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How rental and resale growth will outpace that of new apparel, taking 23% of 2030’s fashion market

Circular business models encompassing rental and resale have the potential to take 23% of the global fashion market by 2030, as rising consumer awareness of sustainability along with cost of living pressures come to bear.

Global economics is also forcing a rethink on fast fashion. With 39,000 metric tons of clothing dumped in Chile’s Atacama desert and 15 million garments pouring into Accra weekly, regulatory pressure is mounting to tackle waste at all stages of the product life cycle.

A new report from Bloomberg Intelligence, Global Apparel the Rise of Rental, Resale and Repair, finds that rental and resale provide an opportunity for higher-end retailers developing their own second-hand capabilities to capture new revenue streams, as well as new customers, while fast fashion might be priced out. 

In the US, Eileen Fisher offers customers a $5 coupon for recycled clothing, which it then repurposes and resells. Allbirds launched a resale program, ReRun, as part of an initiative targeting a reduced carbon footprint.

In Europe, H&M and Zara both run their own buy-back schemes, with the latter looking to offer repairs and resale services too.

Taking this a step further, companies such as ThredUp, Poshmark and The RealReal focus on apparel resale. Applying GlobalData estimates, Bloomberg Intelligence analysts note this market could grow five in 2020-25, significantly outpacing the anticipated growth rate for new apparel.

Grace Osborne, senior associate analyst, ESG at Bloomberg Intelligence explains: “Companies without their own or partner resale abilities may risk losing sales to consumer-to-consumer (C2C) second hand sites such as Poshmark, Depop, Vinted and TheRealReal.

Zara was one of the most-listed brands on Depop in 2021, contributing to the resale platform’s £50.1 million in revenue. Zara started its own platform, Pre-owned, to capture this revenue stream. H&M saw an 85% increase in revenue from its resale partnership with Sellpy, targeting €90 million in resales in 2023.

“Circular business models have the potential to grow to 23% of the global fashion market by 2030,driven by rising consumer-sustainability awareness, and inflationary pressure squeezing spending power. Retailers developing their own resale platforms stand to gain a revenue stream while those trailing risk canabilization of sales to C2C platforms.”

Resale is an opportunity for high-end brands to acquire customers who’d been priced out, generating new revenue. Kering took a 5% stake in resale platform Vestaire Collective as part of a strategy to capture younger, green-conscious consumers. Digital IDs will be key in luxury resale, and Richemont-owned Chloé launched product IDs allowing “instant resale” with authenticity and green credentials, critical to overcoming counterfeiting risks.

Osborne, adds: “Luxury is synonymous with longevity and quality, key for resale value. Fast fashion is not. Vestaire banned fast fashion from the platform, hitting 5% of listings, to drive margin and challenge retailers that overproduce. Decoupling revenue and production growth should be a key resale objective, with financial growth coming from less use of resources as targeted by Ralph Lauren.”

Regulatory pressure

The EU Strategy for Sustainable and Circular Textiles proposes that by 2030, textiles entering the EU must be durable, repairable and recyclable. The amount of fibres in garments makes industrial-scale recycling at end of life challenging, putting collection schemes such as Levi’s and H&M’s into question. Embedding circularity at the design phase, such as Patagonia, Puma and Salomon’s partnership with Carbios to aid recyclability of products, is crucial.

With extended producer responsibility programs proposed in the EU, H&M’s joint venture, Looper Textile, is a positive step, with about 30% of collected clothes to be recycled. However, about 60%probably will be resold in Europe or Africa, potentially perpetuating the problem of mounting textiles waste in developing nations. About 5% will be incinerated.

AI disrupting production waste, reducing operating costs

AI stands to disrupt production models to reduce waste and drive margin, but may cost manufacturers revenue. VF Corp.’s North Face brand’s AI personal shopper asked customers what they’re looking for, suggesting items for an enhanced shopping experience, while gathering data insight about their interests. In 2017, H&M was accused of burning 12 metric tons of garments, and the retailer now has a dedicated AI team gaining insights from search-engine trends to better predict demand, improve the in-store location of clothes, gather data about purchase timing and re-stocking information and minimize unproductive inventory and resulting waste. Tech can help reduce the 45 billion garments made each year that are never sold (30% of production) and either enter landfills, are dumped on developing nations or incinerated.

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