Can’t steal my style, but maybe we can share it?

sharing-economy-sector-and-traditional-rental-sector-projected-revenue-growth-infographic.gif.pngFor this week’s discussion of the ‘sharing economy,’ Professor Kane asked us to watch Professor Sundararajan’s NYU lecture about crowd-based capitalism and block chain markets. Professor Sundararajan speaks to the future of the sharing economy and its rapid growth. Pricewaterhouse Coopers predicts that by 2025, the five key sectors of the sharing economy — finance, staffing, car sharing, hospitality and music and video streaming — could generate $335 billion in annual revenue, up from about $15 billion today. But as Professor Sundararajan emphasizes, the sharing economy is more than just Uber or Airbnb. We, as crowds, can become the source of capital in many different industries and markets.

In the beginning of his talk (2:45), he projects a slide with numerous logos of the largest players in today’s sharing economy today. The fourth line down, I noticed a category entitled “high-end retail”, presenting examples such as Rent-the-Runway and Eleven James. Although being very familiar with such companies, I have never pictured them to be part of the ‘sharing economy’… and then I started to question:

How does the sharing economy work for the fashion industry?

This question led to some research, which then led to my blog post because I wanted to share my findings with all of you.

1442609124-clueless-index.jpgThe concept of the shared economy is easily applied to services like transportation (Uber), hospitality (Airbnb) and chores (TaskRabbit), but is not as seamlessly applied to the product-dependent retail segment. The challenge becomes that we as consumers do not think about our material possessions, products in our homes (or closets), as things we can “share” or borrow when needed, rather than own. Despite this consumer mindset, the sharing economy actually enables the transformation of one’s possessions into revenue streams, by enabling items to be useful all of the time, or more of the time. It is way cheaper to pay to use something for a short time rather than outright buying it. Essentially, the sharing economy offers us access without ownership.

Items in the fashion industry, especially luxury goods, are often used only once. Ownership of such expensive items is not cost-effective, but it has been the only way to ensure access to these items for the required occasions. Therefore, items in the fashion industry, especially in the luxury sector, possess the key qualities of successful sharing consumption models; high value but low usage.

I discovered that not only does the sharing economy work for the fashion industry, but it truly makes sense due to the high value, low usage nature of the products. And, as a result, dozens of fashion companies have entered the sharing economy in recent years in a number of different ways.

Fashion Rental Services

Most of us know the classic example of Rent the Runway. Launched in 2009, this US-based company now has over 5.5 million members. Beyond RTR, there are a numerous amout of start-ups in either other companies or niche fashions. Some of these include Girl Meets Dress in the UK, Chic By Choice in Europe and Glam Corner in Australia, as well as Gwynnie Bee (plus-size fashion rental) and Borrow For Your Bump (maternitywear rental). Rental models allow customers to borrow items for a set time period, typically at a 10%-20% discount of an item’s retail value. By loaning clothing on a pay-per-use basis, rental companies also lower the cost of items, giving customers access to aspirational brands they couldn’t usually afford. Greg Portell, a partner in retail and media at A.T. Kearney explains, “You wouldn’t necessarily spend $700 on a one-time use or even two-time use item, but you may spend $100 [to rent] it for a one-time use.” With more spending power and choice, but less commitment, consumers can use rental sites to constantly update their wardrobes, enabling them to keep up with fashion’s fast-turning trend cycles.

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Peer-to-Peer Platforms

In the US alone, over $8 billion worth of clothing sits in closets, unworn, according to a report by online thrift store ThredUp. Just like idle cars or empty rooms, these possessions are sitting there with the potential to produce a profit for the owner, and delivering value to someone in need of the good. Peer-to-peer rental services connect consumers and let them borrow from each other. “That value proposition is obvious to people,” says Sundararajan. “‘I’ve got all this stuff in my closet, it would be great to rent it out.’” I even discovered a niche college closet-sharing app called Curtsy that allows you to rent clothing from girls at your school (haven’t used it yet, but definitely might try it out!).

Peer-to-peer businesses also need to figure out how to get fashion items from the owner to the user, and ensure items are in good condition. Some companies handle these logistics themselves. In the peer-to-peer rental service Style Lend, a site that let’s New Yorkers borrow clothes from others within the city, requires owners to send in items they want to rent out. The company stores them in its New York offices, and handles delivery and dry-cleaning, much like a traditional rental company. On the other hand, when UK-based Rentez-Vous first launched, users were responsible for cleaning their own items, and had to arrange to have each item delivered, or meet their customer and hand over the item in person. While this cut costs for the business, it deterred usage for customers.

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So the answer to my question, “Does the sharing economy work for the fashion industry?” is both a yes and a no (or a not yet).

The nature of the products and the few successful examples show that the sharing economy can be effectively applied to this industry. But it seems challenging for fashion to ever fully adopt the shared economy model in the same manner as the automotive or accommodation industries. So far, the sharing economy has been slower to take off in retail. According to the PwC report, just 2% of the US population has engaged in a sharing transaction in the retail sector, compared to 6% for hospitality and 8% for transport. While the clothing is “shared”, these companies and sites do not embody the true nuts and bolts of the shared economy model and there are three key challenges that prevent them from doing so.

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Consumer Mindset

Primarily, there is the problem of the consumer mindset. Convincing people to share clothes with other people requires a much bigger behavioral shift than convincing them to share vehicles or accommodation. In my research I saw a comment on an article reading “Outerwear & bags OK, evening gowns maybe, but sharing clothing & shoes is creepy to me and I don’t see this as a category for significant apparel growth. Maybe people should just start making their own clothes and learn to knit if they want something truly unique that fits and is affordable.” (BOF.com). Some people (especially germ freaks) find the whole concept of sharing clothes a little disturbing, while many others enjoy owning something unique that is theirs. Mentally, sharing your clothing is hard when style is one of the biggest forms of self-expression. Many arguments are made that customers will continue to buy everyday staples — such as a good pair of jeans or a classic leather jacket — but turn to rentals for occasion-wear and statement pieces with a limited wardrobe lifespan.

“Consumers will become smarter about what they want to own forever and what they don’t want to own forever.” – Jennifer Hyman, CEO of Rent the Runway

Speed and Efficiency

The second barrier of fashion in the shared economy is that it lacks on-demand speed and efficiency. While it is less expensive and more convenient, these retail offerings lack the important “right now” feature consumers expect. For those using either Rent the Runway or Style Lend, unless you live in Manhattan or other major hubs of these two companies, the fashion shared economy lacks the direct-to-consumer aspect of the business. People outside Manhattan also can borrow through Style Lend, but will not receive same-day shipping. I expect the model can be expanded to apply to different cities, though. As millennials today, we expect services almost instantly, but it becomes challenges for every industry to figure out how to deliver this. A number of retailers are trying to prove their models by simply taking advantage of the existing shared economy, not creating ones of their own. They are, essentially, intersecting with Uber. Cole Haan, Nordstrom, Rent The Runway and Dick’s Sporting Goods have all explored the UberRUSH; Uber’s local delivery service. By delivering for major retailers, UberRUSH is serving as the middleman between retailers and their shoppers.

Logistics

And the last barrier is simple logistics. “Logistics seems to be the key barrier to this really taking off,” says Sundararajan. Especially the peer-to-peer marketplace “has the challenge of getting enough people in so that they actually have sufficient inventory,” Sundararajan continues. In fashion, the wide range of product styles and sizes make this difficult to achieve. Rent the Runway buys each product in a range of sizes, and sends users two sizes in case the one they order doesn’t fit. But for peer-to-peer rental services, this problem is harder to fix. Because of style and fit variation, a fashion marketplace needs to offer consumers a wider range of products than sharing economy sectors such as cars or accommodation. Inventory turnover is much higher in fashion in order to keep up with trends.

In the crowded sharing economy space, where many companies don’t have such high overheads, so the investment to start such ventures in the sharing of fashion becomes a challenge compared to the absence of overhead in majority of share economy companies so far. Unlike Airbnb and Getaround, which connect users through a marketplace of third-party controlled goods, a fashion rental company must take on the role of owner — purchasing and holding all the stock they rent out. Therefore, fashion rental services also face greater logistical barriers. By contrast, fashion deals in products that are more difficult to transport between users, and require maintenance between uses — such as dry cleaning and repairs — which create operational challenges and costs for businesses. Rent the Runway has invested heavily in logistics, to ensure products that are returned to the company in the morning can be ready to ship to a new customer that evening. It is currently the US’s biggest dry cleaner, operating a 160,000 square foot fulfillment center that dry cleans 2,000 dresses every hour. The majority of returned items are cleaned and sent back out for a delivery within a day.

 

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a9c9f06c8e9d387b027067db44c5f437.jpgWhat the shared economy shows is that the future of consumption, even for fashion, is not ownership, but access. Although there are more challenges in the fashion industry in attaining this access, I have no doubt companies will figure out the issues with on-demand speed and logistics. The slow takeoff for fashion seems to come from us; the consumers. So my new question is: When will we be ready to share our closets with strangers? Seeing as I don’t even let my little sister borrow my clothes… I’m not sure I’m the best person to ask… but I only time will tell.


Sources:
http://www.forbes.com/sites/bryanpearson/2016/09/20/where-is-the-uber-of-retail/#3d0483f244e0
https://www.businessoffashion.com/articles/fashion-tech/will-the-sharing-economy-work-for-fashion-rent-the-runway-rental

9 comments

  1. fernaneq4 · ·

    I love this! I’m a (relatively) frequent user of rent the runway. I agree with you that the mindset of older generations may still hold some of these companies back — I know my parents would not be interested in sharing clothes with a lot of other people as well as they see it as if they want to purchase a high-priced item they are going to (1) use it as many times as possible/get their money’s worth (2) take a lot of time to think about the purchase beforehand. I think they were more of the quality over quantity generation. Not saying our generation is not, but I think we see the value in these sharing sites and even comparing it to companies like uber and airbnb where you can do it all for a lower price. I think for the high-ticket items this will really open doors to all consumers, however, some high-end brands may not like that. It could diminish their high-end brand. As with anything, all we can do is wait and see. But in the meantime, I will continue to enjoy companies like rent the runway!

  2. gabcandelieri · ·

    Loved this post! In response to your question, I am definitely skeptical of sharing my closet with others, even if I am making a profit. Professor Sundararajan’s lecture mentioned how today’s on- demand economy is blurring the lines between the personal and professional realm, and I would still consider the clothes I wear to be extremely personal. Although Rent the Runway does not involve some sort of high-stake interaction as that of Uber or Airbnb, there is a certain level of digital trust we need to establish in sharing items of clothing that would ensure pieces don’t get ruined or abused. In regards to clothing sharing becoming a completely peer-to-peer market, I believe I would be more likely to trust a Rent the Runway type of system with a centralized intermediary maintaining the quality and cleaning costs of clothing pieces. I think I would be more in favor of sites like Rebagg or Tradesy where you can sell your one-time use luxury items to others–although this is an ownership rather than a rental model, it still increases product turnover and use. Great post overall!

  3. Interesting post! I hadn’t really thought of the fashion industry as an opportunity for the sharing economy but can see how it makes sense. I feel like the retailer to consumer model is a little more replicable than the peer to peer model. Logistically, it seems really difficult to match up sizes, styles, condition of clothing, etc. between consumers. Retailers adopting this model in a way that is profitable would definitely gain a competitive advantage over more traditional business models.

  4. katieInc_ · ·

    What a great topic! The most sharing within the fashion industry that I have done has consisted of swapping clothes with my roommates in college or, back in high school, exchanging dresses with friends for school dances each year. I think the three main obstacles to increasing the overall percentage of sharing participants in the fashion industry is spot on. Intuitively, it does not make sense immediately. Clothes are traditionally thought of as “owned” or occasionally lent to close friends/family, not strangers. I agree — that if we can overcome the three main barriers (1) consumer mindset, (2) speed/efficiency, and (3) logistics, there is a huge opportunity in this space.

  5. Really enjoyed your post this week! I love how you tied in the readings and video for the week. I feel like many of us fail to tie together the weekly post with this and I really feel your post was successful due to the back-up research and support you gathered from these sources. I feel like you went above and beyond this week with your inclusion of the breakdown of the fashion industry.

  6. bishopkh1 · ·

    Really great post. I worked for Rent the Runway this summer and I agree with a lot of your points about this area of business being SO difficult. Behavioral change and logistics are huge, and are definitely reasons that collaborative in consumption hasn’t taken off… yet! These factors are issues now, but in the future I believe they are 100% fixable and eventually, whether it’s RTR or another company, someone will figure out how to master this space and take advantage of the huge potential here.

  7. jagpalsingh03 · ·

    Really informative post! For my senior prom I actually used a site called “theblacktux,” similar to Rent the Runway, to rent my tuxedo! As a guy interested in fashion (and sometimes into pieces above my price range) it has always bothered me that there really isn’t any attractive option out there for males to rent clothes outside of a handful of formal wear websites. Like you illustrate, the sharing economy of clothes hasn’t exactly taken over the female clothing industry, so its possible that the women’s industry has to adapt first and the men’s industry will follow. Even though people in my demographic are more receptive to the idea of sharing clothes, like what @fernaneq4 said, my mother would never even entertain the idea of exchanging clothes with strangers. And for me, anything more intimate that outerwear or formal wear is still in the gray. I’m interested to see how society’s attitudes towards sharing more intimate items such as clothes change, and how that will affect companies like Rent the Runway moving forward.

  8. Great post! I think this is a very interesting topic for the future of fashion. I was once skeptical of Rent the Runway. The idea of getting clothes shipped to me that I did not even know if would fit, wearing it once, and sending it back seemed like an extremely tedious and complicated process to me. However, once I tried it, I realized it was quick, simple, and extremely fun and efficient. I am a loyal Rent the Runway user for all major formal events. You think I would have learned my lesson right? However, I am honestly very uncomfortable with the idea of sharing my closet with strangers. As the blogger said, I do not even let my little sister touch my clothes, why would I let a random person do it. I find clothes to be something pretty personal because it reflects my own style and it goes directly on my body. However, homes and cars are also personal, and sharing platforms for these types of personal items have been widely successful as we see with Air BnB and Uber. My concern is that right now as a broke college kid with relatively cheap clothing I am uncomfortable with this idea. I feel like the older I get and the nicer my clothes gets will make me want to share less and less. However, who knows. This may just be another cultural obstacle ready to come down.

  9. Great topic! I actually read something an hour ago that directly relates to your blog. There’s a new Boston clothing start-up called Brass, which basically seeks to construct high quality, low cost “basics” for your wardrobe. These are mostly staples like a chambray shirt, little black cotton dress, navy sweater dress, etc. They want women to feel great without breaking the bank. Up until now they’ve been selling their clothing online and in pop-ups, but don’t have an official brick and mortar location. Anyway, they just revealed their new program today called the Brass Edit. (http://brassclothing.com/products/the-brass-edit?_ke=a21jY3VsbG91Z2gxMzRAZ21haWwuY29t)

    With this new program, you pay $548 to receive six items of clothing on a rotating basis (one item per month for six months.) You can pick your items from a capsule collection and send it back right away if you don’t like how it fits or feels without having it count as one of your six subscriptions. You also get to have virtual conferences with a member of their design team who will help you select items that fit with your personal style, help you experiment with new looks, or fill a gap in your wardrobe. Think, “I wonder if I *really* want a black leather skirt. How often would I really wear it, and how would I pair it with my existing clothing?” This is where the “Brass Babe” consultants help. Plus, the Brass Edit is only open to 500 users. There are 200 people on the waitlist, and the program won’t even officially launch until the end of November. I thought this perfectly captures your themes of the Sharing Economy and how the element of ease is so crucial for potential shoppers!

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