Retail rental set to explode
Consumer behaviour is shifting from ownership to usership. In the fashion space for example, we are seeing more consumers renting their wardrobes.
Harrods has recently partnered with My Wardrobe HQ where people can rent a $10,000 dress for as little as $134 a day rather than buy it outright for a special occasion. Similarly, Selfridges has recently partnered with HURR, allowing customers to rent clothing and accessories from its website.
It is not just the fashion sector that’s tapping into the sharing economy. UK retailer, John Lewis wants to be the Airbnb of furniture rentals, working with Fat Llama offering 500 lines of rental furniture.
As the concept of usership over ownership grows we should expect to see more retailers jumping into the retail renting market.
The resale market will boom
Customers will buy used rather than new via the ‘resale’ market. For example, there is an estimated $16bn of old electronic devices lying in peoples’ drawers, which equates to around 11 devices per household. This offers retailers a huge opportunity to enter the ‘money for old’ market, because there is revenue to be made from manufacturing a product once and selling it twice – just like Apple does.
Apple began offering discounts with trade-ins in 2013. Apple then refurbishes these trade-in-devices and resells them into emerging markets such as India, Latin American and Africa. In effect growing Apple’s market by capturing millions of users in these developing countries that ordinarily could not afford the latest technology.
Apple is also seen to be reducing its carbon footprint by making good use of old product -manufacturing a device once, and then selling it twice.
Retailers such as H&M, IKEA and now Levi’s are also getting into the resale game. Levi’s has recently launched a resale website where customers can return old jeans which Levi’s then refurbish, repair and resell at a lower price. Money for old jeans.
The idea of hand-me-downs being second best is over. Increasingly, circular retail products will be seen as better than new.
Clean retail will grow
The third big change is that clean retail will grow market share. In 2020, the circular economy retail market grew 25% faster than the wider retail market and is set to double in the next five years.
Smart retailers are seeing an opportunity and are developing ethical and highly lucrative new concepts. For example, Allbirds uses carbon labelling on each of its products. Each item of clothing displays a carbon emissions score so customers know the climate impact of their purchase.
The Allbirds range includes items including flip-flops made from sugarcane, shoes made from eucalyptus trees and uses recycled bottles to make shoelaces. Allbirds is no small operation: the relatively new start-up has a global footprint and a market cap of US$1.75 billion.
Green products can be cheaper to manufacture. Take Mud Jeans for example, producing one pair of MUD jeans uses 477 litres of water, compared to an industry standard of 7,000 litres of water. This is made possible by water recycling plants and innovative washing techniques. There are huge fortunes to be made for retailers who play clean.
Dirty retail will be punished
The fourth big change coming to retail is that ‘dirty retailers’ will no longer get away with it, because they will attract consumer activism and lose market share. Given the fashion sector contributes 10% to global carbon emissions, how long will it be before the likes of Extinction Rebellion turn their attention to dirty retail?
The reality is that as climate tensions increase so too will the boycotting of dirty brands. Brand boycotts have now spread virally. It is very easy for consumers to voice their disapproval of badly behaved brands. There is even an app for it.
Sustainability and environmental concerns are an expectation now from the consumer. So, woe betide any retailer that doesn’t listen to those concerns and act accordingly.
The retail rental market will explode. Increasingly customers will buy reused. Clean retail will grow. And dirty retail will get punished.
Successful retailers have always thrived by responding to and anticipating consumers’ needs. The big winners will be those retailers who listen to their customers’ clarion call and do the right thing by their customers and the planet.
Nick Taylor, senior managing director of international retail, Gordon Brothers