, the equity conversion percentage for the investor is determined by the
number of users that a company can on-board. In the first case, if the company is able to
reach its milestone of 5000 sales, the founder has to dilute only 5% of his shares to the
investor. However, in the 4th case, if the company reaches only 50,000 users; the founder has
to dilute 20% of his shares to the investor.
Customer Acquisition Cost (CAC)
Total Marketing Expense∈ given period
Customer Acquisition Cost =
Number of customers Acquired∈a given period
Total marketing expense to achieve milestone 1: Rs. 10,00,000
Number of customers acquired till milestone 1: 5000
CAC = 15000000/5000
= Rs. 3000
Average value of customer’s purchase for = Rs 700
Frequency of customer purchase = 2
Time period of a customer purchase = 1 year
Customer Lifetime Value = (700/1) x 2
= 1400
Customer Lifetime Value for 1st year = Rs 1400
Avg Value of No. of times a Time period CAC Total Net profit on
customer’s customer will of customer CLV customer
purchase purchase purchase
(Cumulative)
700 2 1 3000 1400 -1600
700 4 2 - 2800 -200
700 6 3 - 4200 1200
700 8 4 - 5600 2600
The company incurs a Rs 3000 acquisition cost per customer and earns Rs 700 per customer
to achieve milestone 1. As shown in the table above, the company stops making losses year
2 onwards. This indicates that the business needs to keep a customer loyal for at least 2
years in order to make some profit on it.
