What Rental and Resale Can Teach Retailers

This article was originally published on WhichPLM on October 28.

“The global online clothing rental market is expected to reach a value of $1.85 billion by 2023.” ¹

“Nine out of ten retail executives want to be in the resale market somehow by 2020.” ³

With data points like these, it’s no wonder that all eyes in fashion are on the distinctly different, yet equally interesting, resale and rental markets. A whole host of factors have brought us to the present, where these channels and modes of “ownership” are gaining increasing traction amongst consumers. Those factors include – but are certainly not limited to – heightened awareness of the environmental impact of disposable fashion, a desire to try new styles in a lower-risk context, and increased competition on wallet share for non-apparel purchases.

While I see firsthand evidence that both resale and rental are in the process of revolutionizing the fashion industry, I also believe that retailers employing resale and rental alongside their main retail strategies would be well advised to not consider these channels a “fix” for what is ailing their businesses.

If the product in your core assortment misses the mark, layering rental or resale on top of that isn’t going to address the root problem. So, is the opportunity immense? Yes it is, but it’s only as immense as these new channels can inform and improve your existing retail business. With that in mind, let’s explore what brands and retailers, either considering or already experimenting with these channels, can learn and apply.

Retailers employing resale and rental alongside their main retail strategies would be well advised to not consider these channels a “fix” for what is ailing their businesses.

Understanding and Reaching New Segments

These days, you’re more likely to hear brand executives talk about how resale and rental are a “testing ground and learning opportunity” for them, rather than dismissing them as second-class citizens. Alas, that proper recognition wasn’t always the case as companies early to this space, including Rent The Runway, initially had difficulty convincing brands to partner up with them. Even leaders in the resale space are fighting ongoing litigation about the provenance of secondhand goods. But the consumer will get what the consumer wants, and the fact that there’s all types of new entrants to rental and resale, both of the dedicated and auxiliary nature, is proof that these channels are opening up access to an exciting world of new shoppers.

So what can be learned about a shopper who’s choosing rental over ownership? You can learn her detailed demographics, which brands and styles she’s drawn to, her usage occasions, and even which products she loves so much she decides to purchase outright. If you’re a brand in this mix, isn’t this data incredibly informative for developing new products and salient messaging for this shopper? Yes, it is. And what about the brand whose products are in demand in the secondhand market? Can’t these purchases tell you about what the gateway products to your brand are, and which styles might be worth re-issuing? We’d answer both of those, again, with a resounding yes.

Product Quality and Longevity

As a brand, do you know just how long your products will hold up to wear-and-tear? Once they’re off your shelves, it’s not always guaranteed there’ll be feedback on whether the product met the consumers’ quality expectations. While admittedly, in some fast-fashion contexts, this hasn’t always been top-of-mind, in the rental context this literally comes out in the wash. Rent the Runway notes that each garment is rented out an average of 30 times – which is 30 times it goes through an intensive cleaning process – which means that garment’s quality is paramount.

In a world where we’re increasingly conscientious of buying things that will last, putting your products through the spin cycle test will not only help you become more sustainable, but it will also improve your brand’s quality perceptions over the long haul. CaaStle, a full-service rental solution for brands, notes that operating margins for each garment in their rental ecosystem is between 18-23%, so brands stand to bring in higher profits through rental versus outright selling. Why not put those margins to good use and develop products that will last?

The same notion of longevity ought to apply to resale (and not just luxury resale) products which is, can your products make the long haul? Can they stand the test of time and find a place and life in various wardrobes over time? It’s the ultimate challenge for today’s product designers – capturing the present opportunity and envisioning future usage.

Be More Reactive to Opportunities

These new markets have done a considerable amount to help those outside their ecosystem understand demand. If you haven’t seen them yet, I highly recommend looking at both The RealReal’s and ThredUP’s annual rental reports. They detail search interest, resale value, and quickly rising stars. As for companies offering rental, they’ve overwhelming noted that customers are often opting to try more trend-driven outfitting. In both contexts, there’s improved insight into what people want, when they want it, and why they want it.

Whether you choose the avenues of rental, resale, or both, consider it a sort of incubator without walls and from which an abundance of insights can spill into your mainstream business. Identify those fast-moving products, learn about pricing strategies for core versus trend items, and experiment with virtual and physical merchandising.

At the end of the day, for those of us who have spent our days in the retail industry we recognize the operational shifts that these emerging channels entail, yet we have to remind ourselves that the customer doesn’t care. All you’ve got to do is meet them where they are.

Interested in learning more about rental and resale? Check out our article, "Why Your Core Collection Has Never Been More Important," here.

¹Allied Market Research
²Globaldata
³ThredUp