Article | April 13, 2020

Clothes Sold New And Used While Rented And Repaired Online – Doing More With Less

By Benjamin Wall

Buying Preferences Of In-Store Vs. Online Consumers In Clothing And Shoe Retail

Clothes are being handled like cars – and why not? Digital fashion companies can learn from the auto industry in building deeper relations with customers by treating them newly as business partners who supply apparel. Together with re-fashioning the value chain, there are opportunities for online clothes retailers to raise their market profile and market share. And also help the environment to boot.

Clothes are becoming like cars for consumers. You can sell them, e.g. in the twelve months to June 2019, a total of 20 million pre-owned fashion items were sold on eBay for a value of over $200 million, having grown 15 percent in the past five years. Meanwhile, the apps for used clothing sales such as Depop and Vinted are booming. You can trade them in: Patagonia accepts pre-worn clothing in exchange for credit on online purchases. You can rent them: in 2019 Urban Outfitters Inc. and Bloomingdale’s began renting clothes online, joining Ann Taylor, Rent the Runway, Express Inc. and New York & Co. Inc. And you can repair them: Along with millions of appropriately skilled and dutiful private persons and thousands of small sewing companies spread throughout America, Patagonia for one offers clothing repair on its website via a facility in Nevada with 45 employees.

Comparing apparel to automobiles raises the point that, like cars, clothes may be regarded as a so-called “investment good”, creating value for the owner over time and in some cases generating cash through re-selling. People always have wanted to use and enjoy some of their clothes for a long time, which is why there always have been repairs. Selling them for cash has started to boom in this century. And rentals as a way to bring different clothes into the wardrobe at a reduced cost are quite recent. Currently, consumers rent clothes for a special occasion, but, who knows, just like we rent a car when we fly to a city, maybe someday we will rent clothes while traveling rather than drag them along in the suitcase. With these options available, consumers can start to think of their wardrobe as an “investment portfolio”: some items can be held for the value of wearing them over many years; other items are no longer valuable to the owner and can be sold, and the third category of attire can come into the “inventory” for just a few days. In this kind of sharing economy, fewer clothes in total will be produced and disposed of, thereby preserving natural resources and reducing waste.

Indeed, one-third of homes are rented and many people do not own a car; for many consumers, their wardrobe may be their most valuable type of “wealth”. And even for those owning a home and a car, their clothing represents a considerable volume of accumulated worth, both in terms of the emotional and increasingly the re-sale value.

For online fashion retailers, addressing this huge accumulated value with more services than simply the sale of new clothes makes very good business sense. Again a comparison to cars reveals some of the potential in second-hand sales, repairs, and rentals, which could be available down the road. First, more than twice as many used cars are sold annually than new cars: in the USA in 2019 it was 40.2 million used vehicles compared to 17.2 million new. Volumes of second-hand car sales are also more stable than for new cars. Second, outlays for auto repairs equaled $188 billion in 2018 and have steadily grown over the years, compared to the cycles in sales of cars. Finally, car rentals in the USA account for roughly $22 billion annually.

Expenditures for products and services in the apparel industry will never reach the magnitudes in the auto industry. Nevertheless, for digital companies in fashion, diversifying the sources of revenue can never be a bad thing and, as will be shown below, can open up very promising chances to improve customer relations and thus loyalty. The successes of eBay and Patagonia are not to be ignored, and in Europe, both the trendy online fashion retailer Zalando in Germany and the staid department store John Lewis in London are starting to sell preworn clothing.

Online fashion retailers can gain six key competitive advantages from repairing and renting attire as well as selling preworn clothes. First, the greater volume of items to be rented or sold - new or used - raises the breadth and depth of the entire product range on the retailer’s shop, making it the go-to site for shoppers to see the full spread of what is available on the market. Second, more price-sensitive shoppers will be drawn to the site for the first time. Third, consumers who sell their used items to, or have them repaired by, an e-commerce retailer, will be more loyal to the online shop. Fourth, fashion consumers who are running down their wardrobe also will feel the need to build it up at some point, and what better place to shop than where they sell their clothes? Fifth, consumers who supply preworn clothes to a digital retailer can be treated like a valued business partner, representing a chance for the retailer to build a new and different kind of relation to them. This deepens the overall tie and by its singularity can attract customers away from rivals. Sixth, the environmental benefits of less textile waste and production, with consequent reductions in water use, chemical dyes, animal furs and hides, transport, etc. can improve the corporate image of the retailer in sustainability. Taken together, these benefits can substantially improve the standing and market share of a retailer.

Perhaps the most interesting of these new business areas for digital companies is the sale of preworn clothes, where volumes are likely to be the highest. Looking to the near future, retailers can treat customers who supply their clothes as a kind of business partner. After all, the customer becomes a kind of supplier for the retailer. The relations with these “consumer-suppliers” can be managed by retailers in five different ways, again drawing on the auto industry as food for thought.

Car producers share knowledge about production methods and logistics with their suppliers, working together to solve tricky operational issues. Turning to fashion, the consumers selling their clothes need to learn techniques for selecting the best clothes to be re-sold or to find out about the most efficient ways to pack and ship the items. A fashion retailer could inform the consumer-suppliers about such techniques and form workgroups with them to improve the methods.

Some auto companies encourage their suppliers to fine-tune the parts and components to mutual benefit. A fashion retailer can support consumer-suppliers in fine-tuning their re-sold clothes by making it easy for them to increase the attractiveness of their items. For example, retailers could provide sewing kits and instructions for the consumer-suppliers to sew on new buttons; or there could be the option to add in an accessory, e.g. match a handbag to a dress, making the combined offer more appealing.

Some car companies want the so-called “best practice”, i.e. the best way of doing things, from the suppliers, either using the best practice of the suppliers or instructing them in what the best practice is. Fashion retailers can use the “best practice” of the consumer-suppliers by asking them to select and price clothes to re-sell according to their understanding of the market. Or a retailer can use its understanding of the market to send out a call to the consumer-suppliers for specific kinds of used clothes which it believes will sell well.

Car companies help the business development of their suppliers by explaining their long-term plans so the suppliers can plan accordingly and then do the same with their suppliers. Consumer-suppliers can be helped to develop their business by being informed about the retailer’s vision and plans and by being helped in mobilizing a circle of sub-consumer-suppliers that they lead.

Lastly, some auto producers build a sense of community with their suppliers around the fascination with automobiles and the engagement to have a positive impact on the customers, the society and the planet. A fashion retailer can make a community out of the consumer-suppliers by stimulating discussions online about trends in the market and use the “wisdom of the crowd” to reach conclusions about demand. Also, the consumer-suppliers could offer their clothes for rent via the digital fashion company, forming a community in the sense of working as one. A strong community feeling could be also formed around the shared fascination with clothes and the collective dedication to reducing the overall levels of clothes production and waste.

Predictions can be made about changes in the value chain for apparel, should second-hand, traded-in, rented, and repaired clothing become more prominent. Raw materials will be of higher quality with more durability to give longer-lasting value. Designs will take account of easier repairability. As for the taste informing the “look” of the clothes, there could be one tendency toward clothes being more timeless, less trendy and more mainstream, i.e. more aligned to the common denominator for the masses. There could also be a tendency toward more niche clothes than before, where extreme clothes as re-sale or rental items find repeated demand from small groups of consumers with special tastes each seeking a short-term kick. Furthermore, retailers could put together collections entirely out of second-hand clothes.

Operations in the value chain for clothes will involve lower production volumes and new kinds of activities, namely handling the in- and outflows as well as refreshing of both preworn and rented clothes. The structure of the retailer’s website will become more complex: It will need to be made clear whether an item is offered for rent or sale as new or used; or in any combination thereof. Furthermore, there will presumably be new challenges in selling online: website visitors will need to be aided in searching or navigating through a greater product range, and efficient procedures to handle the logistics and website presentation of single preworn items will need to be developed. After-sales will include more repair work and product warranties will become more widespread. The logistics and pricing for trade-ins as well as the market for “spare parts”, e.g. buttons and patches, will be further developed.

The dynamic in online fashion retail has been relentless and by all accounts will continue to be. A comparison to the auto industry reveals some surprising overlaps which could provide guidelines to future innovations in digital commerce, serving as useful orientation for e-commerce apparel companies.

About The Author

Benjamin Wall is active as an author, professor, and management consultant in the Zurich area. His most recent book is Amazon: Managing Extraordinary Success in 5-D Value.