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

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

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 and
the rental market close to $2 billion. 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

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 to fund their ambitious growth
plans, the RealReal went public and is now valued at at $1.06 billion, and
The Renewal Workshop raised $5.5 million 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

Images: Shutterstock, courtesy of Circle Economy


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