YOWO- You Only Wear Once

It is not a new phenomenon that people, and women in particular, do not have anything to wear despite a closet full of clothes. A study of 18,000 households in 20 countries discovered that approximately 50% of people’s wardrobe are not in use. [1] Between 2000 and 2014, the production of clothes doubled with the average consumer buying 60% more compared to 15 years ago. However, each item is kept for half as long. [2]

Increased shift to eCommerce shopping.

With the spread of covid-19 and social distancing measures, many traditional retail- and department stores were closed for several weeks. Apparel retailers have fast-tracked the shift to eCommerce through technology and software development in order to enhance digital capabilities and speed to market. Brands like Nike and Lululemon are channeling sales directly to the end consumers taking control of inventory and reducing costs.

Ecommerce is a USD3 trillion market globally, excluding China and bill payments, and has reached a fundamental inflection point likely to grow in the mid-to-high-teens range post covid-19. The pre-covid-19 levels are in the low-to-mid-single digit range. In recent weeks US eCommerce spend on apparel was up +102% and was growing more than 50% YoY since mid-April, even after stores had begun to reopen. In the UK during lockdown online shopping increased from 27% to 88%. In 2019, US e-commerce represented ~26% of apparel, up from 6% in the last decade and is estimated to increase by 20% in 2020. European online penetration increased from 6% to 18% over the same period and is expected to reach 23% penetration in 2020. [3] The broader offline retail sector is projected to shrink 15% from 2019 to 2021. [4]

Wardrobe rentals gained momentum prior to covid-19.

There are a variety of subscription-based clothing services on the market dubbed on the Airbnb fashion of a sharing economy. These services offer to rent you items for a monthly fee or at a cost typically equal to 10-20% of the item’s retail value. If you love the item, some platforms allow you to buy it at a discount or extend your rental. You get a prepaid label with every order and can switch items within the rental period. Other services allow you to rent just for a special occasion such as a wedding or tuxedo event, and some even offer to send a free backup size to ensure customer satisfaction. The subscription service providers will handle your specific requests through technology driven software, notify you when other items you listed are ready, package the goods, ship the clothes to your door within i.e. 2 days, dry clean the items and provide styling services tailored your needs and preferences. The shipping service, dry cleaning and insurance of damage goods are all included in the price.

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The rental business is growing through three different eCommerce platforms.

The first alternative, B2C (“Business to Consumer”) offer rentals directly from a brand’s own website or from a wide distributor platform where perhaps the best known is the US based Rent the Runway (“RTR”, private). RTR launched in 2009, has more than 9m members and was valued at USD1bn in 2019. RTR takes on the role as a new wholesale partner by purchasing the inventory and is providing rentals in all shapes and sizes, thereby removing the inventory risk from the brands. They are also becoming the customer interface effectively owning the customer relationship. RTR looks as themselves as a data and logistic company and has invested heavily to ensure quick inventory turnaround and the handling of complex inventories. It is currently US’s biggest dry cleaner operating 160,000 square foot fulfilment center that dry cleans 2,000 dresses every hour. [9]

The second alternative rather than a direct to consumer model, is B2B (“Business to Business”). In example, US based CaaStle plays the “Clothing as a Service” angle, an alternative provided to brands where retailers continue to own the customer, inventory, website and customer data. CaaStle provides the technology and manage services to help retailers participate in the new economy. This platform is compatible to a single brand rental platform with far less inventory than B2C. In comparison RTR offers more than 7k dresses for one-time rental, while a single brand may offer 200. The price point for the latter option may not have enough reach to command the price point of services such as RTR.

The final subscription service C2C (“Customer to Customer”) is the opportunity to rent directly through a peer-to-peer platform such as the Norwegian based company Fjong. This option permits you to lend out your own items for others to rent for a specified period. The service platform is responsible for the handling, logistics and cleaning, and will typically take a share of the profits.

You may argue that the rental platforms run high carbon footprint with frequent last mile delivery, extensive packaging, frequent dry cleaning and for some of them, continuous purchase of new inventory. The services have an advantage in dense cities where logistics are cheap and available, and in a market of maintaining a unique position offering the latest fashion items is justifiable.

Secondhand resale is growing fast.

The resale market grew 25x faster than the overall retail market last year (+49% versus +2%) with 62 million women buying secondhand products in 2019 up from 56m in 2018. The resale market is expected to grow 5x over the next five years due to value and sustainable conscious consumers and is a multi-billion a year industry that continues to be one of the fastest growing segments of retail. First Research estimates the resale industry in the U.S. to have annual revenues of approximately USD17.5 billion. ThredUp, an online resale marketplace, estimate the total resale market in 2020 at USD32 billion, predicting it will reach USD64 billion by 2024 while fast fashion will only reach USD44bn. [4], [8] Secondhand goods are expected to make up 17% of a person’s share of closet space by 2029, up from just 3% in 2009. That would put it behind only merchandise bought from off-price outlets such as TJ Maxx, at 19%. [4]

The biggest market within resale exists in used luxury goods. The secondhand luxury goods market keeps the consumer in the cycle, validate the price paid for luxury goods and support sustainability sectors growth, which largely benefit the industry. The US Online start up The RealReal (Real) sells used luxury apparel and accessories and is considered the largest marketplace for authenticated luxury. [10] The company reported revenues of USD318 million in 2019 and consensus revenue estimates for 2021 and 2022 is USD432 and USD545 million respectively. Real’s current share price is almost back to pre covid-19, however still above historical average. The recent share price improvement reflects the faster ramp up in supply and demand following covid-19 lockdowns. During Q1 2020 the company experienced supply-constraints rather than demand constraints, and the company has communicated that it doesn’t see any signs of different dynamics with this year’s customer base vs the past. Real is positioned for circular tailwinds with the online shift in the luxury market and is continuously investing in technology and marketing.

This is marketing material. Past performance is not a guarantee of future returns. Returns may be negative due to falling market values.

YOWO- You Only Wear Once

Increased shift to eCommerce shopping.

Wardrobe rentals gained momentum prior to covid-19.

The rental business is growing through three different eCommerce platforms.

Wardrobe rentals may be a solution to the excessive buying of new apparels.

Secondhand resale is growing fast.

Rentals and secondhand buying combat with well-known environmental complications that the fashion industry is facing with heavy resource demands, labor issues and excessive waste.

Will the consumer be smarter about what they only want to wear once?

Rentals and secondhand have changed the way we think about clothing ownership and is something we will hear more about in the future.

Thrift Offsets Wastefulness of Single-Use Fashion

This is marketing material. Past performance is not a guarantee of future returns. Returns may be negative due to falling market values. Read more

Increased shift to eCommerce shopping.

Wardrobe rentals gained momentum prior to covid-19.

The rental business is growing through three different eCommerce platforms.

Wardrobe rentals may be a solution to the excessive buying of new apparels.

Secondhand resale is growing fast.

Rentals and secondhand buying combat with well-known environmental complications that the fashion industry is facing with heavy resource demands, labor issues and excessive waste.

Can a sharing economy platform work for fashion?

Will the consumer be smarter about what they only want to wear once?

Rentals and secondhand have changed the way we think about clothing ownership and is something we will hear more about in the future.

Thrift Offsets Wastefulness of Single-Use Fashion

This is marketing material. Past performance is not a guarantee of future returns. Returns may be negative due to falling market values.