Researchers reveal insights into clothing rental business models aimed at reducing the environmental impact of the fashion industry, highlighting challenges and opportunities in the sector.

A recent study led by researchers from Chalmers University of Technology, along with the University of Borås and the research institute Rise, reveals insights into the viability of clothing rental business models aimed at mitigating the environmental impact of the fashion industry. This research is detailed in the article “Exploring renting models for clothing items—resource interaction for value creation,” published in the Journal of Business & Industrial Marketing. The findings highlight the potential of niche markets and partnerships with manufacturers to enhance the success of clothing rental enterprises.

The fashion industry is identified as a significant contributor to global greenhouse gas emissions, accounting for up to 10% worldwide. In Sweden, the impact of clothing production is especially pronounced, with over 90% of the climate impact linked to the purchase of newly manufactured garments. Frida Lind, a professor at Chalmers and one of the researchers, emphasized the importance of clothing rental in promoting sustainable consumption. She stated, “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.”

The research team analyzed nine Swedish companies involved in clothing rental, focusing both on those that have found success and those that struggled or failed in the market. The analysis led to the identification of three primary business models emerging in this sector:

1. Membership Model: Customers subscribe to borrow clothes for a fixed period, akin to a library model. This approach often sees founders with a passion for sustainable consumption driving the business.

2. Subscription Model: In this model, customers pay a monthly fee to rent a defined number of garments. Startups employing this model often aimed to scale operations and attract venture capital but faced significant challenges.

3. Individual Rental Model: This model caters to specific types of clothing, usually combined with other items, such as pairing outdoor clothing with ski equipment.

Despite the existence of a customer base willing to rent clothes, the researchers observed considerable challenges in achieving profitability. Lind noted, “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.” Notable hurdles included the extensive handling and inspection required for each garment before rental, as well as high costs associated with warehousing, logistics, and laundry services. Additionally, subscription models struggled to secure venture funding, complicating their capacity to maintain financial stability during early growth phases.

The study found that companies specializing in specific markets, particularly those with a local focus on outdoor clothing, demonstrated more success. “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,” Lind explained.

Moreover, the researchers emphasized the importance of collaborations with clothing manufacturers and suppliers. Those rental companies that maintained close relationships benefited from immediate feedback about popular clothing types and garment quality.

While the current study did not address the environmental impact of the business models in depth, it highlighted significant statistics about clothing waste. The European Union discards approximately five million tonnes of clothing annually, translating to roughly 12 kilograms per individual, while in the United States, the average person generates 37 kilograms of textile waste each year. Past research by Chalmers suggested that garment production accounts for 70% of the climate impact associated with clothing during its lifecycle.

Lind expressed optimism regarding the potential for environmental benefits through reduced clothing purchases and longer garment use, particularly if consumer transportation needs remain minimal. She underscored the importance of all initiatives toward sustainability, stating that they play vital roles in altering perceptions of clothing consumption and enhancing awareness about feasible solutions.

The study culminated in several recommendations for aspiring clothing rental businesses. Key suggestions include focusing on niche markets that clearly define target demographics and product types, forming partnerships with suppliers to refine products, and strategically planning logistics and transport from the outset to foster scalability in rental models.

Research contributors included Lind from Chalmers University of Technology, Agnes Andersson Wänström and Daniel Hjelmgren from the University of Borås, and Maria Landqvist from Rise. The study received funding from the Swedish Energy Agency.

Source: Noah Wire Services