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The high costs of laundry and warehousing are among the challenges facing startups. Renting clothes can reduce the fashion industry's hefty environmental impact, but so far, business models for the practice have not worked very well. A recently published study led by researchers at Chalmers University of Technology, Sweden, has delved into what measures can make clothing rental a success.
The researchers hope their findings will have significant benefits for greening the industry. The fashion industry is one of the world’s most and can account for up to 10 per cent of global greenhouse gas emissions. In Sweden, over 90 per cent of clothes' climate impact is linked to the purchase of newly produced goods.
Previous research from Chalmers has shown that the production of new garments accounts for 70 per cent of the of Swedes' clothes throughout their life cycle. In the European Union, seven million tonnes of clothing are each year - around 16 kilos per person. In the US, the average American generates 37 kilos of textile waste each year.
The researchers behind the new study believe that there is great potential for environmental benefits through reduced clothing purchases and extended use of existing garments – especially if it can be done without extra car journeys for consumers. Researchers at Chalmers University of Technology, the University of Borås and the research institute Rise have examined the success of alternative, more sustainable business models for the in their new study. "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," says Frida Lind, a professor at Chalmers and one of the researchers behind the study. The researchers analysed nine Swedish companies that have either tried and failed, or are in the process of creating a sustainable clothes rental company. The study identified three main business models for renting out clothes.
The membership model allows customers to become members and then borrow clothes for a certain period of time, similar to a library. With the subscription model, customers pay a monthly fee to rent a certain number of garments. These startups worked on scaling up operations and attracting venture capital.
Under the individual rental model, companies provide specific types of clothing to rent out, often in combination with other equipment, such as paired with ski equipment. The researchers interviewed founders, managers and other key people from each company about their business success. "What struck us was that it seemed so difficult for them to make their business profitable.
Several had had to end their investments for various reasons," Lind says. The researchers noted that although there was a willing customer base for in this way, there were several other challenges that made it difficult for companies to achieve profitability. "Renting out clothes involves many steps where each item of clothing needs to be handled and inspected before it can be rented out again, which takes time,” Lind says.
“Companies also struggled with high costs for warehousing, logistics and laundry. Especially for the subscription models, there were also difficulties in obtaining venture capital to be able to survive financially through the first phase of building the company.” The researchers found that some of the business models worked better than others.
Companies that focused on a specific market, such as outdoor clothing, were more successful and sustainable. "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," says Lind. The researchers also examined how the companies created value in collaboration with different stakeholders and concluded that certain collaborations were particularly valuable.
"Rental companies that worked closely with clothing manufacturers and suppliers, such as designers with a profile, benefited greatly from this as they were able to quickly get feedback on which types of clothing were most popular," she says. “They also gained valuable information about the quality of the garments, for example if there was something that often broke.” Lind emphasises that even if some of the companies and services in the study have not survived, all initiatives that can contribute to the sustainability transition are important.
At the very least, they help to change attitudes about clothing consumption and increase knowledge about what can and cannot work. "Our study can be an important contribution to the 's sustainability transition, as it shows the possibilities of new business models in this industry,” Lind says. “We hope that it can have an impact on decision-makers who need a basis for establishing incentives and financial motivation for a more sustainable fashion industry.
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