January 31, 2020

Something old, something borrowed: the rise of resale and rental in fashion

Gwen Cunningham
Textiles Lead
Something old, something borrowed: the rise of resale and rental in fashion

Fast fashion brands drop new collections as often as every two weeks, illustrating the fast cycle of manufacturing, buying and disposing of which drives the fashion industry’s wastefulness and polluting impact. In fact, it is estimated that more than half of the fast fashion produced is disposed of in under a year.

But it appears that the “elephant in the room” of the fashion world may be gaining the recognition that it deserves. Coming May 2020, the theme of the Copenhagen Fashion Summit will be ‘Redesigning Growth’: an indicator that the critique of the traditional growth paradigm, and the business models that drive it, has finally hit the mainstream.

The fashion industry’s sustainability efforts thus far have been dominated by a focus on sustainable materials. While this is, of course, a very important driver for impact reduction, with a growing population that is consuming at hyperspeed, the apparel industry is finally realising that a shift toward using sustainable materials alone is not going to cut it.

The time is now to have a conversation about redesigning growth– one that will hopefully lead the industry to create truly sustainable business models in a world that is at ‘peak production’ and hitting up against planetary boundaries.

In order to address this challenge in earnest, we need to not only produce better but also to produce less.

Something old, something borrowed: the rise of resale and rental in fashion

The circular promise of resale and rental models

Resale and rental models promise to do more with less, curbing ‘peak production’, while still fulfilling the needs of a growing population that loves to shop.

“Extending the life of clothing has a significant positive impact on the planet. Extending the life of clothes by an extra nine months reduces its carbon, water, and waste footprint by around 20-30% each, and cuts the cost in resources used to supply, launder and dispose of clothing by 20%.”, according to research by WRAP.

Under these models, clothes are used more intensively, providing brands with a direct incentive to design long-lasting, high-quality garments.

Indeed, the longer an item lasts, the more revenue it can generate, and the more pressure it could take off the resources needed to produce new items: a win-win-win. Brands like Patagonia and Eileen Fisher, who have always focused on quality, successfully acted on the opportunity in circular business models years ago– so much so that Patagonia recently announced their plans to open a brick-and-mortar shop for their recommerce collections.

In addition, brands who have deliberately designed garments for recyclability or biodegradability can reap the rewards for their efforts by retaining ownership over their garments via a rental or subscription model. For Days and Houdini both take this approach of combining design for cyclability with rental/subscription to ensure that their products come back to them and are effectively recycled at the end of their life. In this way, these brands take full responsibility for their product at the end of life – something that now mainly lies with the consumer, who in many cases lacks the knowledge or available schemes to dispose of their garments properly.

Something old, something borrowed: the rise of resale and rental in fashion

The fine print: ensuring circular is truly sustainable

The impact potential of circular business models is compelling and has been recognised by both industry and non-profit stakeholders. However, we should remain critical and assess the impact that each of these models actually delivers, to make sure they uphold their circular promise.

To do this, brands should make an effort to measure the extent to which their recommerce or rental/subscription model displaces the purchase of new items, assess the garment utilisation rates compared to a baseline and quantify the additional operational impacts that might be associated with the model (for example, the increased transport, laundry, packaging involved in the reverse supply chain).

Finally, some models, especially in the resale market, might signal displacement of purchasing new items for the customers that buy second hand, but at the same time lead to increased consumption for the resellers, who are rewarded with store credit or a discount, and thus, incentivised to buy more. In this way, the addition of a recommerce business model can drive growth of the primary sales of a brand, a knock-on effect that has been reported in other industries active in second-hand. It is the opposite of cannibalization, something that has always been mentioned by brands as a barrier to enter the recommerce and rental space. This is a phenomenon that brands should definitely consider, and protect against, when designing and launching a truly impactful circular business model.

Designing the ideal circular business model

2019 marked a sudden rise in brands and retailers tapping into the potential of these new business models, with brands from Burberry to H&M launching a recommerce or rental model. With this trend expected to continue in 2020, it is clear that we are still in a time of transition, with many of the launched models still acting as pilot programs with limited scale and/or limited levels of disruption. It signals that it is quite challenging for established brands to step outside the comfort zone of their existing model and create capacity to cultivate the new tools, capabilities and mindsets required to implement a truly disruptive circular business model at scale.

The Switching Gear project is helping brands navigate this transition.Through a series of intense masterclasses, Switching Gear is helping brands design the best model for them: one that fits their product, consumer, market and ambition level.

Ideally, a new model will be optimally designed to meet three key criteria for success: (1) it has a value proposition that is convenient and affordable for the consumer, (2) has a positive business case that can compete with, and in time, even cannibalize the brand’s primary business model, and (3) it has a net-positive impact on people and planet.

Since target consumers, product ranges, market context, price points and internal capabilities vary greatly from brand to brand, the ideal model is far from a one-size-fits-all. Brands have many choices to make when it comes to operationalizing new concepts and it won’t be an easy task to launch the ideal model on the first try. Not every product will be suitable, not every consumer will be ready (yet) and there will be some trial and error to design services that optimally balance consumer ease and affordability with impact and financial return for the brand.

To enable brands to do this more easily, solution providers like The Renewal Workshop, Yerdle Recommerce, Thred Up, Stuffstr, Lizee, Rent the Runway and Caastl offer brands services (eg. reverse logistics, cleaning, repair, inventory care, customer service, e-commerce platform) or even turnkey white label solutions. Many of the new concepts launched in the past year are in fact in some way or another supported by these players proving that they are key enablers for scaling circular business models in the market.

The Future of Resale and Rental

By 2023, the resale market will be worth an estimated 51 billion US dollars and the rental market close to 2 billion US dollars. Both markets are expected to grow rapidly, with rates generously outperforming traditional – linear – apparel retail, and are set to displace fast fashion in as little as 10 years time.

Disruptors in the resale and rental space like ThredUp, the RealReal, and The Renewal Workshop are also having huge success and growing rapidly. Just last year, ThredUp raised 175 million US dollars to fund their ambitious growth plans, the RealReal went public and is now valued at at 1.06 billion US dollars, and The Renewal Workshop raised 5.5 million US dollars to continue their expansion in Europe and the US. These investments are also good news for brands, who are increasingly seeking partnerships with these solution providers to reduce risks, lead times and resources required from the brand organisation to launch a new recommerce or rental model. Despite the growing confidence of brands in the business potential of recommerce and rental, it is clear that we are still in the early phases of this transition. There is no shared long-term vision in place to guide the industry, and common frameworks and tools to guide the development of net-positive circular business models are still few and far between. While we work to shape these as an industry, through projects like Switching Gear, Market Makers, Circular Fashion Fast Forward and platforms like Copenhagen Fashion Summit, Fashion for Good and the Ellen MacArthur Foundation, the fashion industry should not sit back and wait.

Now is the time to join the conversation about redesigning growth and to drive and accelerate further experimentation in order to build the experience, capacities and infrastructure required for the transition towards circular business models in fashion.

This article was written by Helene Smits and Gwen Cunningham for FashionUnited. It is the first in a series of articles that will published in the coming year on the topic of resale and rental business models. Helene and Gwen lead the Switching Gear project at Circle Economy.

About Switching Gear

“Switching Gear: Towards a Circular Business Model” , is a C&A Foundation supported project, led by Circle Economy, that guides 4 apparel brands on a circular innovation process towards the design and launch of rental and resale business model pilots by 2021. The project still has one brand slot available and should you be interested to join Switching Gear as a core brand, please get in touch.

To support the practical implementation of these pilots, and enable the wider uptake of circular business models in the apparel Industry, Circle Economy have joined forces with strategic partner Fashion For Good. Through this partnership, Circle Economy and Fashion for Good will work together to drive the formation of a powerful global Enabling Network of over 50 circular solution providers and innovators, frontrunning brands and relevant experts, until the end of 2021. Should you be interested to join the Enabling Network, please get in touch through.

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