- While the conversation around sustainability in fashion has been dominated by a focus on sustainable materials, a growing number of stakeholders have started to see resale and rental business models as the solutions to the industry’s environmental footprint.
- As the cultural stigma of buying secondhand begins to fade away, especially among value-driven shoppers from the millennial generation, resale and rental have become the fastest-growing categories in retail.
- Start-ups Rent the Runway, Le Tote and thredUP were the most often mentioned companies in the recent media discussion, while high-end fashion brands Gucci and Louis Vuitton have been presented as embracing culture changes and adapting to the shifting demographic of luxury buyers.
As with so many other industries, ‘sustainability’ is the buzziest concept in fashion, sparking a gold rush among players who recognise that the sector’s business model is ripe for disruption. The industry has been perceived as more self-conscious than others about its dire eco-credentials, with concerns over its unsustainable price tag growing. Critics have focused particularly on fast fashion, which involves increased numbers of new collections and quick turnarounds, encouraging overconsumption and the sale of clothes so cheap they are being treated disposably, contributing to water and air pollution.
The discussion around the fashion industry’s sustainability efforts so far has been dominated by a focus on sustainable materials, with brands building their business models on sustainable production and operation, making sustainability a major focus for long-term growth and communicating an eco-conscious attitude by showing transparency, emphasising local manufacturing and sustainable packaging, and collaborating with artisans.
Emerging fashion brands entering the market also tend to build their reputations via socially conscious marketing efforts, considering environmental sustainability a management agenda and using words such as “green”, “eco”, “organic”, “slow” and “ethical”. In order to gain attention and credibility, as well as to strengthen the emotional connection with their customers, brands have also started promoting specific initiatives like supporting charitable organisations and collaborating with influencers focusing on sustainability.
But a number of critics have pointed out that in some cases, fashion brands hawking a sustainability ethos are just engaged in “greenwashing” to reap the market benefits of an eco-consciousness they can’t actually prove they’re practicing. Another oft-repeated criticism has been that sustainable clothing comes at a higher price, given the ethical materials and production processes required.
For more on this topic, read our analysis “Sustainable Fashion: Bringing Green into Vogue”.
In the meantime, a growing number of stakeholder have started pointing out that a shift toward using sustainable materials alone is not going to cut it. Many experts have stressed that a penchant for resale and rental clothes now feels urgent, necessary, and non-negotiable as it would curb peak production while still fulfilling the needs of a growing population that loves to shop. Some commentators have framed this solution as part of “circular fashion“, an off-shoot of the circular economy concept, which challenges fashion’s linear production line that ends with clothes being discarded in a landfill.
Thanks to growing consumer awareness, particularly among younger generations, the resale and rental markets are expected to grow rapidly, with rates generously outperforming traditional – linear – apparel retail. The markets are even set to displace fast fashion in as little as 10 years time: the rental market will be worth an estimated 2 billion US dollars by 2023, and a 2019 report by resale marketplace thredUP predicts the value of the secondhand market will reach $51 billion within the next five years.
This comes at a time when the cultural stigma of buying secondhand has started to fade away, particularly for 18-37-year-olds, who are adopting secondhand apparel 2.5 times faster than other age groups. Major factors here are the changing consumer attitudes towards ownership and the desire for frequent turnover of wardrobes among young shoppers who are active on social media.
Last year marked a sudden rise in brands and retailers tapping into the potential of these new business models, with companies such as Burberry and H&M experimenting with a resale and rental models or turning to re-commerce partners to tap into secondary markets. However, the major beneficiaries of fashion’s recent push toward sustainability have been resale and rental online platforms.
In order to find the brands at the forefront of the media discussion around the new trend, we analysed a sample of 318 articles published in daily and trade English-language outlets from October 2018 to February 2020.
Rent the Runway, an online platform that rents out high-end designer clothing and the best-known clothing rental business, dominated the discussion. The articles in our sample commonly credited it for starting the rental trend and referred to it as the trend-setter in the rental market.
Having initially built a reputation as “that place where you rent dresses for weddings and formals”, Rent the Runway has been viewed by more and more commentators as a service for upgrading your everyday, workwear, and workout style. It has appeared in articles offering general fashion advice such as “Rent your wardrobe and save hundreds on fashion” and “How to rock a secondhand formal gown“, as well as in articles on sustainability like “The Beginner’s Guide to Cutting Your Closet’s Carbon Footprint” and “Retailers Get Serious About Sustainability Into 2020“.
The online service made headlines last year for gaining “unicorn” status as a billion-dollar business, which journalists took as a sign that the rental business model has moved into the mainstream. The company also attracted media attention when it teamed up with hospitality giant Marriott International to make wardrobes accessible to women staying at hotels across the US. It also partnered with Nordstrom, a retail company which embraced the idea of dealing in used clothing in mid-2019 and which launched its own resale shop, called “See You Tomorrow.”
Rent the Runway continued its domination of the clothing rental space with a move into a new category: children’s clothes and with the addition of athleisure and ski apparel to its lineup. Struggling to keep up with demand, the company hired former Amazon executives to its leadership team who joined with the belief that consumers will increasingly embrace rental as a better model of consumption.
Le Tote, a seven-year-old online rental firm, was all over fashion media outlets for buying Lord & Taylor, the oldest US department store (it was founded in 1826) for $100 million. This became the first case of a digitally native brand to acquiring an established brick-and-mortar retailer.
For some commentators, the deal was rather surprising, especially given the relatively low profile of Le Tote, which lacks the name recognition of Rent the Runway. But it was perceived by others as a symbolic victory for the rental fashion business and a sign that the clothing rental craze is coming for the struggling department store model.
The deal led to a number of analyses of the changing face of retail, as department stores have struggled to remain relevant due to their dinosaur infrastructure. Department stores are increasingly perceived as heritage players, especially when contrasted with the new breed of start-ups that boast compelling propositions and that have made the concept of borrowing a designer dress for an event as normal as renting a tux.
The rental trend in fashion has been presented as part of the sharing economy, where customers — particularly those in their 20s and 30s — are less interested in making big investments but still want access to different brands and services. And while the sharing economy has been a term commonly describing vehicles or housing, it’s now picking up steam in the apparel market as well.
It’s also part of a gradual shift in consumer behaviour which sees consumers choosing to rent rather than own goods: the most obvious examples are Spotify replacing CD sales and Netflix replacing video stores. In addition, the “Marie Kondo Effect” – a recent trend to get rid of unnecessary possessions inspired by the hit series “Tidying Up with Marie Kondo” – shows no signs of slowing down.
In its State of Fashion 2019 report, McKinsey identified the “End of Ownership” as one of retail’s top 10 trends and called it “a fundamental evolution in consumer behaviour”: “Fashion players will increasingly tap into this market to gain access to new consumers seeking both affordability and a move away from the permanent ownership of clothing.”
In 2019, sneaker resale platform StockX achieved unicorn status, luxury consignors The RealReal went public, and Vestiaire Collective opened its first permanent bricks-and-mortar concession. But the media conversation around resale was dominated by roughly 10-year-old consignment company thredUP, which has positioned itself as the world’s largest online thrift store.
The San Francisco-based firm was mentioned for announcing partnerships with big department store chains Macy’s and J.C. Penney, which intend to lure younger, more environmentally conscious shoppers into stores. Macy’s had 40 ThredUp pop-up shops within its stores, where customers could buy discounted American Eagle and Victoria’s Secret garb, among other brands, while J.C. Penney had 30 such locations.
According to many analysts, the legacy chains use the partnerships as a chance to save their business as the circular fashion movement is gaining steam, while threadUP uses this as a chance to boost its brand awareness and enlarge its audience.
thredUP Chief Executive James Reinhart told Reuters that his firm is in “active conversations” with “dozens of retailers” about how they can help them tap into the resale market: “The conversation from our end is: ‘Look, you guys need a strategy, this is what young people are doing… and if you’re a retailer and you’re not ambitiously trying to figure out how to be a part of this, you’re going to wake up one day and wonder what the hell happened.'”
In addition, thredUP featured in many outlets for launching its own clothing line designed for resale: customers are supposed to sell the items that they no longer want back to the company so that each item would ultimately be owned by three to four customers, leading to fewer clothes ending up in landfills. The firm has promoted the clothing line as produced in factories that passed social responsibility and compliance testing, with the factories also participating in projects to benefit women’s health and education.
Rival secondhand retailer RealReal, founded in 2011, made headlines for going public on the Nasdaq stock market in a move which many journalists saw as a milestone for the commerce of secondhand-fashion. The company has aimed to place itself on the vanguard of changing consumer habits for younger shoppers who want luxury goods but also want to be environmentally responsible.
RealReal also became the first company in the resale industry to join the UN Climate Change’s Fashion Industry Charter for Climate Action alongside luxury leaders like Kering, the owner of brands such as Gucci and Yves Saint Laurent. The start-up also entered into a partnership with Burberry which aims to promote the benefits of a circular economy for fashion by encouraging customers to extend the life of their products through resale.
“Leading the way in creating a more circular economy for fashion is a key element of our Responsibility agenda,” said Pam Batty, Burberry’s VP of corporate responsibility, in a statement. “Through this new partnership we hope to not only champion a more circular future but encourage consumers to consider all the options available to them when they are looking to refresh their wardrobes.”
For some commentators, Burberry‘s move will also allow it to tap a previously ignored opportunity to reach into the lifetime value of its brand and build consumer demand in a new way beyond paid advertising. Burberry may be the first major brand to realise that it could bring aspirational customers in at a more affordable price through resale and trade them up to being full-price customers. In addition, the ThredUp 2019 Resale Report found that Burberry is the luxury brand with the best resale value.
Other luxury fashion brands such as Gucci, Louis Vuitton, Chanel, Cartier and Prada were mentioned in the media conversation for being frequently in demand on resale platforms. RealReal‘s latest Resale Report showed that Gucci and Louis Vuitton were the most in-demand brands within luxury resale, and have expanded their lead more than 225% over No. 3 brand Chanel.
Gucci and Louis Vuitton have been perceived as embracing culture changes and adapting to the shifting demographic of luxury buyers. Rati Levesque, COO and head of merchandising for RealReal, said that this pays off with increasingly strong demand for both brands in luxury resale “that has distanced them significantly from the other top brands.”
Gucci also has great prominence in sustainability discussions because of its latest initiative, Gucci Equilibrium, which aims to solidify the brand’s position as a sustainable and responsible luxury fashion house. Another initiative which grabbed the media’s attention was the WeChat programme named ‘My EP&L’ (Environmental Profit & Loss), an environmental impact measurement tool that informs consumers of the environmental cost of what they buy.
Gucci‘s owner Kering has pledged to transform its own business and the wider luxury industry at every level. Unveiled in 2018, Kering’s 2025 ethical strategy asserts that the company sees sustainability as a necessity, because “sustainability and luxury are one and the same”.
In the meantime, many brands have largely been left to see their goods swapped in the aftermarket without any financial incentive to participate directly. Others stay away over concerns over brand positioning, afraid that engaging in secondhand or rental might hurt the perceptions of their brand as luxurious and exclusive. This goes to show that it could be quite challenging for established labels to step outside the comfort zone of their existing model and engage properly with the circular economy.
However, in order to be relevant to younger customers, fashion brands would need to reconsider their attitudes towards new ownership trends. While the accelerating hunger for newness is rather impressive – the average person today buys 60% more items of clothing than they did 15 years ago – consumers keep that clothing for only half as long as they used to, and one in seven consider it a fashion faux-pas to be photographed in an outfit twice.
At the same time, younger generations are more interested in sustainable clothing than older consumers. In this regard, rental and resale models are increasingly framed as a good way to reconcile the hunger for newness with sustainability concerns, lengthening fashion’s product lifecycle while offering quick wardrobe turnarounds.
The conversation around rental and resale fashion was also amplified by the growing interest in climate change expressed by both liberal- and conservative-minded media outlets. Climate change and global warming have become powerful coverage drivers not only in ecological and scientific discussions but also in political, economic and cultural analyses.
Scientists and liberal politicians are increasingly using the language of risk to convey their messages about climate change and to shift the debate towards the need for timely action. This has been reflected in the liberal-minded media: for instance, the Guardian announced that it would start using “climate emergency”, “climate crisis” or “climate breakdown” instead of “climate change” to reflect the seriousness of the situation.
In addition, the messaging of a new wave of climate activists such as 16-year-old Greta Thunberg has given an unprecedented vehemence to the climate change media debate, engaging politicians and corporate representatives from various sectors. Having inspired a large number of school-aged adherents to launch their own school climate strike movements, Thunberg’s influence was dubbed by several media outlets as the “Greta Thunberg effect”.
The new wave of activism spearheaded by Thunberg made many companies take a more active part in the climate change debate by communicating corporate social responsibility. This has started translating into a gradual shift in corporate behaviour against a backdrop of a significant rise in sustainable finance or Environmental, Social and Governance (ESG) investing – a way of investing which takes into account not only the potential financial returns of an investment but its social impact as well.
For more on this topic, read our analysis “The Greta Thunberg Effect: Can Climate Activism Influence Corporate Behaviour?”
Thanks to the dynamics of such debates, the last few years have seen a growing public awareness of fast fashion’s environmental impact – journalists, scientists, academics and industry representatives regularly raise concerns. There are also a growing number of charities, not-for-profit organisations and global movements such as Fashion Revolution which campaign for systemic reform of the sector. The Fashion Revolution’s call for transparency under the hashtag #WhoMadeMyClothes became a global trend on Twitter for trying to raise the standards in the back end process of manufacturing.
Textile manufacturing, for instance, is a major contributor to climate change, producing an estimated 1.2 billion tonnes of carbon dioxide equivalent (CO2e) per year – more than international flights and maritime shipping combined. The annual carbon footprint of the industry is close to the combined carbon footprint of all 28 current members of the EU. In addition, the fashion sector is projected to use 35% more land for fibre production by 2030—an extra 115 million hectares which could otherwise be used for sustaining biodiversity or growing crops.
These problems are likely to deepen as the fashion industry is expected to expand: by 2030, global apparel consumption could rise by 63%, according to The Pulse of Fashion report. The annual retail value of apparel and footwear would reach at least €2 trillion by that time, which would represent an over 30% increase of €500 billion between now and then.
This comes at a time when consumer activism has become the most common form of political action in the United States aside from voting, with more and more US shoppers starting to understand their purchasing power not just only in economic terms but also as an enactment of practical ethics. Boycotts of brands which aren’t aligned with consumer values can significantly hurt a business’ reputation even if they don’t have an immediate impact on earnings: empirical analysis demonstrates that protests are more influential when generating greater media coverage.
Although some primary analyses suggest that BUYcotts (passionately supporting a brand) appear to be gaining momentum against consumer boycotts, our media research showed that boycotts make headlines much more often, presenting considerable reputational risks.
For more on this topic, read our analysis “Consumer Activism: A Growing Threat to Corporate Reputation”.
The fashion industry regularly faces such consumer activism problems, as clothing items are often taken to be markers of cultural and social identity, as well as a direct expression of ethical values, and thus are susceptible to be perceived as controversial across social networks. The fact that fashion brands are exposed to such risks could also be explained by taking into account the fashion industry’s increasingly controversial presence in the media – apart from environmental harm, big fashion brands have faced allegations relating to sexism, racism, harassment, exploitation of workers and cultural appropriation.
In light of these issues, established fashion labels, which have traditionally turned a blind or scorning eye towards secondhand, could benefit from rental and resale models. Apart from offering low-risk pathways to the circular economy, these models present an opportunity for high-end brands to strengthen their troubled reputation by having a larger share of voice in the trending sustainability discussion and becoming more relevant to a young generation of consumers which is not simply wearing clothes but is defending certain values with its fashion choices.