Rental market expanding: UNSW expert
Factors such as new generation’s inclination towards novelty, awareness of fashion footprint, and affordability are leading to an increase in rental market. Uncertainty stemming from COVID-19 pandemic and consumers’ desire to save resources have further added to this shift from ownership to renting designer apparel, says a UNSW consumer behaviour expert.
The rental market has disrupted the retail industry and will flourish in the long run despite COVID-19 setbacks. With Australia officially in recession, many people are now looking at ways to cut down on expenses. The fashion industry hasn't been spared and there has been a significant shift from ownership to renting designer apparel, says the expert.
“Despite a dip in demand due to hygiene concerns and confinement throughout the pandemic, it is expected that the clothing rental market will eventually pick up post-coronavirus especially given the increased savings focus due to the pandemic,” says UNSW consumer behaviour expert, Associate Professor Nitika Garg.
In China, YCloset – a garment sharing platform backed by e-commerce giant Alibaba, reported that the demand for renting apparel is on the rise again as people are returning back to work. In the United States, Rent the Runway, the billion-dollar clothing subscription service, is also receiving interest from investors amidst concerns about employee safety during the pandemic. As of December 2019, Australian brand Glamcorner also started offering a monthly subscription for everyday wear in addition to one-off rentals of formal dresses.
However, one thing to note is that customers’ appetite for rental apparel will not grow overnight. Garg warns that any positive returns will take place in the future as not only have many businesses seen a disruption in their business models – demand has also been impacted due to the economic impact of the pandemic.
Before the pandemic, the clothing rental market was already booming with research estimating the industry to reach $3 billion by 2025. Garg attributes this increase in demand to a shift in consumption patterns demonstrated by younger generations. “It is definitely a generational effect. The younger generation tend to have a higher threshold for stimulation. Due to an everchanging flow of new information and the need for novelty, they subsequently have a lower threshold for boredom – which means that renting clothes becomes a better solution (than buying) as they can continuously wear new outfits at a lower cost.”
Garg explains there is a trend predominantly amongst millennials and Generation Z about sustainable clothing and the impact that their consumption has on the environment. “The younger generations are more trusting of the sharing economy and this shows in the market growth of the clothing rental market.”
“Renting apparel also appeals to those who are more conscious about their fashion footprint and affordability. In comparison, older generations who are usually less fashion conscious and more wary about hygiene are less likely to partake in this trend,” she says.
Garg shares that whilst rented fashion is currently a niche market, it is positioned to become more mainstream as the next generation enters the workforce. “Consumers’ shopping habits are changing, and they are valuing sustainability and affordability even more. It is not likely for the rental model to become obsolete anytime soon.”
On comparison between a rental service and seasonal sales like Black Friday, Garg says that the fashion industry is likely to see a clear segmentation across both types of target audiences. “Consumers who have a higher need of change or stimulation will go for fashion rental services. On the other hand, consumers who are cash savvy but do not care about their fashion footprint as much, will shop around sales more.”
Garg advises that businesses need to build their market strategy around what their customer base is after to ensure they are meeting their consumers’ needs.
“Currently, rented fashion and fast fashion are both appealing to the price-sensitive customer. If traditional retail does not adapt, rented fashion could gradually drive out fast fashion if they keep vying for the same customer base. However, this does not mean that it will be the demise of fast fashion,” Garg says. This can give fast fashion retailers the opportunity to adapt to keep up with customers’ needs. Examples are how H&M trialled its own rental exclusive line in 2019 and furniture giant Ikea is testing a range of subscription-based leasing offers to tap into the environmentally conscious consumer market.
Garg further explains that millennials are consciously not entering the buyers’ market in other sectors of consumption as well due to practicality and uncertainty about their future. “People prefer to rent on a needs-basis such as car sharing service Goget. They want to own less and only use things as needed. Buying a car, for example, comes with hidden costs such as car registration and maintenance. Renting a car for the day on the other hand is more cost effective for the individual who is looking to save money.”
Due to the uncertainty stemming from COVID-19 and climate change, millennials are leaning more towards saving their resources rather than investing in the ownership economy. “Millennials are looking to balance being fashion forward with their limited incomes. They are in the early phases of their careers. With changes happening in their environment, there is the additional motivation where they feel they have to be more resource-conscious as well.”
Garg says that there is an opportunity for marketers to address this gap in the market. “Marketers will see more of the rental markets in the next decade or so. Future generations are gravitating more towards the rental market and less towards ownership. The rental movement and the sharing economy in general – from dresses to cars and furniture – is testament to the changing lifestyle of the working population around the world.”