Fashion blockchain start-up Retraced: “Building trust throughout the entire industry”
German start-up Retraced uses blockchain technology to collect data in the value chain of fashion brands and thus contributes to transparency in the supply chain: End customers can trace the extent to which their consumer behaviour influences the environment and the lives of the people involved with a particular product. For this business model, the startup, which was only founded in October 2018, won this year's special prize for digitalisation in the start-up category of the German Sustainability Awards 2020. FashionUnited wanted to learn more about the idea behind it and talked to co-founders Lukas Pünder (CEO) and Philipp Mayer (COO & CMO) about the challenges and latest developments.
Could you tell us a little bit about how Retraced got started?
Lukas Pünder: The story of Retraced actually starts with Cano - the brand with which we wanted to bring Mexican huaraches (comfortable, handcrafted loafers) to Germany. Philipp has lived in Mexico for a while and started the production there, which of course had to be done under fair conditions. Furthermore, the leather is vegetable-dyed and vegetable-tanned. It was not so easy to establish ourselves in the fashion market at the beginning, and even with the sustainable advantages, we thought about 'how can we communicate this?’ from the beginning. Thus, we decided to move into the sustainability niche and are tapping into what is in demand right now.
Philipp Mayer: As a brand that is not a manufacturer as well, we wanted to focus more on the people who produce our products. A transparency solution was important to us, such as being able to scan the shoe and then see who worked on it, the history of how the shoe was made, as there are about ten people working on each pair of shoes, and also to be able to see where the materials come from.
LP: This laid the foundation for Retraced, as we couldn't find anything adequate on the market and thus pursued our own approach. Then we found that this is a super cool solution that would also be interesting for other brands. So we teamed up with Oracle early on to benefit from their technical expertise.
It helped that there was already a basic understanding of transparency, since we had just spent six months discussing transparency for Cano. Oracle supported us a lot in the conceptualissation, so that we were able to start with a pilot project at the beginning of last year and after five to six months of testing on our own and another brand, we were able to expand.
We are currently working on automation, and in the end it will not matter whether a company produces 100 or 100,000 products. We've made very rapid progress and expect to add six or seven more brands in the first quarter of 2020.
Who is most interested in this model? What kinds of brands approach you?
LP: The fashion market is very specific but we have the advantage of covering both social and environmental sustainability. So at the moment the interest is more from sustainable fashion brands, but we also talk a lot to more commercial fashion brands looking for a tool to communicate their efforts in this area. The first brands we've come into contact with are either through our personal network or through trade shows that we visit with Retraced or Cano. The message about the product and transparency is spreading very quickly; word of mouth works very well. We mainly reach German brands, but we also have our sights set on Europe.
How do interested brands start using Retraced and increase their transparency in the supply chain?
PM: First, the supply chain has to be mapped. In the best case scenario, a brand already knows who its manufacturers and sub contractors are. If not, the individual suppliers are contacted and asked to disclose their supply chain. Once this has been done, each participants gets their own account and all are linked.
What does that look like concretely?
PM: Let’s say a brand has ordered 1,000 t-shirts, then the manufacturer will receive the enquiry 'Is it true that brand XYZ has ordered 1,000 t-shirts?’. As proof, the manufacturer has to upload an order form, or a photo of it, or the delivery note or the product itself. Thus, we have a two-way tracing system in place. Once the order is accepted, the brand has something to show until the product arrives; it also knows exactly where it is produced. However, many brands still ask 'what is the value of such a service?’. A rethinking has to take place here or the product has to speak for itself and do the persuading.
What steps are involved exactly?
LP: First, a mapping takes place, then the tracing and then the analysis. For example, one can view information on raw materials and certifications. Currently, there are eight criteria in the fairness and the ecological area. Consumers can also take a look at the proof submitted. The interest in this has been growing, especially in the last ten months.
Digitisation has helped a lot here and the fact that everything can be called up on the mobile phone. At the same time, there are people who grew up without a mobile phone and prefer more traditional methods. Such brands can rely on hang tags, but we explain to them that a young target group is the market of tomorrow. In addition, it is exciting for brands selling in retail to adopt this technology in order to drive digitisation in the store. Lack of it is often a training problem that can be compensated for with QR codes or hang tags.
It all happened very quickly, from the idea for Retraced to founding the company. Did everything work out smoothly or did you have difficulties to overcome?
LP: The technical solution works very well. But of course we work with people who we need to respond to. Many people don't want to reveal their secrets, where and how they produce, so we have a lot of persuading to do. In addition, the technical system has to be very simple, otherwise the time required is too great and the resistance is great towards using it.
PM: In any case, with every customer, we have to build trust and explain our transparency model. In those cases where some manufacturers are indeed well kept secrets in the industry, Retraced must build the confidence that the data is treated confidentially. However, we do need to verify each manufacturer so that end consumers can track this step, but we can keep certain information confidential.
LP: In the future, we see our solution as an add-on for larger brands that have their own systems. We also plan to offer additional information on the data collected, which can be used to demonstrate improvements in the supply chain, because we see every step in detail. This is what we will focus on over the next one to two years.
End customers and brands should understand that transparency is created for the end customer. Retraced sees itself as a communication platform through which more trust can be built throughout the entire industry.