Sustainable Fashion Company

Among the five stages of the company life cycle, I believe the product of this sustainable
fashion company lies in the ideation stage. In this stage, a problem is identified and a
corresponding solution is formulated. This eco-friendly recyclable attire can solve the
problem of waste generation due to fashion industry. Though they are currently a bit
expensive but with more and more funding they can compete with the normal fashion
products (here we can take the example of solar energy, which was costly during its inception
but became cost effective during the course of time) There are two guiding principles for an
ideation stage, the product must act as an intellectual property and must be mass marketable.
This green product is a successful intellectual property for the company as it tries to address
the problem of waste generation. Also, this product is catered towards the Millennials and
Gen Z who are more concerned about environment and therefore has mass marketability
potential. Although, this potential has not turned into reality due to lack of value
communication. This demonstrates that the product needs funding and expertise to catch sight
of its market before commercializing and finding the right product-market fit.

SWOT Matrix

Strengths: Weaknesses:

1) Environment friendly. 1) Lack of awareness.

2) Better brand Image. 2) Middle men intervention.
3) Increasing awareness among 3) Cost.
consumers. 4) Lack of regulations and
4) Producers are benefited. guidance.
 Eg: ITC e-chaupal

Opportunities: Threats:

1) Reduce Reuse Recycle – 1) Influence of external forces

reduces cost. involved cannot be
2) Effective value controlled.
chain integration. 2) Government influence.
3) Companies adopt as marketing 3) ‘Green Washing’ – Act of
tool. misleading customers.

Recycling the products is not a new concept there are many startups focusing on recycling
use clothes, diapers etc. such as Reformation, vivo barefoot etc. these brans have made their
identity but failed to appeal to the mass.

Following are the challenges which sustainable fashion company will face.

1) Conveying value to the customers:

There is a large market for sustainable products but it is of prime important to convey
the USPs of the product. Here company should focus on giving information to the
customers about from which material the fabric/ product is made this will induce a
 sense of curiosity and brand value in the minds of customers. Example. If company is
making products using Plastic they should let public know how it is made and how
this is going to help saving environment.
2) Actually producing products in a greener way:
Though the products are green, is the process used to manufacturing it is green or not
is one of the most important question in the customers mind. Example. In case of EVs
we are using electricity to drive the vehicle which is a green fuel but if we are using
coal or other fossil fuels for producing this electricity then it is of no mean. So it is
important for company to use the greener way of manufacturing and coney same to
the market.
3) Cost of the product:
Due to the new concept the manufacturing systems are not developed sufficiently for
mass production which is resulting in a higher cost. Company should justify the
reason behind the extra cost. Also funding is very important for reducing the cost as
more research in the field will result in better manufacturing alternatives which will
subsequently reduce the cost.

In many occasions, it is very difficult to determine the valuation of an early-stage

company. Therefore, in many cases, an investor invests using a convertible note. A
convertible note is a loan extended to an early-stage company, that is convertible to
equity after achievements of certain milestones in a defined time period. A convertible
note is ideal for the selected portfolio as it is still at its ideation stage. The perk of a
convertible note is. This allows the start-up to align its objectives and start operating
towards the bigger picture instead of immediately trying to bring in a large chunk of sales
to impress potential investors. From an investor’s perspective, this note acts as a shield
against potential losses while still keeping faith in the product. Given that brand building
and efficient manufacturing system development are one of the biggest obstacles the
company is facing, as an investor, I would create some stringent milestones for the
company to achieve in order to lay a path to help their vision come to fruition whilst still
protecting my investment.

Milestone 1

The two important factor for brand building of this product would be tie-ups with
various fashion boutiques for dead stocks, conversion factor from dead stocks to product
and the increase in customer base with addition of boutiques.( acquiring the customer
base) The first milestone would test the reach of the concept and also act as PRing tool
for the customers of those boutiques Given the tremendous positive response to limited
launch sales in niche-high end markets. it is time to commercialise the product and find
the right product-market fit. This would help the start-up understand whether the
product’s characteristics fit with the original concept. The parameters would be set as
follows:

Fashion boutique tie-ups: Minimum 5 medium to upper tier boutiques.

No of customers from newly added boutique : Minimum 100 customers.

 Milestone 2

After the product has commercialised, the second milestone would be focused on
expanding the market through product development. Company should look for the newer
trends in the fashion industry and various fashion segments such as party wear, sport
wear, casuals, ethnics etc. Which will help the company to improve its portfolio.

The parameters for adding new fashion segments would be set as follows:

Product development phase: Develop 4 basic segments for the same customer
base(women) viz. a party wear, sport wear, casuals, ethnics.

Milestone 3

Once the product has made a set presence in the market, it can aggressively work towards
grabbing a higher market share and broadening their portfolio. This milestone would
focus on the company’s ability to maintain their system, penetrate the market and
accelerate their offerings. For grabbing higher market share company should diversify
( i.e. New products with new markets) under this company can go for the products for
men as well as for kids and then slowly get into various age and income segments also.

The parameters for adding new institutes would be set as follows:

Diversification: 1) targeting men and kids segments with subsequent products.

2) developing products for various age and income groups.

The Company should reach the 3rd milestone in approximately 5 years.

Initial Investment customers added Total number of Convertible Note

per milestone customers (in 5 Conversion Rate
(optimally) years) (%)
50,00,000 500 < 500 24
50,00,000 1000 1500 – 501 16 to 23.9
50,00,000 2000 3500 – 501 15.9 to 10

For this table, we have taken the total number of customers on as the milestone. The initial
investment that we are looking to make in the company is Rs. 50,00,000 and the time period
of investment is 5 years. From the table, we can see that the respective conversion rates that
are applicable to the investment and how they are range bound and based on the number of
customers that the company is able to capture. In the first case, which is possibly the
grimmest one – in case the company takes 5 years to reach the first milestone itself, the
conversion rate would be 24%. In the second case, in case the company takes 5 years to reach
milestone 2, the conversion rate would be 16%. In the third case, in case the company takes 5
years to achieve milestone 3, the conversion rate would be 10%. We have kept the conversion
rates, rangebound in each of the cases as they would depend on the exact number of
customers that company can capture and retain in 5 years.
CAC is the cost of convincing a potential customer to buy a product or service. the
customer acquisition cost will be mainly driven by placing ads across a range of media to
drive installation. Boosting social media posts, google ads and having a well-designed
website can deliver a significant payoff. Although, the primary cost the company may face is
b-to-c costs like advertisements, promotional events.

Customer Acquisition Cost = Total marketing expense in given period

Total No of customers acquired in given period
Total marketing expense to achieve milestone 1: Rs. 12,50,000
Number of customers acquired till milestone 1: 500
Customer Acquisition Cost = 12,50,000 / 5000
Customer Acquisition Cost = Rs 2500
Customer lifetime value helps determine the value of the customer to the company. The
customer lifetime value can be calculated using three variables – average value of customer’s
purchase, customer purchase frequency and time period of a customer’s purchase. For this
sustainable fashion company, we are assuming the average purchase per visit is Rs 500 ( as it
is mentioned that the product is on higher price side )and frequency of purchase is 2 times a
year.
Customer Lifetime Value for 1st year = Rs 1000
Similarly, CAC and CLV for a span of 5 years would be as follows:

Avg Value No. of times a Time CAC Total Net profit

of customer will period of CLV on
customer’s purchase(cumulative) customer customer
purchase purchase

500 2 1 2500 1000 -1500

500 4 2 0 2000 -500

500 6 3 0 3000 500

500 8 4 0 4000 1500

500 10 5 0 5000 2500

The company incurs a Rs 2500 acquisition cost per customer and earns Rs 1000 per customer
to achieve milestone 1. As shown in the table above, the company stops making losses year 3
onwards. This indicates that the business needs to keep a customer loyal for at least 3 years in
order to make some profit on it.