Dive Brief:
- Sixty-nine fashion and textile companies and organizations signed a statement last week urging changes to government policy that would boost the competitiveness of resale and repair activities in the apparel industry. The group includes apparel makers Decathlon, H&M Group, Lacoste, Primark and Reformation, as well as resale platforms ThredUp and Vinted.
- The statement, spearheaded by global nonprofit the Ellen MacArthur Foundation, calls for reducing the value added tax across the European Union and eliminating sales tax in the United States and Canada on resold products and repair services. The statement also asks governments to reduce labor costs for jobs involved in resale and repair operations by lowering labor taxes in the EU and providing labor tax credits in the U.S. and Canada.
- The statement also calls for Extended Producer Responsibility policies, which encourage resale and repair by introducing additional costs for primary production, according to an accompanying Ellen MacArthur Foundation report. Those funds could be used to support resale by creating collection and sorting infrastructure, the statement said.
Dive Insight:
The global second hand market grew 13% in 2025, capturing 10% of global apparel spend, according to ThredUp's 2026 resale report. The market is expected to reach $393 billion by 2030, according to the April report. The repair market is harder to measure, but a 2025 report by the Circular Fashion Federation, a French nonprofit, valued the clothing repair market in Europe at 2.7 billion euros in 2024, projected to reach 3.7 billion euros in 2030.
Despite promising projections, the apparel resale and repair markets face additional challenges compared to traditional production, the report said. One is high labor costs, representing about 35% of the cost of a resold product, and 50% of the cost of a repaired product, based on estimates from European retailers. Another challenge is inconsistent or insufficient inflows of used goods, the report authors said.
Though increasing production leads to lower costs per unit produced when manufacturing new products, “sorting, cleaning, and repairing 100 items of used clothing takes 100 times the effort of sorting, cleaning, and repairing one,” the report said,
The new report is based on the Fashion ReModel, a project launched in mid 2024 by the Ellen MacArthur Foundation that works with thirteen brands to increase the percentage of their revenue derived from circular business models over three years and report their progress to the Foundation confidentially each year.
“We consistently heard from the very beginning [from brands] that circular business models are currently disincentivized under today’s economic system,” Miranda Beckett, the Ellen MacArthur Foundation fashion and textiles project manager, said in an interview with ESG Dive.
The new report modeled how three policy changes incentivizing repair and resale would affect these industries in the U.S., Canada and the EU. In the model, the EU VAT on resale and repair is reduced to 6%, and U.S. and Canadian sales tax on resale is eliminated — there is already no sales tax on repair services in these two regions.
To lower labor costs, the model reduces EU employer social security contributions on gross wages to 10% for jobs inherent to resale and repair activities, and applies tax credits in Canada and the U.S. equivalent to a 5% reduction in employer SSC. The model also allocates a portion of hypothetical EPR fees (estimated at $0.29 per item) to support resale and repair activities. This imitates the French “repair bonus” system, which uses EPR funds to subsidize customers’ individual repairs.
Taken together, the three policy levers could increase gross profit margins to 55% for resale and 44% for repair, the report estimates. This would represent a 23% increase for European markets and a 12% increase for the U.S. and Canada.
Nevertheless, factors such as consumer behavior and awareness, access to finance for small operators, product design requirements and quality standards for repaired goods are also needed to further encourage circular business models in fashion, the report said. Until policies change, supply chain resilience, emissions reductions and customer engagement can help executives make the business case for circular business models internally.
“Your customers are demanding this, they're shopping in the circular economy anyway, and they've got a sort of expectation on brands and businesses to have these services,” Beckett said.
