«The pre-order pricing model is something that existed before. Combining it with digitization, new models can be found». In conversation with the founders of ATACAC and Artknit Studios
Demand before production
When talking about sustainability in the fashion field, many times the approach to the issue focuses on the supply chain or the materials utilized to fabricate items. There is a tendency to forget that part of the waste, which is one of the problems that the sustainability movement tries to fight, is caused by overproduction. Some brands base the choice of the number of garments to produce, on market predictions: in this case, overproduction and waste can’t be avoided.
Other brands are trying to achieve a level zero of scraps. They take advantage of technology, using the internet to predict the number of items to be produced, and then fabricating these items with machines that allow to minimize fabric scraps, or implementing manufacturing methods taken from tradition. The first type of brands, which estimate the quantities to be produced on market forecasting, choose the price considering the total cost of the manufacturing and retail processes – within which the majority of investments goes to managing and communication.
Production before demand
This business model is based on production before demand. It includes the loss cost of unsold items in the final price: when buying a garment, the consumer is paying for this loss cost, which can be considered a sort of debt that the brand asks the consumer to pay for. Talking about pricing determination, in his 1767 book Inquiry into the Principles of Political Economy the proto-economist James Denham-Steuart introduced the combination of the terms supply and demand.
In the ‘On Demand’ chapter he states that «the nature of demand is to encourage industry; and when it is regularly made, the effect of it is that the supply for the most part is found to be in proportion to it, and then the demand is simple». This statement inspired Adam Smith, considered the Father of Economics, for his law of demand. During the 19th and 20th centuries, there was a shift from a pricing determination dictated by the cost of labor and feedstocks to one dependent on market forecasting, based in part on sales data but influenced by trends expectations.
Direct contact between sellers and buyers
Trends forecasting leads to a production before demand business model, and this model causes waste. Pricing determination reflects the manufacturing process of the items it is referred to. With the advent of the internet and its related technologies, online market platforms emerged. Some work as shops for existing businesses, but there are others where it is possible to make direct contact between sellers and buyers.
This individualization of the market, without mediation by retailers, can bring benefits to the two parts, one of which is flexibility in manufacturing gained by sellers, who balance prices and production amounts according to the demand from consumers. «The supply for the most part is found to be in proportion to the demand». The internet, a 21st-century tool, allows a change in the market reapplying a form of trading that was the norm in the past. This form is based on a demand before production business model.
Lampoon reporting: Pre-order pricing strategy
Swedish fashion brand ATACAC chose to carry out a pre-order pricing strategy with the aim of sustainability. «We release a model online a month before» explained Jimmy Herdberg, one of the brands’ founders, «then we produce the amount of pre-ordered items, plus some more for our physical retailers. If you preorder you have a discount». For ATACAC, customers become a sort of investors, that the brand attracts using the discount formula.
«They work like a bank for us» pointed out Herdberg, «consumers pay only the amount for the required garment, no more». This strategy helps to reduce, if not nullify, the losses that can occur in some periods, such as the current pandemic. «2020 has been a challenging year, but thanks to our pricing strategy we didn’t have a real risk. We rethought our online store and now we’re going to release a collection, with patterns and silhouettes that are thought to never go out of fashion».
The virtual mannequin
The new collection, online from the 1st of March, is presented by a furry mascot (a reference to a fur coat of the brand) which accompanies the visitor on the website. In a virtual room stands a virtual mannequin, which changes shape as the visitor changes the indications for height and weight. As a consequence, the garment adapts to changing kinds of bodies. «The development of this technology took us time. What can be seen now is a first step, in a direction that we are showing».
The virtual mannequin stands as a body double for the customer: no more wonderings about how the garment will look like on the customer body. Thanks to this technology, the risk of returning items is minimized. The virtual mannequin becomes a key factor for the demand before production model since it helps to calculate the specific number of required garments, reducing the margin of risk. Apart from the minimization of waste, another benefit of this digitizing process is that ATACAC «can release whatever, whenever. We could create a garment in the morning and sell it online the same day. In addition, we don’t have to follow or costumers’ trends».
Zero waste in the manufacturing phase
Concentrating their production on patterns never to go out of fashion, and knowing in advance how many items will be sold, the brand is freed from mainstream impositions. The garments made by ATACAC are formed by fabrics without toxins, allergens, or genetically modified organisms. These fabrics, chosen keeping in mind the impact they would have on the environment, are then digitized and finally fashioned adopting a craftsmanship technique of assembling garments taken from tradition.
Then, applying the ‘demand before production’ business model, the impact on the planet is reduced at the minimum. The practice to produce an item only when requested is one of the pillars on which is based Artknit, an Italian fashion brand from Biella. The brand chose to invest in knitwear to achieve sustainability. There are machines in the market that allow fabricating knitted garments directly in 3D.
The garments come out finished and without seams, achieving zero waste in the manufacturing phase. Artknit’s founder Alessandro Lovisetto explained that «there are machines that have a considerable cost and require more programming than a normal machine, but when you work with such valuable and natural materials [as certified cashmere or wool], being able to achieve this almost neutral environmental impact gives us a competitive advantage, both towards the environment and in terms of sustainability of the project».
Producing less but more consciously
By producing only when the order is requested, the brand minimizes the risk of waste in terms of warehouse management. «We don’t always use wool-garments machinery: when we use other, more traditional technologies, we rely on made-to-order to not misuse yarn. Since we get our supplies from spinning mills near us in the Biella territory, and we have very flexible contracts with them, we achieve to use only the yarn we need for a specific period».
These spinning mills buy batches of wool a year in advance. Then the brand chooses from their stocks the yarns which have certifications trusted by Artknit: GRS, Global Recycle Standard, for eco cashmere; Woolmark approbation for merino wools; Associazione Tessile e Salute (Textile and Health Association), which makes sure that the fibers are not harmful on the skin; RWS, Responsible Wool Standard, that certifies the entire supply chain in terms of transparency, declaring who did what, from the farm where the sheep was sheared to the final yarn.
Arknit – Made-to-order mode
«Once we buy the spools of yarn, we then distribute them to the laboratories, each one entrusted with a certain type of garment». Depending on the type of laboratory, some decide to go and produce by supplying some of the garments in advance, while others, the artisanal ones, work in made-to-order mode. Artknit decides what items to fabricate by applying the demand before the production model. «The item is designed, then a prototype is produced and photographed and put in the online store» said Lovisetto. «After ten or thirty days, we control the number of clicks the product has received and the conversion rate of the product page. At that point we analyze data to see if it has potential, if so we send it to the laboratories».
If the feedback is not positive, the item is kept online until the end of the season, available in made-to-order. The following year, or at the next drop, it is either redesigned or enhanced or removed. «The idea is to create as few products as possible, that can be functional and durable. Hence the idea of creating fewer collections, and garments that can be versatile and reusable throughout the year». Once it has been approved, the garment is available for order. When the order arrives on the platform, the knitter is notified, remaining autonomous in production.
The pre-order pricing model
«We have clear analytics data, with daily control and a short supply chain that allows us to supply quickly». When some items have flaws, or they do not meet certain parameters, they are left to external collaborators, which resell or dispose someway of these items to prevent them from being abandoned or discarded. «The pre-order pricing model is something that existed before» said Jimmy Herdberg. «With new technologies combined, as digitization, new models can be found».
This can be referred to ATACAC and to Artknit. The two brands have used a business model which was the norm in the past, when Adam Smith thought about his law of demand. But they achieved to refine it thanks to the internet, wiping away forms of intermediation that can provoke harm or waste in some passages of the supply chain. Thanks to a pre-order pricing strategy, based on a demand before production business model, they accomplished the amalgamation of digitization and craftsmanship, letting know the industry that, quoting Herdberg, «innovation and tradition, combined are powerful».
ATACAC
Is a Swedish fashion studio started by the KOKOKAKA communication studio’s founder Jimmy Herdberg and fashion designer Rickard Lindqvist. ATACAC is KOKOKAKA’s fashion laboratory where they explore new ways to design, present, sell and communicate fashion through digitization.
Artknit
Is an Italian fashion brand founded in 2018 by Alessandro Lovisetto in Biella. They say to be setting the new standards of The Modern House of Knitwear, a fashion form which Lovisetto believes to be the key to achieve sustainability.
