It used to be that you bought clothes, hung them in your closet and wore them a number of times (or didn’t). Eventually they either got donated to a charity or thrown in the trash. But things are changing quickly, as fashion re-commerce — renting, reselling, thrifting — becomes a bigger part of the retail industry.
Rental is going strong, with Rent the Runway, the pioneer in this area, now 10 years old and profitable. The global online clothing rental market is expected to grow annually by over 10% for the next four years, according to MarketWatch. And the fashion resale market has been expanding a breathtaking 21 times faster than traditional retail over the past three years, Fortune reports. Millennials and Gen Zers, in particular, enjoy frequenting thrift and consignment stores, shredding the last remnants of social embarrassment about such places and remaking their image into trendy shopping destinations.
Re-commerce loomed large at the Baker Retailing Center CEO Summit, “Powering the Future of Retail in a Changing Environment.” Major industry lights offered their take on the phenomenon, also discussing where it leaves traditional retailers.
Secondhand, but It’s New to You
One notable resale business is thredUP, which bills itself as “the largest online consignment and thrift store.” Founded in 2009 as a men’s shirt-swapping company, thredUP is today a consumer resale marketplace touting representation of over 35,000 brands. Its CEO and co-founder, James Reinhart, delivered one of the conference keynotes.
Reinhart asserted that the total secondhand apparel market will double in five years, reaching $51 billion. One reason for this meteoric increase is a growing concern among the public — especially among younger people — about fashion’s negative environmental impact. Right now, said Reinhart, the industry is a major polluter. “We’re buying twice as much clothes and wearing them half as long,” he noted, adding that the equivalent of one garbage truck of textiles is dumped in a landfill or incinerated every second.
Reinhart highlighted some factors in thredUP’s success. The service is easy to use, he said. The company provides customers with prepaid bags to fill, picks the bags up from their doorstep, and then compensates them for items determined to be resalable. People can shop for used clothing on thredUP’s website, the design of which Reinhart identified as another contributor to the business’s popularity. He said it features high-quality attractive photos, clear information and sophisticated functionality so it resembles retail platforms rather than platforms selling items people are getting rid of.
“We’re buying twice as much clothes and wearing them half as long.”–James Reinhart
Moreover, thredUP’s website displays new items every time a user hits refresh. Reinhart compared the appeal of this to today’s habit of checking email or social media frequently (almost obsessively, for some of us) to see the latest messages and posts.
Should retailers feel threatened by the growth of secondhand? Reinhart noted that, in fact, thredUP has been forming partnerships with large retailers such as Macy’s and J.C. Penney, and it is now operating over 100 store-in-store collaborations. According to Reinhart, having a resale option in traditional retail settings has been shown to boost overall sales: It spurs customers to spend 21% more and to visit 70% more frequently. He attributed the big increase in visit percentage to the fact that the secondhand collection is replenished every other week, whereas in traditional retail formats, new pieces arrive only about four to six times a year.
ThredUP has been attracting brands onto its platform as well, such as Reformation and Madewell. “Bringing brands and retailers along with consumers into this equation is how we’re powering this next generation of resale,” he said.
Reinhart cited a statistic that nearly nine in 10 retail executives say they want to get into the resale game by 2020. Discussions among traditional retailers at the conference tended to echo this sentiment. One C-level executive of a high-end luxury department store, when questioned, said he wouldn’t rule out the possibility of incorporating rental or resale items as long as the fashion and quality were still there. If his customers wanted it, he said, the store would embrace it.
The Fashion Rental Business Is Looking Sharp
The same year thredUP was founded — 2009 — Jennifer Hyman and Jennifer Fleiss co-founded Rent the Runway, an online service that rents out designer clothes and accessories. Its launch was a major leap toward bringing the sharing economy into the fashion business. Today, the company’s subscription base has crossed 11 million members.
In Hyman’s fireside chat, she described what originally inspired the company’s unique business model. It was actually a customer group long considered “department stores’ worst customers”: those who would buy an expensive outfit to wear to an event, keep the tags on it and return it. Hyman said it was a difficult behavior for retailers to stop, especially because this group included shoppers who often spent plenty of money elsewhere in the store. But she glimpsed in the behavior a new opportunity for supplying women with formal wear.
“We are really trying to build a living closet, a discovery platform that enables people to express themselves differently every day.”–Jennifer Hyman
Designer brands have been very amenable to working with Rent the Runway, according to Hyman. “We’ve been very proud that … we’ve had zero brands stop working with us,” she said. She explained that a woman who goes out wearing a Rent the Runway piece spreads awareness and adoption of many designer names because customers enjoy sharing that they’re renting these remarkable clothing items. Hyman noted that more than 90% of her customers come to the site via word of mouth, a percentage that has been accelerating year over year.
Hyman mentioned that Rent the Runway has expanded its business to include a subscription model in addition to short-term rental. The initiative was introduced in 2016, which was also the year the company announced profitability, according to Fast Company. Hyman explained that the decision was based on customer feedback: Many women wanted to rent not just for weddings or parties but to dress well at work five days a week.
“We are really trying to build a living closet, a discovery platform that enables people to express themselves differently every day,” she said.
How Mainstream Will Rental and Resale Get?
Rent the Runway’s success has inspired other entrepreneurs to get into apparel rental, and the industry is becoming a market worth billions, according to Baker Retailing Center experts. Analyzing this phenomenon was a panel of innovative industry players.
Panelists noted that the shift toward clothing rental and resale mirrors what’s been happening across industries: less outright purchasing and ownership, more limited-time experiences. Sharing-economy businesses such as Spotify, Netflix, Uber and Airbnb come to mind. “Consumers are evolving and moving towards access models. We’ve seen this of course in music, entertainment, transportation and hospitality,” said John Donoghue, a senior vice president for corporate development at CaaStle, a logistics platform for retail brands offering subscription rental.
“Consumers are evolving and moving towards access models. We’ve seen this of course in music, entertainment, transportation and hospitality.”–John Donoghue
Another factor pushing consumers toward re-commerce is their increasing concern about reducing pollution, which thredUP’s Reinhart had also cited. Jeffery Fowler, president for the Americas at the online luxury fashion retail platform Farfetch, sees a substantial upside opportunity in re-commerce. He referred to it as enabling companies to “do good and do good business.” Fowler asserted that when shoppers know their clothes can have a second life instead of going directly into a landfill, they’ll feel more comfortable buying and enjoying the attractive, fashionable items they want.
The industry’s waste challenges were also discussed by other conference speakers. One pointed out that even though people have long donated used clothing to charities, some of it ends up being destroyed because of the sheer volume of donations. Consumers’ growing awareness of this situation is pushing them toward fashion re-commerce options.
An executive of a top European luxury brand observed that today’s customers demand environmental responsibility from the brands they shop. He said his firm has long been committed to sustainability, even to the extent that the CEO’s annual salary is linked to achieving specific environmental measures.
The panel’s moderator brought up the question of rental and secondhand when it comes to buying gifts. “Can I buy my wife a used handbag? Is that OK these days?” he asked.
The panelists agreed that re-commerce items have so far been considered a purchase for oneself rather than a gift. But they speculated about whether giving a rental subscription, for example, instead of new clothing, would increasingly become socially acceptable. If it does, that would be a milestone for consumer adoption toward re-commerce going mainstream.
This article first appeared in www.knowledge.wharton.upenn.edu
Seeking to build and grow your brand using the force of consumer insight, strategic foresight, creative disruption and technology prowess? Talk to us at +9714 3867728 or mail: firstname.lastname@example.org or visit www.groupisd.com