Material Exchange, an online platform for the procurement of materials based in Stockholm, has seen growth in the number of its footwear and fashion supplier and brand members accelerate as the Covid-19 pandemic gives a new impetus to digitalization.
By end May some 60 brands and 250 big suppliers had joined the platform, which contains data and images on over 10,000 materials. That compares with just a “few” brands and suppliers at the start of 2019, says the chief executive, Darren Glenister. The platform expects to see a further push for growth from a new role helping to organize and run material trade shows, which have moved online this year due to the health emergency.
The exchange sees itself as a form of centralized materials library. “Lots of brands work with the same suppliers and use the same materials, but before there wasn’t a way for the industry to manage this information centrally,” explains Glenister. Industry associations Footwear Distributors & Retailers of America (FDRA) and the United States Fashion Industry Association (USFIA) are among those backing the exchange.
The platform represents a radical departure from a traditional model that saw material sourcing teams sift through physical swatch books. Aside from reducing the need for physical samples, with the environmental and other benefits that brings, digitalization represents a faster means to transfer information and communicate with suppliers. It can help speed up innovation and bring down supply chain management costs.
While simplifying life for brands, suppliers have also been keen to use the platform to showcase their capabilities and generate new business, particularly as some have been hit by order cancellations due to the Covid-19 pandemic. Subscription fees to use the platform are paid by both suppliers and brands, although the latter are typically given a period of free access to get up to speed with the system. Details about the supplier, its location, production, pricing and technical attributes of materials are among those contained in the database.
Sustainability and new types of materials are leading trends
The platform hopes to contribute to sustainability but doesn’t weed out suppliers based on sustainability criteria. “We’ve built the platform to be democratic and allow the market to decide what it wants,” says Glenister. But he points out that the biggest trend seen on the exchange “is about sustainability and new types of materials.” Examples of these could include leather that is chrome-free or made from mushrooms or shoe soles manufactured from recycled car tires.
Platform provider Material Exchange Ventures late last year raised $2 million in a seed funding round led by Finland-based Inventure, a technology fund backing early-stage entrepreneurs. The seed financing round helped to support expansion in China, where the platform has a team of seven that acts as “a bridge from Chinese suppliers to brands.” Generally speaking, Glenister notes that “a lot of suppliers aren’t English speakers and aren’t telling the right story about their materials.” While these suppliers would traditionally rely on agents, agents have been operating much less lately due to limitations on travel.
Funds from seed financing were also used to update the platform, with a brand new version to be rolled out this August after the original one made its debut in 2018. The new platform will feature more information and data, and greater analytic tools for both brands and suppliers.
One objective is to guide suppliers better in the choice of materials they produce, by also allowing them to aggregate data available on the platform on what brands are seeking and improving feedback they receive from brands. Earlier this year, it unveiled a “digital profile,” a digital business card presented in a standardized and transparent fashion that allows suppliers to highlight sustainable accreditations, production capabilities, certifications, information on the materials they produce and company details.
The Material Exchange’s CEO says the platform is also now looking into centralizing and standardizing materials testing, “so you don’t have to keep testing over and over again” and this information can be shared between brands.
The group, which now has a staff of 41 in Europe, China and the U.S. and does not disclose revenue data, is in the middle of a second financing round, which it intends to complete this summer. Glenister is silent about a fundraising target but says the money raised “will be much more significant (than in the first financing round) and will allow us to scale much more.” Investors have not and will not include brands. While some have expressed an interest in buying stakes in Material Exchange, the company intends to remain independent.
New digital fair to start July 15
The group is now preparing for the Digital Material Show to be held online for a month starting July 15 on the Material Exchange platform. The online show replaces the NE and NW Material Shows usually held in the U.S., which were cancelled due to the pandemic, and will feature materials library data and sustainability standards and other information on suppliers, alongside live networking events and seminars. Glenister says the company is finalizing partnerships with two other big materials shows and expects to see a sharp increase in those joining its platform from those events.
While it does not currently operate as a payment platform, Material Exchange does not rule that out in the future. “If we find the right model that’s an option, but at the moment the focus is on getting as many suppliers and brands” onboard as possible, says Glenister.