The rise of rental and resale

Apparel players from Boohoo Group's PrettyLittleThing to Burberry are eager to dip their toes in the rental and resale space as it has the potential to become a lucrative new revenue stream with consumer awareness surrounding sustainability continuing to rise.

The global secondhand apparel market is projected to grow 127% by 2026, three times faster than the global apparel market overall, according to the tenth annual 'Resale Report' from online resale store ThredUp Inc. What's more, the US secondhand market is expected to more than double by 2026 to reach US$82bn, while resale is expected to grow 16 times faster than the broader retail clothing sector by 2026.

Apparel retail rental is also proving a popular model, with the market set to be worth GBP2.3bn by 2029, according to GlobalData.

The first five months of 2022 alone have seen French Connection, Allbirds, M&S, Lululemon, Hugo Boss, and Gore-Tex in addition to Burberry, Oasis and Boohoo Group's PrettyLittleThing, all explore rental — and those are just the announcements Just Style has covered.

Most recently, and a move likely to push resale even further into the spotlight is UK reality TV show Love Island’s decision to partner with eBay. The sponsorship breaks away from the show’s tradition of teaming with online fast-fashion retailers such as I Saw It First and Missguided.

But why the sudden influx of fashion firms entering the rental and resale space?

Dr Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, believes it is down to several factors with the first being consumers' growing awareness of sustainability.

"Generation Z, which is anyone born after 1997, has become a critical target market for fashion brands and retailers," he tells Just Style. "I know this generation is more committed to sustainability based on the interactions I have with my students, and they expect their favourite fashion brands to embrace the same philosophy. In other words, purchasing used clothing or rental clothing has become Generation Z's lifestyle, so retailers and brands have to cater to their needs."

However, Lu points out another contributing factor could be the sustainability problem in the fashion industry has become so severe that apparel companies have realised they need to do something to change the course.

"Statistics show that between 2010 and 2021, the quantity of US apparel imports increased by nearly 20%, meaning several billion additional pieces of new clothing are supplied to the market every year. Even worse, my estimates show that almost half of all the new clothing launched in the US retail market could never be sold. Thus, the development of the resale and rental market is an intelligent choice to ensure the long-term sustainable growth of the fashion industry."

Industry consultant Robert Antoshak agrees that a portion of fashion consumers have come to appreciate less is more.

"There are two growing subsegments of the consumer market — those interested in sustainability and those interested in lower prices. However, like a Venn diagram, there is crossover between the groups. Hence, rising consumer interest in resale and rental markets. We saw some evidence of this before the pandemic with rising interest in consignment shopping.

"In any case, apparel brands and retailers are wise to examine these markets as a shift may be occurring for at least a part of the consumer market."

With so many brands entering the rental and resale market, will it ultimately make a difference to sustainability in the long-term — and when consumers can buy a new garment for roughly the same price as renting or buying secondhand — do they really care?

"Several industry sources predict the secondhand clothing market could exceed new clothing sales over the next ten years," Lu says. "Hopefully, as the resale and rental clothing market substantially expands, we will see more investments, technologies, and new players come together to create a new fashion retail model that is more sustainable than today. One crucial aspect is integrating the conventional apparel supply chain with the resale or rental business to make it a seamless operation for fashion companies."

On the other hand, Lu says given the complexity of the sustainability issue in the fashion industry, resale and rental can only be part of the solution.

For example, he points out the impact of the used clothing trade on the least developed countries remains highly controversial today. Plus, millions of garment producers in the developing world still heavily rely on making and exporting garments to make a living with few alternatives. He adds: “This reminds us that fashion sustainability is never just about protecting the environment or reducing CO2 emissions but involves complex social, economic, and political factors."

Antoshak, meanwhile, notes these initiatives could be a sign of the future or they could equally be a sign of challenging times.

He says: "Prices are rising thanks to pandemic-induced supply disruptions and raw material inflation. An unfortunate truth, however, is that sustainability initiatives suffer when prices rise. More so, cost-cutting programmes adopted by retailers over the years have trained consumers to always buy in the sale — regardless of whether a garment is sustainably made or not."

As to whether consumers are buying into the idea of buying less, or at least fewer pieces of new clothing, Antoshak suggests it's a mixed bag.

"Price is most important for a large block of consumers. Inflationary times only drive home that point further. Moreover, many retailers have built a mode of production and sales predicated on a churn of inventory in the stores. It's hard to unlearn what has been so successful for many firms in the past."

As to whether consumers care, Lu notes studies consistently show consumers are willing to pay a premium for clothing labelled "sustainable" or "eco-friendly." However, the price premium does not necessarily apply to secondhand clothing.

"On the contrary, chasing the lower price is a primary factor driving consumers' shopping for secondhand clothing. This is particularly the case for the luxury resale market. Studies found that consumers shopping for such products intend to find a good deal rather than seeking "sustainability."

He adds: "Another legitimate question is: What are the financial implications of launching the resale or rental business for conventional fashion brands and retailers? Do such companies make profits?

"I have to admit little information is available. However, the answer is critical to help us understand the prospect of a resale or rental business— whether it will be a niche market strategy for companies or could play a more significant role as a new revenue driver."

Table 1 Frequency of keyword mentions in fashion apparel companies’ public filings