Gone were the days of customers pursuing only traditional models of ownership. The proliferation of the Internet and e-commerce has led to diversification in alternative ownership models to now include pre-owned, resale and rental markets. The growth of the fashion sharing economy or fashion rental market has been significant in recent years. Allied Market Research reports that this market, which stood at $1 billion in 2017, is forecasted to grow by over 10% CAGR to reach $1.9 billion by 2023. Geographically, North America stands out as this market’s biggest customer, driving 40% of online fashion rentals. Such strong growth figures have led sources to suggest that these new ownership markets could be bigger than fast fashion in ten years.
So what is really driving this dramatic shift in consumer ownership models? Arguably, its consumers’ desire for variety, sustainability and affordability. While younger customers, the main target of the fashion rental market, desire novelty, they also wish to consume and purchase in a sustainable way - that the fashion industry is one of the most polluting industries in the world has not escaped them. The pre-owned and rental markets therefore offer an opportunity to provide the churn in their wardrobes that they desire while prolonging the lifespan of clothing.
The sustainability angle is definitely something online fashion rental and resale players are promoting. Retailers such as Depop and ThredUp, which are well-known to promote this sustainable philosophy, have seen great success among Millennials, so much so that established brands including H&M and Primark have now jumped onto the bandwagon with free mending services and clothing recycling programmes.
Affordability is also a key driver for the growth the sharing economy. With many luxury brands such as Louis Vuitton and Chanel upping their prices, consumers are seeking more affordable alternatives, which luxury resale and rental markets provide. The success of players including The RealReal and Rent the Runway bears testament to this: The RealReal currently enjoys a $450 million valuation and recently raised $115 million in a Series G funding round to grow its physical storecount in the US.
Over time, a larger proportion of consumers’ wardrobes is likely to be made up of pre-owned or rental items. Hence, given the enormous potential of these markets, we should expect in coming years to see an increase in the number of players engaging with fashion’s sharing economy: both established retailers who are beginning to run alternative ownership models, and “digital rental natives”.
Written by Charmaine Leong
Charmaine is a fashion-tech and luxury enthusiast currently reading the Masters in Management 2019 and participating in the Walpole Programme. In addition to gaining a BSc (Hons) in International Fashion Management at the London College of Fashion prior to LBS, she also has experience in digital consulting, merchandising and fashion-tech incubator projects with Microsoft.