The ascent of German blockchain start-up Retraced has been rapid: Founded in October 2018, and just over a year later, the company won the German Sustainability Prize 2019. During the pandemic year 2020, Retraced was able to win over 40 fashion companies (including Armedangels, Boyish Jeans and ErlichTextil) and started 2021 with raising one million euros in seed funding from European VC firm Samaipata.
The money will be used to finance the technical development of additional, user-friendly functions of the digital platform as well as the acquisition of new fashion companies. FashionUnited spoke to Retraced co-founder and CEO Lukas Pünder about the start-up's future plans, the year 2020 and the development of the fashion industry.
Lukas, we already spoke in an interview in December 2019. Back then, you still had the feeling that the reception of Retraced in the industry was a bit hesitant, as transparency was still a “nice to have” and you had a lot of convincing to do. More than a year and a pandemic later, the situation is certainly different.
That is correct. Back then, we often had to explain how a brand can communicate transparency to the consumer and thus create trust and how this also pays off economically. But that is actually only the second step. In a first step, companies work on internal transparency, define it for themselves as a brand and apply it to their supply chain, compliance and sustainability efforts. Digital sustainability management includes defining catalogues of requirements, for example that all suppliers must sign a Code of Conduct, pay fair wages, etc. This is recorded and one can see immediately how much was achieved.
About half of the 40 companies use our platform internally in this way, and then communicate this to their customers in the second step. First you have to clean up internally. In the meantime, however, transparency is a must-have, as the responsibility for brands and thus their demands are increasing.
Has the Corona pandemic made your work harder?
Transparency and sustainability are still really important issues in fashion. You can see that many brands want to work on this. However, you also notice that many brands have economic difficulties because of Corona that prevent them from working intensively on transparency or sustainability.
There were certainly many ups and downs last year. The lockdown in April/May/June was more difficult, as it caught many brands and retailers quite unprepared. We work a lot with young brands, from start-up to start-up; brands that already rely on digitalisation and thus had fewer problems during the crisis than traditional retail, for example. But retail brands are in touch with us too; they want to learn about transparency and apply it to their own issues.
For the customers who already rely on transparency, Covid-19 did not change much. They knew where they were producing, were able to ask the supplier directly and adjust deliveries accordingly. They were also able to address supplier needs, such as a reduction in production capacity due to labour shortages and lockdowns. Nevertheless, there were hardly any delivery problems because they were able to communicate. We have also noticed this with our own brand Cano. Last year, for example, we already ordered the summer collection in September because we knew that capacities had been reduced and that production would therefore take longer. So there was planning security on both sides.
In our last conversation, you also had to struggle a bit with the fact that not all industry players want to disclose their sources - for example, their manufacturers. Is that still the case?
There's always a lot of secretiveness, but now companies also see the advantage of sharing information and experiences with suppliers with each other. For example, we have three customers who use the same supplier in Turkey, and the exchange of information makes processes faster and more efficient, because the supplier doesn't have to say everything three times, for example, but everyone can communicate centrally via the platform. These are simply wonderful synergies. We create value not only for the brands, but also for the suppliers. Our goal is to create a network between the individual companies and, in the future, to also include certifying agencies.
Moreover, for large companies with large order volumes, it is not a secret where they produce, as there are not many factories in the world that can meet certain volume requirements. Moreover, at least in the first step, the information does not have to be shared with the end consumer. We definitely want to make sure that if someone benefits, others can benefit too, and we have found sustainability managers to be very cooperative about this.
Are there concrete case studies? Companies that have benefited from more transparency?
Absolutely. For one, there is Boyish Jeans in Los Angeles. The brand for sustainable women's jeans wanted to find out, for example, where their organic cotton comes from. We helped them track the entire journey - from the fabric supplier to the yarn manufacturer. Everyone was cooperative and transaction certificates can be used to prove when and what kind of quantities were ordered and delivered. This was then passed on to consumers and it was interesting to see how they dealt with the information: The conversion rate from click to sale increased by 100 percent, from 6 to 12 percent.
Another example is Erlich Textil: The sustainable German fashion label wanted to better understand its sustainability management, i.e. define requirements, streamline processes and see to what extent suppliers fulfil the requirements. This revealed which changes the company needed to make in order to save time and manpower.
Does it happen that suppliers do not meet the requirements and that has consequences?
Almost every company has to change, that is, remove suppliers from their supply chain. Almost every brand draws consequences if suppliers do not meet the requirements or do not disclose enough information. Suppliers will find that if they are not transparent and do not disclose raw material sources, for example, certain clients will not accept that and will stop using them. This also makes suppliers start to rethink too.
Keyword supply chain: What does Retraced think about the new German Supply Chain Law?
This is certainly a great first step. Germany has established itself as a pioneer and set an example. You can see that the companies are taking it seriously now that they have received this signalling effect from the state. This is certainly a good first step. Smaller brands are also taking the issue seriously now, the benchmark is rising and they don't want to be left behind, even if they are not affected by the law at the moment. Of course, it should have gone deeper into the supply chain, but changes and adjustments will surely follow.
Last but not least we want to know of course what happens next at Retraced after the seed funding of one million euros?
Yes, it was a good confirmation for us that we are on the right track and that someone like Samaipata sees value in what we are doing. Internally, this means planning security for the next one and a half years.
With the money, we want to recruit more brands, start several projects and expand the team. For example, we are currently working with five or six brands at the same time; this would not be possible with a smaller team. We will also develop new exciting features together with the brands and continue to work on the platform. These will help brands make better decisions based on real data from the supply chains.
Transparency certainly means having the right data available at the right moment and bringing responsibility on board. Producing better quality, setting up better processes and finding out where bottlenecks are and transferring the information from the sustainable to the commercial sector. Our task as Retraced is to show that transparency also pays off economically.
This translated article was originally published on FashionUnited.de.
Fotos: courtesy of Retraced