Could Crowdfunding Disrupt the Fashion Industry?: Emergence of new business models due to crowdfunding, and their implications

Abstract

Crowdfunding is a rapidly growing phenomenon, and it has emerged as an alternative source of external funding. It has given opportunities for common people (i.e., the crowd) to fund a variety of different causes, such as projects in arts and science, charities and start-ups, while getting some kind of value in return. While it has enabled new possibilities in many industries, the research on crowdfunding is limited, and virtually no studies have looked at the new business models that have emerged as a result of crowdfunding. We found this curious, and wish to help start-ups by showing the new opportunities that crowdfunding enables, specifically in the fashion industry. In this master thesis, we have therefore studied the phenomenon in the context of the fashion industry. By conducting semi-structured interviews with managers in European and American fashion companies, we have been able to identify not only one, but three new business models that have emerged in the fashion industry as a result of crowdfunding: The Gustin model, the Presale model, and the Equity model. These business models change the way business is done in the fashion industry. They require few resources and have low risks, which makes it easier for start-ups to enter the market. Crowdfunding is used to generate different sources of revenues (“revenue boost”), which can either enable the launch a product, a collection, or a start-up, or to grow an established company. Further, all of the respective models facilitate a strong customer engagement, and give customers the opportunity to directly influence the industry. This creates an added value for the customers, especially early-adopters, and has symbiotic advantages for both customers and the companies. In addition to this, the business models offer a cost-efficient, sustainable, and ethical way of doing business. The new business models are not only applicable for start-ups, but also have significant value for incumbent firms. All together, the models identified challenge the traditional business models in the industry, and have the ability to change the industry in the years to come. This master thesis lays the foundation for future research, and facilitates that companies can exploit the opportunity that comes with crowdfunding in the fashion industry.