Discussing the Demand for Sustainable Fashion with Wearwell’s Erin Houston

The sustainable apparel market is projected to reach a value of $20.51 billion by 2030, driven by a mindful consumer base and growing social awareness. Erin Houston, co-founder and CEO of Wearwell, a sustainable goods platform, joins the podcast to discuss the growing demand for ethical and green fashion, how she’s grown her company amid a challenging consumer landscape and why they pivoted away from a subscription model.

Middle Market Growth: Welcome back to Middle Market Growth Conversations podcast, I’m Carolyn Vallejo here with a special Next Target episode of the podcast. Sustainability in the apparel market is increasingly top of mind for conscious consumers, but amid the rise of fast fashion and growing awareness of greenwashing, responsible shopping can be especially hard. Wearwell has stepped in, offering online buyers a platform to make more informed ethical purchases. Here with me to talk about the company’s mission and share why investors should be keeping a close eye on the sustainable fashion sector is Wearwell co-founder and CEO, Erin Houston. Erin, thanks for being here.

Erin Houston: Thanks for having me, Carolyn.

MMG: Let’s start with the basics. Can you provide a little bit of insight into Wearwell’s company details? Things like your product offering and your staff size—what’s the elevator pitch here?

EH: Absolutely. So Wearwell is the one-stop shop for sustainable clothing, accessories, jewelry, secondhand, shoes and now even home goods. We got started several years ago, and incorporated in 2020. Our team is actually quite small. We’ve got about three staff at the moment with a team of contractors as well.

But really, when it comes down to who we are, what we do, we’re serving typically that millennial woman who most people hear is interested in sustainability, but they don’t quite know where to begin shopping for their clothing and accessories to make sure that they are ethically and sustainably made. And so we began working on just creating a platform that would simply make it easier to discover the most sustainable and ethical fashion out there and in doing so, created a platform that’s now partnered with 50 different brands that all meet the strongest criteria in the industry on workers’ rights as well as environmental sustainability.

MMG: Tell me a little bit about how Wearwell is unique from competitors. What does the competitive landscape even look like right now?

EH: The competitive landscape is rapidly changing right now for sustainable fashion. So most people when they hear sustainable fashion, they either know exactly what it is or they think of luxury sustainable fashion or something like a fast fashion H&M Conscious collection. And the landscape has really changed quite a bit over the last probably seven, eight years with the rise of more and more brands in sustainable fashion who are really walking the talk when it comes to their ethics.

But there’s really been a gap that’s wide open with a marketplace that connects those individual brands to the consumer that’s looking for their product. And there are a few competitors of ours out there that we’ve actually seen unfortunately a few of them close their doors this year. Some, we know, have been struggling. But what we have found is that the thing that differentiates us and has allowed us to survive in this landscape is that we focus on really, really high criteria for ethics and sustainability that imbues our customer with confidence that what they are purchasing is actually making the difference that they want in the world.

But we’re also curating the shopping experience. A lot of marketplaces—obviously most of your listeners will know—they make the mistake of just throwing a ton of product on their site and going with what sticks. And instead we go through a process of evaluating, is this product going to sell? Is it beautiful? It is usable? Do we think that there’s a demand for the product itself? And then we put it through our evaluation for its sustainability and ethics. So we’re really leading with product rather than leading with the sustainability piece when it comes to our customers. But then we’re backing up that sustainability in ways that the customer can really understand and dive as deep as they want to to understand the supply chain.

MMG: So there is clearly consumer demand, particularly among millennial women, as you mentioned. You have these brand partnerships, which is great. Tell me a little bit about your growth strategy. I know you also launched initially as a subscription service, so can you tell me a little bit about that pivot and maybe some recent initiatives or upcoming plans for growth?

EH: Absolutely. So yes, we did pivot from a membership model to an open marketplace where someone can come and discover brands, dive into the sustainability, really shop a ton of different collections that are available to them. But we ended up pivoting because we saw that with a more open marketplace, we were seeing larger cart sizes, we were seeing better repeat purchase rates, we were seeing people talk about us more on the products they were finding because they could refer those types of products outside of our existing membership. So we made that pivot. What that also meant was we changed one of our core offerings, which is a personal styling service. We had designed a personal styling service that is a big part of what we do. It’s connecting that customer with exactly what they could possibly want to purchase.

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It was an entirely digital experience where someone would, instead of getting a subscription box, they’d get a link that had a note from a stylist and some items that were curated for them. And we’ve actually just transitioned that to an online chat with a stylist. So again, going back to that curation element, we were seeing that we want to give our customers tons of options, but we want to make sure that they’re having that curated shopping experience and finding exactly what it is they want.

And kind of the nice-to-have is that they can feel confident that it was sustainably made. But it comes to that growth strategy, we’re looking not just at becoming an even more fully open marketplace with more brands, we’re also talking about expanding who it is we serve and how we serve them. So that means extending our size offering. Today we offer sizes XXS up to 5X. And we’re beholden to the size runs our brands make, but we’re always looking to expand that. We think it’s really important to continue offering additional product for additional people who were clearly see a demand from them. We’re also looking at our customers’ interest in home goods.

So we started carrying home goods last year and saw a ton of interest in people saying, you know, I love that I can get this jewelry and this clothing that fits my aesthetic, but now I really want something for my home. I’m tired of the kind of mass market options that are out there and I want to bring things like artisan goods into my home. And so that’s really a growth frontier for us that we’re pushing hard into this year.

MMG: So Wearwell has already shown that it’s willing to evolve even as a young business. Are there any growth metrics that you can share with us?

EH: Yeah, absolutely. So what we have seen in the market is really just a huge increase in the desire for sustainably made products. We’ve seen a 5x increase over the past several years. And that’s the broader market. I think most of your listeners will know that last year was an extremely challenging year for consumer-facing businesses—still lots of unpredictability because of pandemic hangover, economic uncertainty on a lot of people’s minds, even if all indicators are pointing to okay, a lot of people are still not spending in consistent patterns like we used to see. So one of the growth metrics we take into account is we did grow slightly over the past year, revenue-wise.

For us, that’s a big deal when we look at our competitors really looking at losses over the past 12 months. So we’ve not only been able to stay steady, we’ve been able to grow in this economic market, which I think just shows that desire. But the biggest indicator I love to point at is average order value. So our average order value over the past 12 months has actually gone up 63%, and it’s really just highlighting that sustainability has a really compelling sales message to both new consumers and repeat customers coming back to make a second purchase but also adding on to what it is that they’re buying for their wardrobe and for their home when they know that it’s got some sort of better cause behind it than just the product itself.

MMG: Really impressive, especially considering it’s a challenging market out there, especially for consumer brands and consumer businesses. I imagine you are of course planning for future growth as the market conditions improve. So what are some of the most notable challenges you might face as you prepare for future growth?

EH: The biggest challenge in our space is really around the lack of access to funding. I think there’s some broader categories that we fit into that are historically underfunded as a female-founded team. We’re also working on social impact issues, prioritizing that alongside of profit. But really, when you look at the sustainable fashion space more broadly, there’s not a ton of funding available. And so a lot of our future growth has really focused on how we can build a business that is sustainable in and of itself. We’ve always focused on incremental growth and making sure that we’re running a business that is quote unquote sustainable from a business mindset.

But really when we think about growth and what’s next and getting over that type of challenge that we’ve had to face over the past several years, we’re looking at not just growing through fundraising, but rather growing through strategic partnerships. So a major focus for us right now is finding larger players in the fashion industry and in this space that are interested in reaching that type of customer. We know that larger players are really, really looking to reinvent their reputation right now.

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But conscious consumers are sticklers. They can see through those types of efforts. And so one of the ways that we are getting over that growth challenge in a unique way is seeking out larger partners that we can team up with in really unique ways. It’s something that I think is unique to the sustainable fashion industry overall. It’s one that’s highly cooperative. Of course, we’re all competitive, we all operate in a capitalistic mode, but we do all see that when we help each other out, the entire industry gets stronger and our businesses grow better. It’s been an interesting journey so far.

MMG: I imagine. You mentioned that access to funding is such a challenge, but you have secured funding—you did raise seed funding relatively recently. Can you tell me a little bit about that?

EH: We’ve raised $1.4 million to date. We did that over the course of a few different methods. Most of that was seed funding and pre-seed funding. We also did a crowd equity campaign, which was a really wonderful way for us to attract new customers but also attract people who could become evangelists for us. We did that through the Republic platform.

MMG: Now I want to dive a little bit deeper into the sustainable fashion space overall and get your thoughts there, and the first place I want to start is there are so many points along the fashion supply chain and the product lifecycle that have the potential to be improved upon from an ESG and a sustainability standpoint—I think we can all agree. So, from your perspective, what are some of the most immediate areas that need improvement?

EH: This question is so hard because you’re right; it is super, super complicated. One of the things that makes this industry particularly complicated is the lack of transparency in supply chains. So you’ve got the major producers, they’ve got many, many subcontractors at the different parts of their supply chains, and it’s really hard to actually track a basic t-shirt, how was it made? But you know I think the one thing that people often overlook is that it doesn’t have to be as complicated as we think.

When you’re talking about scale, yes, of course, the larger the scale of the brand, the more complicated and challenging it is. But really, if a brand starts to focus on their materials choices, it can be really, really powerful for sustainability outcomes, but also, again, for just making sure that sustainability is legit within their supply chain. And so when I say materials choices, what I’m really talking about is choosing materials that are better for the environment, materials that don’t shed microplastics into waterways or maybe organic materials that can biodegrade over time. That also means things like nontoxic dyes. We know from a lot of research in the space that the use of pesticides, use of toxic dyes, which are often found in fast fashion products, they’re not just bad for the garment workers, they’re also bad for the customers. And so there’s a lot of reason for brands to start prioritizing using nontoxic dyes in their manufacturing processes.

But I also love to talk abut the broader definition of sustainability. When most people hear sustainability, they naturally think of the planet and the environment. We have broadened that term for ourselves quite widely, meaning we also look at the lives of garment workers and artisans. Do they have access to fair wages? Do they have access to a safe work environment? And that’s something I really hope brands start prioritizing more. I think it is really important, not just from a storytelling perspective, to be able to say, we’re a brand that uses sustainable materials and we pay our garment workers fairly. But it’s also important to the stability of their supply chain in the long run. Right now we are seeing one of many, many, many years of Bangladeshi garment workers protesting because they don’t have access to safe work environments. And that type of reaction causes instability in supply chains that some larger companies are facing right now. And so I think there’s a win-win with looking at both materials as well as wages for garment worker when it comes to how to start prioritizing sustainability in the supply chain.

MMG: So this is all about going beyond just the E in ESG.

EH: Exactly, exactly.

MMG: Now Wearwell of course is women-led and founded and women are also so important to the fashion industry overall, both in terms of who’s shopping for clothes and who’s making the items. Tell me a little bit about why women are so critical to the effort to improve sustainability in the fashion sector.

EH: Women, interestingly enough, hold very, very few leadership roles in the fashion industry. Tons of women work in the industry, but very, very few are at that C-suite level, all things considered. That’s a representation issue across the broader fashion industry, not just sustainability. But I think the really important thing is when you look at sustainable fashion brands, again, the ones that are truly producing sustainably and ethically and prioritizing that across the entire brand, the majority of them have been started by women. And so it’s really, really important that we start to raise up those leaders who are women within larger brands so that they can start to turn the ship a bit more.

But when you don’t have that representation, it’s not going to happen overnight. It’s not going to happen swiftly. So I think really looking at who’s leading the brands that are making the most impact when it comes to the planet and people. But I also want to highlight something that’s often overlooked: Women make up 85% of the world’s garment workers. That is a huge amount. And so when we think about our purpose as a company and our mission, beyond building a profitable marketplace that reaches conscious consumers, we’re looking at how do we create better livelihoods for people across the world? And if we know that if women are 85% of garment workers that means we need to be extending fair wages to those women. And we know that from, you know, I have a global development background.

We know from research that has been done for generations now that women invest more in their communities, invest more in the education of their children. So we’ll start to see better outcomes for our mission as a company, but also better outcomes for our economy if we begin putting women at the center of companies so that they begin to focus more on sustainability and ethics overall.

MMG: To turn our attention to greenwashing, which is another huge topic in this space, it’s a huge issue. Consumers are growing more aware of this. It’s one thing to understand what greenwashing is, but it’s another thing to understand how to tell when a brand could be greenwashing. This is something that investors in this space are going to have to be looking out for very closely as well. So what should investors be paying attention to in their potential investment targets in this market, and how are they able to verify what is actually fact from fiction?

EH: So greenwashing is a really, really challenging issue to overcome in the space. One of the things that I would encourage investors to do is really, really pay attention to the founder backgrounds. Do you have a founder that is coming from a different space and just tossing around the word “sustainability,” or “organic,” or “ethical,” or do they have a background in it? Have they studied this in some way? Have they worked for another company that’s leading in the space? And if they haven’t, that doesn’t mean they’re not a worthwhile investment, but who are they bringing onto their leadership team to spearhead this? What’s their expertise?

I think it’s very easy for people to start using those terms without deeply understanding what it means. And part of the complexity there is we don’t have a single definition for sustainability and what it should include. And there are many, many ways that you can build a sustainable business. But when you have someone who has expertise, they can look at the nuances of how that particular company can make the greatest difference with their choices. And you want to really make sure that the company is looking at not just the one collection that they can talk about as sustainable or one small facet of their supply chain like packaging.

You want to make sure that they’re really talking about the sustainability of the product that they are making end to end. And of course, a new company that you might be investing in can’t do everything all at once for sustainability. I know better than anyone that is not possible to do, but you do want to make sure that you’re asking questions of the founders to understand, are they prioritizing sustainability and ethics in the areas that matter most for their supply chain? And what are their plans for the future? What are their next benchmarks that they’ll work towards once they’ve achieved their first set of sustainability goals?

MMG: Let’s keep looking towards the future. What are your plans for any future funding for Wearwell?

EH: I mentioned this a little bit earlier in our conversation, [but] right now, we’re really looking to fund ourselves through strategic partnerships. A lot of that growth strategy is just looking the assets that we already bring to the table. Our team has deep expertise in sustainability, and we know that we can bring that to a partner who is looking to improve their reputation and really start to drive more customer loyalty through legitimately expanding their sustainability footprint. And so for [them], we can help them resonate with a younger, more socially and environmentally conscious demographic. But for us, that type of strategic partnership helps to mainstream that it is possible to find [sustainable] clothing and accessories that fit your personal style, that fit your price point, especially when you are a middle market consumer. So that’s a really a huge part of our growth strategy and how we plan to continue expanding Wearwell.

MMG: Wonderful. And Erin, final question for you: In your opinion, why should investors be paying close attention to sustainable fashion?

EH: I just mentioned the middle market players. I think when you look at the sustainable fashion space overall, there’s a lot happening in luxury. It’s people who can afford to shop sustainably, pay a larger ticket [price] for it and so it’s then built into that luxury supply chain and the overhead costs. And then you also think of on the other end of the spectrum, fast fashion. But what we’re seeing is that the middle market area is seeing a ton of change right now. We’re seeing a lot of brands have to reinvent themselves. We’re seeing a lot of brands not survive over the past few years because customer loyalty is all over the place.

I’d encourage every investor to start looking more at sustainability as the way that you build brand loyalty.

Erin Houston

Wearwell

And so I’d encourage every investor to start looking more at sustainability as the way that you build brand loyalty. It is something that consumers love. They love to attach to, I didn’t just buy this amazing blouse that I love to talk about every time I get a compliment on it, but I also love to talk about how cool the brand is that I bought it from, what they’re doing for the world around me. And it’s become a real identity for conscious consumers, and that conscious consumer market segment is only growing, especially as we start to see Gen Z come into greater spending power and needing to look beyond secondhand as their source for clothing, which is wildly popular for Gen Z right now. We’ll start to see more and more consumers in that middle market really opting for sustainability as their driver and their motivation for shopping.

MMG: Excellent. Erin Houston, co-founder and CEO of Wearwell, thank you so much for joining the Conversations podcast.

EH: Thanks, Carolyn.

This transcript has been edited and condensed for clarity.

The Middle Market Growth Conversations podcast is produced by the Association for Corporate Growth. To hear more interviews with middle-market influencers, subscribe to the Middle Market Growth Conversations podcast on Apple Podcasts, Spotify and Soundcloud.