In October 2022, John Lewis announced the launch of a rental service for its womenswear, joining big names including Ralph Lauren.
Having created a specific collection available for rental, John Lewis Chief Commercial Officer Kathleen Mitchell believes the rental platform encourages its customers “to support a more sustainable way of shopping”. So do rental platforms offer the solution to sustainable fashion? Can lawyers expect an increase in their workload for fashion clients, including the review of hire-purchase agreements and even the restructuring of brands’ business models according to their degree of outsourcing of their service?
High demand for rental fashion
COVID-19 has given consumers plenty of time to think about their fashion choices and do a wardrobe cleanup that may even have revealed long-lost items that still had their tags on. Add to that an environmental crisis and rising cost of living and it’s no wonder Lyst saw a 66% increase in searches for sustainable fashion in 2019 compared to the previous year, which has no wonder. Doubt further increased since COVID.
The ability to temporarily rent clothes and accessories instead of having to buy them permanently seems to offer the perfect solution to sustainable fashion. It reduces waste while satisfying consumer demand for fashionable outfits. Consumers can enjoy items at a fraction of their original sale price (for example, Hurr Collective rental prices range from 10-20% of their original sale price). On the face of it, this saves consumers money on an item that likely serves the same purpose, or at least a similar purpose, as if they were buying the item new. Additionally, multiple consumers can benefit from each item when it is returned so that it can be rented again instead of being lost in the depths of a closet or sent to landfill, thereby also reducing the environmental burden. However, there are hidden costs and environmental impact to consider. Dry cleaning must be done, clothes must be transported to collection and drop-off points. Then there are the legal fees incurred if a rental platform or merchant wishes to minimize risk in the relationship.
What is the role of lawyers in all of this? The rental relationship should be documented in clear terms and conditions so that everyone understands their responsibilities and the consequences of failing to meet them. Lawyers may be called upon to draft and advise on the conditions of supply to merchants when it comes to a platform facilitating rental and the rental conditions applicable to consumers. While a standard rental agreement may suffice, more bespoke agreements may be required for specific high-end items or apparel used for a particular purpose. Dispute resolution legal services may be required if the terms of a hire purchase agreement are violated or if items are damaged or lost.
Leasing involves more touchpoints between a brand’s customer service team and consumers than simply selling goods. Consumers may inquire about the waiting list for a wanted item or wish to exchange an item they are currently renting. This ongoing relationship obviously provides more opportunities for engagement and sales, but poor service from a retailer can also be disastrous for a brand. Investment in customer service teams is likely to be essential and employment law advice necessary.
Additionally, premium or branded products must be authentic to maintain customer trust. If particularly high-end big ticket items are offered, it may be worthwhile for the rental company/platform to offer an authentication service to assure customers that they are renting the actual item they are paying for.
Currently, there are three recognizable business models of fashion rental services. The first includes platforms, such as Rent the Runway, that keep most of the rental process in-house, including dry cleaning clothes ready for the next consumer and their delivery. The second model, used by companies like Banana Republic, contracts cleaning and delivery services to third parties, such as CaaStle. The third category works similarly to the peer-to-peer e-commerce company, Depop, in that the platforms operate like marketplaces and therefore only earn a commission from sales made on the platform. -form. Product listing, marketing, communication, cleaning and postage are left to users while platforms, such as By Rotation, only step in to resolve serious issues. Corporate and restructuring lawyers may therefore be called upon to assist and advise on the proposed business models of rental platforms, with the commercial team then being involved to advise on subsequent outsourcing deals.
Is this the future of fashion and therefore the law in fashion?
Reducing waste and lowering costs sounds idealistic, but unfortunately, it doesn’t quite represent the reality of the fashion rental space. While retailers generally aim for as few returns as possible from their customers, a rental service results in a 100% return rate, which means that for each transaction, two transport services are required: one for delivery, one for the return. Not only does this pollute, but it could soon become unachievable for many companies as they try to cut costs amid soaring raw material costs. Retailers offering a rental service may therefore be ephemeral.
For rental platforms that adopt one of the first two business models described above, they will need significant storage facilities to store their inventory of rental items, which again comes at a cost. To justify both the cost of storage facilities and the capital cost of each inventory item, most items would need to be leased multiple times. Peer-to-peer platforms avoid these costs but cannot adopt a strong brand identity in the same way that other business models can control what their platform hosts among platform users by opposition to the retailers/platform themselves.
The jury is out on whether rental fashion is the next holy grail. While this undoubtedly reduces waste and puts the brakes on the fast fashion industry, unfortunately it does not alleviate the fashion industry’s burden on the environment as much as hoped due to the process of delivery and return.