More and more industries are moving from buying to leasing subscription models. We discuss the pros and cons of leasing versus owning your wardrobe

What if someone told you that clothing rental subscriptions are the next big thing and will take a 20% market share in 15 years? Yes, at first thought we would have argued that clothing was already rented out in the years prior to the internet.

And clothing is a means of individual expression. The emotional bond this creates between a clothing item and its wearer leads to a preference for buying over renting (think about wedding dresses!). Furthermore, the technology for subscription services as well as the logistics to ship merchandise have been around for years, yet consumers’ wardrobes have continued to increase.

18% of US consumers have already tested clothing rental (Graphic: priceintelligently.com)

However, there are indications that the accelerated shift to online purchases due to Covid-19, as well as the exponentially growing push for sustainability are key drivers in transforming consumers from buyers to renters.

With one of the authors of this article currently supporting a sustainable subscription model start-up and the other disappointed by electric scooter and rental car subscriptions in Berlin, we decided to look deeper into the pros and cons:

Leasing is more sustainable

The fashion industry is responsible for 4% of global CO2 emissions while many garments are only worn once or not at all.  With access to clothing rental subscriptions, consumers will start renting items they only intend to wear for one occasion and have the option to return items that, in hindsight, are never worn.

Today’s linear clothing system has damaging effects on society and the environment (Source: Ellen McArthur Foundation; image adapted)

“Don’t be gentle, it’s a rental”

Renting rather than buying clothing will socialise responsibility. While products that have the cost of socially fair and environmentally friendly manufacturing built in create a sense of responsibility, leased clothing will foster less care and more damage. Car rental companies have stories to tell on that subject, and socialism has failed before.

Mud Jeans is one of the first denim brands to have created a sustainable denim lease (Source: Mud Jeans)

Better access to higher quality products

The purchase of clothing is outdated and unfair to those in need with little income. Creating innovative clothing rental subscription models will not only allow low income consumers to have access to the latest innovations, it also will allow them to rent high quality products for important events, for example for job interviews.

Nike has launched a subscription model for children’s sneakers in 2020 (Source: www.nikeadventureclub.com)

Clothing rental subscriptions will still be exclusive

Successful brands have been built based on the level of exclusivity and high prices. Brands will be very careful in managing how and in which leasing models their merchandise is offered, either by creating exclusive leasing models or by trying to prevent rentals entirely. Quality clothing can already be bought at low prices today, and non-profit organisations offer free outfits for job interviews.

Pret-a-Manger offers monthly coffee subscription for customers in their UK shops (Source: Pret-a-Manger)

Clothing rental increases share of sustainable merchandise

Rental clothing subscriptions have the potential to boost innovation by shifting the focus to more sustainable and durable merchandise. The more frequent passing along from one consumer to another, coupled with a higher number of wash cycles will be a strain on poorly produced merchandise. Lease models will prefer to work with brands that produce clothing durable enough to be used and enjoyed by several consumers.

Premium clothing lease Hurr allows customers to rent in selected Selfridges locations (Source: www.hurr.world)

More waste due to cheap rental clothing subscriptions

Except in the niche market for super conscious consumers, used apparel will not reach the mass market. Hundreds of start-ups subsidised by investors will flood the market with basic low-risk fashion items that hardly anybody wears. These products will be worn even less than owned items and eventually end-up in Africa as free recycling.

Even though wedding dresses are only worn once, many customers still prefer ownership (Source: www.weddingdressforrent.com)

Less returns in standard fashion e-commerce

Mail-order and online companies currently fight consumers’ bad returning behaviour, where items are bought, ‘event-worn’ and then returned. Free returns risk converting otherwise honest people into return cheaters. With a “buy or lease” button or a membership option, a significant share of consumers will turn away from this return malpractice.

No solution to returns malpractice in e-commerce

The habit of event-worn returns is customer driven and will not disappear with higher availability of fashion rental subscription models. Customers who currently return worn items for free already have many alternatives at hand but opt for free returning – an option that would remain available in addition to any leasing models.

Dutch Bike Rental Start-up Swapfiets has become popular especially with Millennials and Gen-Z customers

More choice of outfit combinations

Leasing models are a great way to make entire outfits available to consumers. This allows combining different styles into an endless number of outfits. This is particularly attractive for consumers who don’t own a large wardrobe to combine new outfits from.

Rent the Runway has a community of subscribers sharing their outfits on social media (Source: Rent the Runway on Instagram)

Complex operations in rental subscriptions

Attractive to consumers, the logistics of shipping, returning, cleaning, and repairing are really challenging and expensive to handle. The reality is that merchandise will have significantly fewer turns and as few shipments as possible.

Zalando has just launched ‘Pre-Owned’ on their main app and website, allowing customers to sell clothing to Zalando and Zalando to resell pre-worn merchandise (Source: Zalando.de)

Clothing Rental Subscriptions are Here to Stay, the Question Is at what Scale

Looking at the pros and cons before closing the edit on this article, we couldn’t have wished for a better conclusion than Zalando taking the first step towards a clothing subscription model. Directly buying and selling pre-owned merchandise on their app and website means that many of the operational challenges we’ve pointed out here have already been solved at scale. From here it is only a small step to develop Pre-Owned into a Zalando subscription model. We expect more platforms and brands to follow soon.

About the Authors:

Despite both sharing long-term experience in the fashion industry, being equally eco-minded and bringing a sound background in finance, strategy and business to the table, Max Gellert and Guido Schild frequently challenge each other’s perspectives on (financially) sustainable business models. You reach them both ideally via Linkedin (Maximilian Gellert, Guido Schild)