A recent study examines clothing rental services as a sustainable alternative, highlighting successful business models and challenges in profitability.

The fashion industry is recognized as one of the most polluting sectors globally, contributing up to ten percent of the world’s greenhouse gas emissions. In Sweden specifically, the impact of clothing is significantly tied to the purchase of newly produced items. A recent study conducted by researchers from Chalmers University of Technology, along with collaborators from the University of Borås and the research institute Rise, investigates the potential of clothing rental services as a more sustainable alternative.

Frida Lind, a professor at Chalmers and one of the study’s lead researchers, articulated the idea that “many people have clothes hanging in the closet that are rarely or never used. Renting clothes can extend the use of each garment and thus contribute to more sustainable consumption.” This research analyzed nine Swedish companies, some that had failed and others still in operation, to understand how clothes rental companies can thrive.

The researchers identified three main business models that have been pursued in the clothing rental market:

1. Membership Model: This approach allows customers to become members and borrow clothing for a limited time, akin to borrowing from a library. Typically, these businesses were initiated by individuals passionate about sustainable consumption.

2. Subscription Model: Under this model, customers pay a monthly fee to rent a predetermined number of garments. Startups employing this approach often focus on scaling up and securing venture capital to sustain their operations.

3. Individual Rental Model: This entails offering specific items for rental, often alongside related gear, such as outdoor clothing rented with skiing equipment.

Despite the presence of a customer base interested in clothing rental, the study highlighted significant challenges that have plagued these businesses in achieving profitability. According to Lind, “What struck us was that it seemed so difficult for them to make their business profitable. Several had to end their investments for various reasons.” The complexities involved in renting clothes, including the necessity for each garment to be handled and inspected before rental, contribute to operational inefficiencies. Furthermore, high costs related to logistics, warehousing, and laundry have presented hurdles, especially for subscription models that require substantial venture capital in early phases of business development.

The researchers found that companies focusing on niche markets, such as specific types of outdoor clothing, were generally more successful. Lind noted that “they seem to have found their niche and seen that there is a specific need that the customer is willing to pay for each time they need to use that type of clothing.” Collaborations with clothing manufacturers and suppliers proved crucial as well; businesses that engaged closely with these stakeholders received valuable insights regarding customer preferences and garment quality.

While the study did not directly assess the environmental impacts of these business models, Lind referenced previous research indicating that garment production accounts for around 70 percent of the climate impact associated with clothing throughout its lifecycle. In the European Union, approximately five million tonnes of clothing are discarded yearly, averaging about 12 kilos per individual.

Lind emphasized the importance of various sustainability initiatives, regardless of their direct success, as they contribute to changing consumer attitudes towards clothing and increasing awareness of potential methods for sustainable consumption. She added, “Our study can be an important contribution to the fashion industry’s sustainability transition, as it shows the possibilities of new business models in this industry.”

In light of their findings, the researchers have provided a set of recommendations for prospective clothing rental businesses, suggesting that they should focus on niche markets with clear consumer needs, develop partnerships with suppliers to enhance product offerings, and consider logistics and transport means from the start to ensure scalability.

The comprehensive analysis in the study, titled “Exploring renting models for clothing items — resource interaction for value creation,” has been published in the Journal of Business & Industrial Marketing, with the research supported by the Swedish Energy Agency.

Source: Noah Wire Services