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Retail’s Sustainability Strategy Needs Revision, Not Recycling

September 13, 2021 Sindhya Valloppillil
September 13, 2021
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We have been raised to believe in recycling, but it has mostly been a sham and a lot of greenwashing. The ubiquitous “three-arrows” symbol doesn’t necessarily mean that a product is actually recyclable. Any product can display the recycling symbol even if it isn’t recyclable. To address this problem, California’s state assembly passed a bill last week that would ban companies from using the recycling symbol unless they can prove the material is in fact recycled in most California communities and is used to make new products. However, the waste problem is much bigger than we think.

Only nine percent of all plastic waste produced has ever been recycled and turned into something that we were able to use again. The fashion and beauty industries are two of the most wasteful industries in the world. The beauty industry produces over 120 billion units of packaging globally every year, and very little of it is recycled. And globally, an estimated 92 million tons of textile waste is created each year and ends up in landfill sites. In the US alone, customers return approximately 3.5 billion brand-new products annually, of which only 80% is not defective according to Optoro, a company that specializes in returns logistics. Most of it goes straight to landfills.

The “reduce, reuse, and recycle” mantra is a reminder of the steps we need to take for a sustainable future. It’s a part of a larger conceptual framework called the waste management hierarchy in which recycling ranks as the least preferred option behind reduce and reuse. Still, recycling has remained our focal point. In a recent NBC News article “Everything Americans Think They Know about Recycling Is Probably Wrong,” science journalist Erin Biba said, “We have to stop thinking that recycling is ‘enough’ when it comes to the planet. Yes, without question recycling is an essential aspect of a healthy planet and clean environment. But it should also be our last resort.” Since recycling efforts alone have had underwhelming results, we should focus on how to reduce our consumption, and tech-enabled personalization can reduce returns and waste in the beauty and fashion industries.

Tech-Enabled Personalization Is a Sustainability Innovation

From virtual try-on for makeup and apparel to evidence-based skin analysis, AI, AR, and computer vision are changing the way consumers discover, experience, and connect with brands. For big brands and retailers, the top 2021 category tech investment is personalization. A recent Epsilon online survey of 1,000 consumers between the ages of 18-64 found the appeal for personalization within retail is high, with 80% of respondents indicating they are more likely to do business with a company if it offers personalized experiences and 90% indicating that they find personalization appealing. Accurate personalization can guide consumers to the right products, resulting in reduced environmental issues related to overconsumption while increasing conversion and loyalty. New start-ups that deliver sustainable personalization solutions—that also improve business for retailers and brands—fall into three categories: I. AR Virtual Try-on with Shade Matching, II. AI-Powered Virtual Fitting Rooms with VR/AR, and III. Smart Packaging with IoT & Distributed Ledger Technology.

“Virtual try-on has exploded in the past few years—but for color cosmetics, the technology doesn't help solve the primary customer pain point: shade matching.”
By Christopher Merkle, Founder & CEO, MIME

I. AR Virtual Try-on with Shade Matching

While faces are easy to map since it’s not difficult to virtually place a lipstick color on a face from a technical viewpoint, using AR and AI to recommend skin tone matching complexion makeup products is challenging, and many AR virtual try-on companies have not been able to successfully match customers based on their skin tones. “I’ve been searching for an intuitive foundation shade finder tool since launching Cult Beauty in 2008, and nothing has lived up to the experience of having a professional match you in daylight until I discovered MIME,” says Alexia Inge, founder of Cult Beauty. “There are so many variables from light, skin tones, prevalent undertones, device, screen, OS, formula density, formula oxidation, as well as preferences for coverage levels, finish, brand, and skin type,” she says.

According to MIME’s Founder & CEO Christopher Merkle, "Virtual try-on has exploded in the past few years—but for color cosmetics, the technology doesn't help solve the primary customer pain point: shade matching. From day 1, I decided to focus our company's R&D efforts exclusively on color accuracy. I want to make sure that when the consumer receives their foundation or concealer in the mail, it's the perfect shade once applied to their skin."

MIME’s Shade Finder AI allows consumers to take a photo of themselves, answer a few questions, then get matched with the perfect makeup color matching their skin tone. MIME helps retailers and brands increase their online and in-store purchase conversion by up to 5x. More than 22% of beauty returns are due to poor customer color purchases. MIME helps customers choose the right color—the first time. Merkle says MIME can get returns as low as 0.1%. Additionally, MIME will soon utilize its GIST (Guide to Inclusive Skin Tones) color guide, which is akin to a Pantone standard for the industry, to provide insights for brands to determine which shades will perform best when manufacturing new shades and for retailers to order the correct shades for their stores at a local level. Licensing the GIST score/rating to brands for their packaging enables consumers to easily identify their shade matches across brands. MIME has already signed on leading retailers and brands including Charlotte Tilbury and Cult Beauty, which was just acquired by the Hut Group.

Last month, L Catterton-backed Il Makiage acquired Voyage81, a 2-year-old Israeli deep-tech AI-based computational imaging company, for $40MM. In its acquisition announcement, Il Makiage said, “Voyage81’s algorithms extract 31 channels of hyperspectral information from RGB images taken with existing smartphone cameras with 98% accuracy. Its software is capable of mapping and analyzing skin and hair features, detecting facial blood flows, and creating melanin and hemoglobin maps from a simple smartphone camera photo. The technology, combined with IL MAKIAGE's current AI shade matching algorithms will allow consumers to use personal smartphone cameras for unparalleled online shade matching and personalization capabilities for IL MAKIAGE and its upcoming homegrown digital beauty and wellness brands.”

At the time of its acquisition, Voyage81 had just finished its Series A funding, which was led by True Ventures, Next Gear Ventures, and Maniv Mobility, and, they were already working with the largest smartphone manufacturers in the world.

II. AI-Powered Virtual Fitting Rooms with VR/AR

In 2020, over 60% of consumers bracketed their purchases (buying multiple sizes to try them out and return those that don’t fit). This has led to increased return rates of 15-40% on average for apparel and 80% for women's dresses purchased online. The lack of standardization of sizing between brands and even within a single brand with different SKUs is a big problem. While there are many companies that offer virtual try-on and size recommendations for apparel across brands, most ignore the interplay of the 3D properties of garments and the shape of the consumer’s body. They offer visualization options by pasting over a flat image file only. Showing a flat image or comparing sizes doesn’t consider differences in construction or fabrics used (such as jersey vs. silk) which make a significant difference in how a garment fits, drapes, or works on a consumer’s skin tone.

Perfitly is a virtual reality / augmented reality (VR/AR) and AI-powered virtual fitting room solution integrated into the e-commerce platforms of major retailers. It empowers consumers to make confident purchasing decisions, taking the guesswork out of size selection. With just a few photos or measurements, customers can create their virtual avatar at 97%+ accuracy, allowing them to see how each garment will fit and look on their unique body. Its 3D visualization allows consumers to zoom in and out and size up or down, catering to consumers’ different fit preferences (snug or loose fit). While the solution was developed to build shopper confidence, it acts as a solution for businesses and consumers alike.

The Perfitly team knew that the best way to buy something was to be in a fitting room with a mirror. In that scenario, 1 out of 4 people buys something. Their goal was to recreate this experience online. By building a tremendous amount of design data, size allocation data, and body shape data, they built their platform.

Due to an increase in online shopping, Perfitly has seen an upswell in demand for their service. They currently have several publicly traded retailers as clients. Co-founder Raghav Sharma says, "We expect to double or triple our number of clients by the end of this year." The net effect of 3D visualization is an increase in conversion and sales while driving down bracketing. Perfitly has reduced returns by 64% and taken conversion rates of their clients up by 80%. By driving down inventory and waste with better insights for product development, Perfitly offers its clients an effective sustainability solution.

The global virtual fitting room market is forecasted to more than double from $3 million in 2019 to $6.5MM by 2025. While some retailers are working with tech providers such as Perfitly or Apple’s ARKit (for iOS applications), others are creating their own virtual fitting room software and/or acquiring companies. Amazon reportedly patented its own “blended-reality” mirror, which works using augmented reality. The publishing of that patent came about three months after Amazon acquired a company called Body Labs, whose 3D body scanning technology was used towards advancing virtual reality applications. Body Labs was acquired for an estimated price of at least $50 million to as high as $100 million; New York-based Body Labs was founded in March 2013, according to CrunchBase, and had raised $13.2MM across two investment rounds—closing an $11MM Series A in November 2015.

In May 2021, Walmart acquired Israeli-based virtual fitting room start-up Zeekit for an undisclosed amount. Interestingly, Zeekit only raised a $9MM round of funding prior to the acquisition. According to Denise Incandela, EVP at Walmart, “Virtual try-on is a game-changer and solves what has historically been one of the most difficult things to replicate online—understanding fit and how an item will actually look on you. Zeekit will help us deliver an inclusive, immersive, and personalized experience for our diverse customer base.” Customers will be able to upload photos of themselves or choose from different models that represent their height, shape, and skin tone. The technology will show how clothing would fit and resemble the experience they have at a store. They can also enlist a friend’s help in deciding on a purchase by sharing the virtual outfit and getting an opinion. According to Zeekit, early data has shown the service to help reduce return rates for its retailer partners by 3%.

“Our mission is enabling brands to create the most intimate and purposeful relationship with their consumers, one that is based on mutual value creation, personalized experiences, and sustainability.”
By Ignacio Longarte, Founder & CEO, Szentia

III. Smart Packaging with IoT & Distributed Ledger Technology

The beauty sector creates 122 billion single-use sample sachets annually, very few of which are recyclable. The industry now needs to satisfy the digital, green consumer and go from transactional to an engaging and personal relationship with its consumers. Reusing packaging designed to last with tracking will create a huge impact over time.

Szentia is a B2B solution for brands that offers smart packaging and a total beauty experience through AI, IoT, and distributed ledger technology to act on real-time engagement and adopt circularity. The Szentia experience consists of reusable tokenized smart packaging that’s co-designed with its brand customers. It also includes a smart hair and skin analyzer, a brand platform, and a consumer app. Founder & CEO Ignacio Longarte says, “Our mission is enabling brands to create the most intimate and purposeful relationship with their consumers, one that is based on mutual value creation, personalized experiences, and sustainability.” He went on to say that “the experience is all under a fair digital exchange because the vision under our technology is that the consumer is willing to voluntarily and intentionally share data against not just product sales, but something meaningful. We help brands achieve that through smart interactive packaging powered by an AI platform. Properly used, gradually our solution can enable a new business model/channel for brands.”

With Szentia, the net environmental savings for brands include 71% less of a carbon footprint and a 50% reduction in water footprint. So far it is the only platform that tracks E2E from factory, distribution, use & reuse to recycling. Other benefits include expert beauty advice that includes personalized recommendation and beauty content, a Smart Coach in the bottle/flank (helpful for dosage of product) and a loyalty plan in the app, and experiential benefits automation which includes recommendations, promotions, up-selling, and rewards. The smart packaging guides you intuitively through your next best routine every time, personalized for you based on your own evolution and external parameters. So far, Szentia has signed two beauty conglomerates and a pro beauty salon chain as early customers.

Conclusion

To solve the world’s sustainability challenges, we must leverage expertise from across a broad spectrum of sectors and industries. We need creative systems-level thinking that cultivates innovation in sustainability. Tech-enabled personalization is one such innovation that provides a more mindful consumer experience which is key to reducing packaging waste, overconsumption, and bracketing. It will increase buyer confidence while building loyalty for brands and retailers.

A previous version of this article was published in TechCrunch.

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