Rental and Resale Market Analysis

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Rental and Resale Market Analysis

Presented below are three online clothing rental trends, five insights, and five trends in the global resale fashion industry. The adoption of subscription services, market segmentation, and technology enabled logistics are the online clothing rental trends discussed. The five global resale fashion industry trends examine the composition of the closet, self-disruption, luxury's nascent relationship with resale retail, market segmentation, and woke culture.

Online Clothing Rental Trends

Overview

  • The value of the global online clothing rental market is projected to exceed $2.8 billion by 2027, with growth expected at a CAGR of 10.9%. The rental platform was ranked second behind resale with 61% of retailers indicating it was a platform they wanted to test by 2020.
  • In addition to traditional markets in Europe and North America, improvements in internet penetration and ubiquitous connectivity in developing countries such as Argentina, Chile, China, and India are driving growth. Market share in the APAC regions is projected at 11.87% for the period 2018 to 2023.
  • Thred Up, reports that 26% of shoppers in the rental category of its 2019 Resale Report indicated that they will spend more on clothing rental in the next five years, while 2% indicated that they will spend less.
  • Additional market drivers include increasing demand for designer clothes and the impact of the make fashion circular movement. Fueled by the need to maintain social media presence, users are demanding access to affordable designer outfits.
  • The move to sustainability, coupled with the fact that clothing production doubled between 2000 to 2014, has impacted the fashion industry, with shoppers are opting to rent clothes to offset the environmental cost of clothing production. This has prompted 96% of senior retail executives to indicate a desire to advance circular fashion efforts at their company by 2020.
  • The challenges the online clothing rental market continue to face are overcoming the social stigma associated with renting clothes, loss of customization for general shoppers as well as those requiring customized clothes, and high costs for maintenance and labor.

Clothing Rental Subscription Services

  • Subscription based services offer shoppers the option to rent three to four pieces of clothing for a monthly fee. The period of rental varies by retailer.
  • The service offers shoppers the opportunity to save time and money, curate personalized selections and satisfy self-gifting impulses. For retailers, the benefit of subscription boxes include the ability to bind existing customers further and increase the retailer's share of the customers disposable income, expand its customer base, and generate recurring revenue.
  • In the 2019 Resale Report from Thred Up, 21% of customers indicated that they will spend more on subscription boxes in the next five years, while 2% said they will spend less.
  • Online clothing rental retailers currently offering subscription services include Rent the Runway, Gwynnie Bee, Tulerie, and New York and Company Closet.

End User Market Segmentation

  • The online clothing rental market is segmented by both product type and end users. Product type segmentation is the more mature of the two, evidenced by the robust market share of over 40% in 2018 for parties and wedding wear. The two product segments account for more market share than all other apparel rental segments, at 36%. Cost effectiveness is also a driver as formal wear, priced higher than casual clothes, accounted for close to 22% of the rental market in 2018.
  • End-user segmentation is also occurring increasingly. Online clothing rentals for men accounted for 46% of the market share and is expected to grow at a CAGR of 10.57% between 2018 to 2023.
  • Another end-user niche in online clothing rentals which has recently seen growth serves plus sized shoppers. The plus sized market is valued at $20 billion, with annual sales rising 17% between the period 2013 to 2017.
  • Although it has now expanded its services to sizes below size ten, Gwynnie Bee began as a service for plus sized women wearing sizes 10 to 32. Stitch Fix Plus is a cost effective service providing apparel for rent to plus sized women, with a service that has free shipping and no subscription fees.

Tech-enabled Logistics

  • Clothing as a Service (CaaS) distributes clothes and accessories to customers on a temporary basis. For this fashion distribution model to work, retailers must manage logistics and inventory efficiently. Garment care, customer service, and reverse logistics are operational activities that take place on logistics platforms.
  • The solution typically enhances retail supply chain systems, inventory visibility, order aggregation and fulfillment, process data, and customer service. The model adopted by CaaStle, a managed service provider, encompasses both online and real world applications. CaaStle utilizes databases, algorithms and analytics, on its websites, provides the physical infrastructure to distribute the retailer supplied inventory, and offers managed services to complement subscription models.
  • Among CaaStle's customers include Gwynnie Bee, Vince, and New York & Company. Additional service providers are Barrett Distribution, a provider to Amazon, Cycleon, and Hollingsworth.

Resale Fashion Insights

Market Size

  • The fashion resale market is a subset of the secondhand apparel market. The secondhand market consists of the resale sector and the thrift and donation sector. Resale refers to a market that is generally curated from high-end merchandise offered primarily through online retail.
  • By the end of 2020 the secondhand apparel market is estimated to total $24 billion, of which $5 billion will be accounted for by the resale market. ThredUp projects this figure to increase to $51 billion for the overall market by 2023, of which the resale market will be valued at $23 billion, and the thrift and donation market, $28 billion.
  • Representing 6% of the total apparel and footwear market, the resale market has nevertheless grown over 21 times faster than the retail apparel market in the previous three years. This share is expected to increase to around 10% by 2022. Leading sector players include ThredUp, The RealReal, and Poshmark.

Resale shoppers

  • In 2018, it is estimated that 56 million women bought fashion resale products, an increase of 12 million over 2017. There was a 19% increase between 2016 and 2018 in the percentage of women who were open to buying secondhand products. In 2016 45% of women surveyed indicated they would purchase secondhand items, while in 2018 the figure rose to 64%.
  • The market penetration crosses the luxury, department store and value chain markets. In the luxury market 26% of shoppers buy secondhand, while 25%, and 22% purchase secondhand in the department store and value chain markets respectively.
  • Among the different generations, Millennials lead with 33% purchasing thrift, followed by Boomers at 31%, Generation X at 20%, and Generation Z at 16%. Between 2017 and 2019, growth among the different generations registered at 46% growth for Generation Z, 37% for Millennials, 18% for Generation X, and 15% for Boomers.

Celebrity Influencers

  • Poshmark's social commerce report for 2020 cites Generation Z as the owner of the most resale, fast fashion, and luxury products among all the generations. Further, Generation Z adopts style cues from streetwear (38%), celebrities and pop culture icons (37%), and social media influencers (34%).
  • There was an 80% spike in Clean Out Kits at Thred Up after Marie Kondo's show premiered on Netflix. With the launch of the Kardashian Kloset in October 2019, the Kardashian family offers items from Kim, Kylie, and Kris Kardashian initially, with additions to the collection planned from Kourtney, Khloe, and Kendall Kardashian later on.
  • Because Becky Li, a fashion influencer that not only sells personal items on the platform, but also discusses her love of vintage shopping on Idle Fish, influenced Chinese shoppers aged 15 to 30 to consider resale fashion. In China users of re-commerce platforms have grown by 46.4% in 2018. On Idle Fish, the re-commerce platform of the Alibaba Group, over 60% of the 200 million total users were born after 1990. Up to June 2019, there were 56 Chinese celebrities on the platform selling personal items to followers.

Luxury Resale

  • The luxury resale market consists of the sale of antique items, luxury arts, and apparel. It was valued at $16.23 billion in 2018. In the next five years 16% of consumers plan to spend more on luxury items, while 9% indicated they intended to spend less. If offered, 33% of luxury retail customers would purchase secondhand apparel.
  • Luxe Digital projects luxury resale to be at $34 billion in 2021, compared to $24 billion in 2018. Drivers of luxury resale are the availability of digital platforms, the availability of a luxury product at affordable prices, enhanced collectability, and a generational shift fueled by changing consumer preference related to conscious shopping and experiential luxury.
  • Some retailers devoted to luxury resale include Rebag, a platform devoted to the sale of preowned designer bags, Stella McCartney, and Burberry.

Circular Fashion

  • A circular economy refers to a deliberate practice of growth rooted in a decoupling of economic activity from resource consumption and the reduction of waste in the system. It is based on reductions in waste and pollution, constant use of products and materials, and a regeneration of natural systems.
  • Launched in May 2017, the Make Fashion Circular initiative convened fashion industry leaders to stimulate collaboration among business, government, innovators, and citizens.
  • To date industry leaders such as Stella McCarthy, HSBC, Gap Inc., H&M Group PVH, and Burberry had joined with the Ellen MacArthur Foundation as core partners to the initiative.

Resale Fashion Trends

Closet Composition

  • Spending by customers is projected to shift to secondhand (51%), Amazon (37%), rental (26%), subscription (21%), off-price (26%), and mid-priced (21%). In 2008, a typical consumer closet primarily contained clothes sourced from department stores (22%), value chains (11%) mid-priced stores (26%), and other retailers (16%).
  • By 2018 the share occupied from mid-priced stores had fallen by 6%, department stores by 8%, and other retailers by 3%, while value chains remained constant at 11%. The share occupied by off-price items had risen by 5%, direct to customer by 5%, secondhand by 3%, and fast fashion by 2%.
  • Projections for closet composition in 2028 reflect a 7% increase in items sourced from secondhand stores, 3% increase from direct to consumer and off-price, and the appearance of subscription sourced items at 3%. The share occupied by department stores continued its fall with a 5% reduction, a 4% decrease for other retailers, 6% decrease for mid-priced items and a 3% decrease for value chain items.
  • In 2019, department stores occupied the worst performing sector on the S&P 500 and is projected to fall 30% in 2019. Among the poorest performing stocks were Nordstrom Inc, Kohl's Corp., Gap, L Brands Inc., and Macy s. Up to October 2019, over 7,600 department stores closed.

New ownership model

  • Customers are increasingly driven by a desire for affordability, variety, and sustainability. This had the impact of prolonging the lifespan of clothing from their sale in preowned, refurbished, repaired, and rental ownership models.
  • Fashion consumers are purchasing 60% more items of clothing than they did 15 years ago, and they are keeping it for half as long. In Britain, one in three young women consider a piece of clothing old after using it for a couple of times, and one in seven believes it is a fashion faux pas to be photographed in the same outfit twice.
  • This trend is expected to develop further from the number of brands moving into the resale space, the number of renal native brands will increase, and changing closet composition.

Woke culture

  • With Generation Z joining Millennals in the workplace consumer behavior driven by social and environmental causes is becoming more prevalent. Unlike Millennials, Generation Z adds social issues to the environmental ones, and nine in ten believe companies have a responsibility to address these issues. In the five years between 2013 and 2018 there was a 15% increase in the number of eco-minded customers.
  • Generation Z and Millennials are critical consumers, representing close to $350 billion in spending power in the US, and Generation Z is expected to account for 40% of global consumers by 2020. Brand loyalty from all generations would increase by 60% of consumers if brands offered recycling programs.
  • With 180 million tons of non-renewable resources are used annually to make clothing, and textiles estimated to account for 25% of the global carbon budget by 2050, retailers have to take note of this behavior and have begun to integrate messaging, and align complementary practices into their products and services.
  • Resale retailers who have integrated the messaging and aligned production standards include ThredUp, Depop, and Reflaunt. Reflaunt offers customer incentives for resold items and facilitates luxury brand participation in fashion resale.

Self-Disrupt

  • Self-disrupt refers to the practice of brands disrupting their business models. Mc. Kinsey reported that at the top of the agenda for executives in 2019 was self-disruption, with 79% of executives placing it in the top five trends in the industry.
  • Methods of self-disruption include continued innovation, adopting agile work, and streamlining of the traditional operating model.
  • In the fashion resale industry this is evidenced by the increased prevalence of department store brands opening fashion resale outlets. In February 2020, the Gap announced that it was joining Macy's J.C. Penny, and Stage stores in partnering with ThreadUp,

Luxury brands embrace resale

  • Luxury resale at 12 % annually, is outpacing overall luxury sales, at 3% by a factor of four. Drivers of this growth include online resellers, the circular economy and the desire for more sustainability, and scarcity induced from limited or capsule collections. Finally, the very nature of luxury clothes, built for durability, makes it a good fit for the resale market.
  • Luxury retailers have to overcome the fear of drawing sales away from new products, and dilution of the brand. Aside from being complementary to the life cycle of luxury products, the resale market offers luxury brands the chance to support long term sustainable goals within the industry.
  • To date luxury retailers such as Gucci, Christian Luboutin, Supreme, Chanel, Burberry, Celine, Valentina, Prada, and Hermes are offered on RealReal's website for resale.












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