Every year, unused fabric costs the fashion industry about $120 billion, according to analysis by online deadstock marketplace Queen of Raw. For some large companies, that can amount to a 15 percent hit to the bottom line on an annual basis.

Some fashion companies are discovering there’s value embedded in their waste.

Next month, TheRealReal is launching the ReCollection programme, a series of collections “upcycled” from old garments, the resale site’s first time turning its hand to developing its own line. Its first drop of 50 pieces will be made up of donated items from brands including Balenciaga, Dries Van Noten and Stella McCartney.

Meanwhile, LVMH is quietly preparing to launch an e-commerce marketplace for its brands’ unused fabric and leather.

Young designers have long treasure hunted discarded fabrics, viewing the castoffs, known in the industry as deadstock, as a cheap supply of high-quality material. In recent years, some brands have built entire businesses out of upcycled items. Reformation started out sourcing deadstock from Los Angeles factories, though it relies more on new fabric now that sales have soared past $100 million annually. Elsewhere, brands like Eileen Fisher and Patagonia have launched re-crafted clothing, helping burnish their green images. And at the luxury end of the market, brands like Bode have turned the use of vintage and deadstock fabrics into a point of value and differentiation.

Some fashion companies are discovering there’s value embedded in their waste.

Many experts say the trend is only getting started. Consumer demand for sustainably made clothing continued to grow during the pandemic. And there’s no shortage of supply: countless brands are sitting on clothes that went unsold during lockdown, and factories have stockrooms full of fabric meant for long-cancelled orders. Some companies may have no choice but to explore upcycling; this year, France may begin enforcing a law banning brands from burning or dumping unsold clothing.

Fashion’s biggest brands have historically displayed little interest in deadstock, but behind the scenes many have been quietly exploring this new market. Many already donate large volumes of fabric to fashion schools and have experimented with resale.

“For so long this waste and unused inventory has been going on and nobody was paying attention to it,” said Stephanie Benedetto, chief executive and co-founder of Queen of Raw. “It doesn’t make sense for people and planet, but it sure as hell doesn’t make sense for profit.”

The number of transactions taking place on the marketplace has grown nearly 125 percent quarter-over-quarter throughout the pandemic. When the business launched in 2018, brands would primarily engage through sustainability departments, but now marketing, finance and strategy teams are all just as likely to want to learn more about the services Queen of Raw can provide, Benedetto said.

Last year, LVMH named the company a finalist for its innovation award. This year, it’s launching its own resale platform.

Meanwhile, The RealReal, which helped create a mainstream market for luxury resale, is eyeing the opportunities presented by bespoke collections from upcycled garments. While its first collection will feature donated items, its second drop launching later in the month will be an in-house range of cashmere loungewear. The upcycled garments will include no virgin materials, zero-waste production and be manufactured in America for a fair wage, according to The RealReal.

The concept was already under discussion before the pandemic hit, but the crisis helped expand its ambition, said Allison Sommer, senior director of strategic initiatives at The RealReal.

“This is just the beginning,” she said. “We saw the disrupted inventory flows that resulted in even more deadstock... that is what showed us this doesn’t need to be a single collection. This should be ongoing.”

Editor’s Note: This article was revised on 26 March 2021. A previous version of this article stated that The RealReal’s second range under its ReCollection programme will be made in collaboration with Atelier & Repairs. This is incorrect. Atelier & Repairs is not involves in this second collection.

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