Primary Challenges in the Fashion Rental Industry and Potential Solutions

The fashion rental industry is getting popular, with a global market size of around 1.22 billion and estimated to reach 1.82 billion by 2028. However, it does not mean every business in this industry is successful due to several barriers.

Before discussing the challenges, let's examine three confirmed reasons why people choose fashion rentals over fashion sales.

What are the Barriers in the Fashion Rental Industry?

Although there is a demand for fashion rentals, businesses must address persistent barriers to build a successful business in this field. 

We analyzed scientific studies conducted in this field to discover those challenges systematically. The most recent study is titled: "Drivers and barriers to fashion rental for everyday garments: an empirical analysis of a former fashion-rental company" by Bodenheimer, Schuler, and Wilkening (2022). 

The findings of scientific studies regarding customer behaviors.

The study found that sustainability-related motives are the highly rated reason among current and potential customers.

Interestingly, sustainability desires were a stronger motivator than saving money in the fashion rental industry.

The same study asked a group of female consumers which clothing type they would rent.

The Lessons from the Failed Fashion Rental Company

A study studied why Germany's fashion rental business, Relenda (which offered children's and women's clothes), went out of business. 

According to the management, the primary reason for the failure were the following:

• Consumers thought that renting clothes did not provide advantages to justify additional costs and change of habit or routine.
• Consumers felt the company did not provide enough choices or varieties to spark motivation.
• Customers who are renting clothes for sustainability reasons wanted to see more sustainable shipments and faster deliveries

The management revealed that they struggled with three main issues:

1. Customer Acquisition and Retention. Relenda's customer acquisition costs were too high. More specifically, the acquisition costs ranged somewhere between 60-120 Euros per customer, and on top of that, customer retention was super difficult; only 20-30% of the new customers stayed with the company longer than 2 to 3 months. 
2. Inventory Management. The company needed to overstock its inventory by about 20% at all times to provide enough variety for customers. Additionally, inventories need to be replenished on a seasonal basis, plus the company has to make sure that inventories are not outdated or inconsistent with modern trends. Another inventory-related issue was prospecting clothes rent well. Only about 15 to 20% of Relenda's inventory was in high demand; another 15-30% were "flop," meaning they were in very low demand. The remaining 40-70% were "gray mass," which was less interesting inventory that was used only to fill orders but was not attractive enough to motivate the customers. The worst part is that the low-demand inventories not only take storage space but also need to be maintained (e.g., cleaned, washed) to make them presentable for potential customers. 
3. Making the business model profitable while still offering attractive pricing. Relenda mostly focused on everyday fashion. They rented their items out for 1/6 of the item's sales price, and their estimated shipping and handling fee was about 5 euros for each item. So, clothing that sells for $30 in the market was priced at only $5, which was not enough to cover the shipping and handling fees. However, luxury or special occasion dresses that cost $300 could generate a stable income of $50 per rental (which is a better business model, in our opinion).

Solutions

It is important to note that there is no single fail-proof strategy. But, the barriers mentioned above can help you make smarter decisions while developing a business plan for your fashion rental business. 

Somebody's mistakes are the greatest lesson for others. With that mindset, here in Reservety, we compiled strategies and implemented them into our Fashion Rental Software to optimize your rental business.

1. Make your fashion rental business consistent with sustainability goals.

The studies suggested that the primary motivator in the fashion rental business is to increase the usage of the same item to minimize the deployment of the planet's resources and avoid manufacturing emissions. Saving money is not as important as saving the planet for those interested in fashion rentals. 

Some cool tips:

• Using greener logistics.
• Renting out clothes that use ecologically friendly materials and labor.
• Creating an online rental store with environment-friendly software (Reservety) instead of trying to manage a huge physical store that consumes electricity and other utilities.

2. Fill up your inventory with special occasion clothes.

The more valuable the items are, the more renters they will attract. Surveys revealed that 94% of the responders were interested in renting special occasion dresses compared to 32% in casual everyday wear.

It is logical and scientifically confirmed that more pricey or luxurious clothes attract greater demand. Even with a low budget, people want to look special in an event or occasion. Also, people may wear that dress only once because they avoid wearing the same dress for all events. 

Tips: 

• Stock up luxury or designer clothes suitable for each occasion (e.g., wedding dresses, garments for corporate events, etc.)
• Limit casual dresses because people can afford to buy them, and they may not produce stable profit, given the maintenance expenses. 
• Present fashion dresses beautifully. So, use fashion rental software like Reservety to display them on clean websites with various galleries, with a zoom feature to show every detail of the dress. 

3. Offer Specialty Clothes such as Maternity wear and business clothes. 

Studies suggest that specialty clothes such as maternity and business wear are preferred in the rental industry over everyday wear. 

Let’s put ourselves in the shoes of a customer. 

Example 1: Assume we are applying for a job and want to look professional in the interview. Without spending so much, we would want to rent clothing for a day. People usually prefer to save money on things they use only once.

Example 2: The study also confirmed that maternity wear is in higher demand because bump sizes constantly change during pregnancy. And women may not wear those clothes after pregnancy. 

4. Focus on one field and offer as many varieties as possible.

As mentioned above, the lack of variety in the inventory is one of the primary reasons that most businesses fail in this industry. Instead of trying to cover more fields, select the category you are comfortable with and add clothes only relevant to your target population. 

For example, if you select wedding dresses, get the inventories only relevant to this category and make all sizes, colors, and styles of wedding dresses available.

Tips: Use Reservety and add all your rental items into inventory with variations such as sizes and colors, and set different pricing for each variation. That way, people can choose and book the correct sizes and preferred styles and colors without contacting you.

5. Employ both subscription-based and one-time rental methods.

Some customers prefer both of these options. Having only one method may limit your customer acquisition and retention. 

One-time rental refers to renting clothing only when needed. On the other hand, the subscription-based model requires a long-term commitment from renters. However, the benefit of the subscription model is that it allows members to use x number of clothes per month at an affordable cost instead of paying per item. 

Implementing both strategies is possible but may be more complex with manual management as you must keep track of the subscriptions and the rentals by hand. However, you can easily bypass those challenges with Reservety’s Fashion Rental Software because it:

• Let’s implement and manage both strategies separately in a single dashboard.
  • Makes it easier for your clients to select subscription plans and gives you tools to manage customer accounts
  • Allows you to create subscription plans, set different pricing for each, and assign different privileges for their members. 
  • Automatically collects full and partial payments from customers in advance or with installment plans (based on your preference). 

6. Establish in-house services to clean and repair clothes. 

The experience of current fashion rental companies indicates that maintenance will be costly and chip away the profit margin, especially when the maintenance services are outsourced to third parties. It would be ideal to do those services in-house to cut costs.

Here are the main reasons why it is better to offer in-house cleaning and repair services:

• You control the cleanliness of the dresses and do your job thoroughly to ensure customers receive clothes that meet the highest hygiene standards. 
• You can minimize your costs as you would do the job yourself and avoid the need to transport goods back and forth to third-party locations. 
• You can use greener cleaning products to stay consistent with your sustainability-focused business model. 
• You can be delicate with the luxury clothes so as not to damage them during the cleaning process, which will add more life to rental stocks. 

Tips: When you use Reservety, you can also track the maintenance records of your inventory, schedule maintenance and repair services, assign those tasks to specific staff, keep track of the costs incurred during the maintenance, and more. 

7. Make the Rental Process Simple

It is a crucial step as the idea of fashion rental is new. An average person may think that rental clothes are for a particular category of people. Sometimes, people feel like the idea is too complex, may require too much time to learn, or it would not be easy to choose the correct sizes over the internet. 

The best solution to sort those barriers and improve customer confidence is to offer a convenient booking process. Unfortunately, the traditional fashion rental model is too complex, involving a lengthy booking process and stacks of paperwork and requiring too much effort from both the customer and the owner. 

Therefore, all-in-one rental software is a must to streamline rental operations.

Here is how Reservety makes the cloth rentals simple:

• A customer chooses a type of dress by viewing photo and video galleries with the option to zoom
• Picks a size and color
• Optionally adds add-ons that go well with the selection (e.g., purses, scarf, glasses, etc.)
• Selects rental duration from a convenient calendar
• Pays with a credit card or e-wallet (cash or check for in-store orders)
• Enters billing information shipping address, and chooses delivery option (or free pickup option)
• Signs rental agreements and waivers digitally
• Completes the checkout process and receives instant order confirmation to their inbox.
• Customer logs in to their account, sees their order status, and track the deliveries.

It is just one version of the booking processes. You can enhance it by customizing the booking steps with Reservety.  

8. Offer perfect-fit guarantee

Studies revealed that most consumers have second thoughts about fashion rentals because they worry about choosing the wrong sizes. Fashion rental businesses that have physical locations can offer try-ons before the rentals. However, companies that operate solely online will need a different strategy. The one that would give customers peace of mind is a warranty that their selection will fit them perfectly.

Additionally, you can add all the garment dimensions (e.g., shoulder length, sleeve measurements, cleavage size, etc.) into the description so the customers can make sure the rental items will fit their body sizes.

Please note: Google developed an AI-based virtual try-on feature that displays how each piece of clothing looks on specific body sizes. There will be more AI-based virtual try-on features in the future. Reservety may implement those features into its system to enable fashion rental businesses to give the best shopping experience to their customers. 

9. Make the deliveries more efficient.

Fast deliveries are a must in the fashion rental business as people may want the clothes for special occasions. Suppose the package does not get to the destination on time. In that case, it will create disputes between business and customers and dent the company's reputation through negative reviews. 

The best solution is to offer more than one delivery option. You may add a local pickup option in addition to the postal shipping options. And even introduce your self-delivery options for faster results. 

Again, Reservety can play a pivotal role in setting up shipping options for fashion rental businesses:

Reservety can integrate postal shipping services with automated fees and add mileage-based delivery options for in-house shipping. Plus, you can conveniently manage shipping & handling at the backend using packing slips, assigning delivery drivers, and updating the statuses of orders with real-time tracking features.

10. Consider all the barriers to develop a resilient strategy.

We have listed all the barriers so you can develop an effective strategy, considering the existing challenges of the industry. It is common sense that a good solution is achievable only when we identify the issues. In this case, your strategies must:

• Show that rental clothes meet the hygiene and health standards
  • Promote the awareness that your business is compliant with sustainability goals
  • Ensure customers that they will receive rental items on time and the selected items come with a Perfect Fit warranty.
  • Simplify the fashion rentals so that customers can't go through lengthy processes (use Reservety for this purpose)
  • Introduce a rent-to-own model to motivate renters to rent consistently.

Those are just a few tips that your strategies should consider. The rest will depend on your creative thinking.

Conclusion

In this article, we discussed several barriers that fashion renters face in the industry and suggested potential solutions.

The primary barriers are:

• Hygiene and Health worries
• Lack of understanding of how cloth rentals work
• Less demand for casual clothes and need for a higher budget to procure luxury or designer clothing
• Logistical concerns (e.g., late shipments, transportation emissions, etc.)
• Trust issues (e.g., Are the clothes free from damages or flaws?
• Difficulty in making people change their daily routines (e.g., people feel like the fashion rentals would involve complex processes)
• Lack of ownership 
• Reliance on third parties for cleaning, repairing, and delivering clothes
• Costly damages to high-end garments (e.g., minor damage can ruin the costly clothes or it will incur higher repair costs)
• Users are unable to calculate the actual savings by rentals. (People can't calculate how much would they save by renting)
• Need for constant replenishment of inventories to stay aligned with fashion trends.

We found that the primary drivers of fashion rentals are:

• Sustainability to minimize the deployment of natural resources and manufacturing-related pollution
• Ability to experiment with new styles and clothes at low cost
• Save money

Potential Solutions are:

• Creating a Fashion Rental Website with a simple booking process. 
• Uploading galleries and videos of dresses with an option to zoom in down to stitches to show the details of each item.
• Offering perfect-fit warranty and writing all the dimensions of the clothes in the description
• Establishing in-house cleaning and delivery services to remove the reliance on third parties
• Implement one-time and subscription-based models
• Focus on high-end, specialty clothing (e.g., business clothing, maternity wear) instead of casual wear
• Promote your company as a sustainability-focused business.
• Consistently replenish your inventory with trendy clothes.
• Instead of trying to cover all the categories, focus only on one area (e.g., wedding dresses) and offer more variety.

Please note: We have developed Reservety's Fashion Rental Software to overcome the mentioned barriers easily. The software is fully customizable, so it will suit your business model, even if you adopt a non-traditional one. Our team will help you to turn your concepts into reality by building an online fashion rental store with convenient backend management.