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How the fashion rental market has changed

From the first wave of rental services to peer-to-peer

How the fashion rental market has changed  From the first wave of rental services to peer-to-peer

The fashion rental market, as reported by Allied Market Research, was expected to grow exponentially to a value of $1.96 billion in 2023. While the fashion rental business has been very popular in the U.S., it seems to have undergone something of a retrenchment. The talk of fashion renting as the most anticipated industry trend in 2019 has now seemed to have reversed.

This is the case of Seasons, a startup founded by Regy Perlera (former designer at Nike), which, in 2019, offered its customers a selection of designer clothes by Marni and Acne Studios. A scenario shared by Rotation, a specialized menswear rental service that closed in 2022. Rent the Runway, on the other hand, is holding out: in its latest report, it affirmed the increase in its net loss, which reached $87.8 million, up from $44 million in the same period last year.

A forerunner in the industry, Rent the Runway was the first company to invest in this new business terrain in 2009. «If you think about rental 10 years ago, it was a practice that no one had adopted» Jenn Hyman, co-founder, and CEO of Rent the Runway, told BOF. The pandemic seems to have enshrined the rise of fashion renting, leveraging lower affordability and greater sensitivity related to environmental issues. For a while, renting clothes seemed like a viable alternative to fast fashion. And so even giants like Kering - the reference is to its investment in the rental service platform Cocoon - have shown interest in this evolving form of business. The general enthusiasm wore off in a short time, however, and managing the rental on business proved more complicated than expected.

Logistics, sending garments and returning them, storage, cleaning, and the need for 24-hour customer service, added to high costs and a slow pace of monetization, are just a few of the key problems. The first wave of rental services stood as a substitute for the entire closet: Rent the Runway, Le Tote, and others promised to dress their customers for the office, a wedding, the disco, or other types of occasions. Today, rental services focus on specific niches, some more successfully than others. Moffitt attributes Ponybox's profitability to its hyper-local approach: the company rents only to customers within a 10-mile radius of downtown Charlotte, with deliveries often handled by Moffitt himself. Hurr, a U.K.-based company, has found that consumers are more likely to experiment with renting by loan for sporadic occasions than with a full subscription.

Daily wear, yet, remains the core business of Rent the Runway, which generates 80 percent of its revenue from monthly subscriptions. Rental companies are also reducing shipping costs by making in-home deliveries rather than exclusively with traditional carriers. Summing up, the biggest opportunity for rentals, both for growth and profits, is improved logistics. Identifying the type of items to invest in, the number of products to purchase, and how to get them to the customer should be a job of constant improvement. One solution that cuts some of the costs is peer-to-peer, an operation in which lenders and tenants independently manage the exchange without third-party interference.

The price is set by the lender ( usually 40 percent of the list price) and the duration of the loan. Companies therefore only have to bear the costs of running the platform and support. This model has been adopted by sites such as By Rotation, Devout, Rotaro, Onloan, and Endless Wardrobe. While the peer-to-peer model seems the only one destined for growth, there is also the environmental implication to consider. Often promoted as a useful alternative to promote circular fashion, studies conducted by Environmental Research Letters have shown how in reality this practice is far from sustainable-both because of the travel and emissions associated with it, and because of the constant post-hire washing. So how do we manage to reconcile the irrational desire to buy, fashion rhythms, and environmental impact?