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How H&M Plans To Make Money off Your Old Clothes

Photo via the <a href="http://www.denverpost.com/breakingnews/ci_19288681">Denver Post</a>
Photo via the Denver Post

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Last spring, H&M announced a handful of inititatives intended to position the retailer as a leader in green fashion. It was a bit of a stretch for the fast-fashion company—whose business model is based on selling millions of trendy, cheap, wear-them-once-or-twice garments—but between their new clothing recycling program, their eco-friendly Conscious Collection, and their sustainability plan, they seem committed to rebranding. Yesterday, Bloomberg took a look at how they're going to make money in the process.

Specifically, Bloomberg crunched some numbers on the store's new clothing recycling program, iCollect, which launched in February and will be in all of H&M's 2,900 or so outlets by the end of the year. iCollect boxes are placed near cash wraps in stores, where customers can drop off bags of used clothes (from any brand, not just H&M) and get store discounts in exchange. In the US, shoppers are promised a voucher worth 15% off one item of clothing for each bag of castoffs, with a limit of two vouchers per day.

"It's a brilliant piece of green marketing by H&M's corporate responsibility staff," writes Bloomberg. "But the company's number-crunchers deserve some credit, too; they have carefully constructed the program in a way that makes it hard for H&M to lose."

According to Bloomberg's math, the 15% discount is a manageable dent in in H&M's typical gross profit margin of around 60%.

Additionally, H&M then sells the castoff clothes which further subsidizes the discount. Most lucratively for H&M, your old jeans and blouses will be sold to distributors who then resell them to developing countries (this practice is actually somewhat controversial; see here for more on that). If they're not in a condition to be resold, the clothes will go to textile recycling firms, which turn former t-shirts and dresses into textile products like dish rags, make them into insulation for cars and houses, or use them to "produce energy." (H&M's site doesn't give details on exactly how the old clothes will be converted into energy.)

So here's how H&M will profit from all of that, per Bloomberg:

"Say a London customer donates a bag and then buys £40 worth of skinny jeans and H&M's David Beckham-brand underwear. If the retailer sells the used clothes for just £1, it has conceded just £4 overall—a 10 percent discount, effectively—and is probably still in the black."

We're curious: What do you think? Is H&M's recycling initiative a step in the right direction? Is it not enough? Have you used the iCollect boxes? Speak your mind in the comments.

· The Brilliant Business Model Behind H&M's Clothes Recycling Plan [Bloomberg]
· H&M Will Let You Exchange Old Clothes for Discounts [Racked]
· 17 Essential Eco-Friendly Fashion Brands To Shop Right Now [Racked]