Fashion Rental Startups Want To Save the Planet. There’s a Catch.

What the startups must do to reduce the garment industry's footprint

Sep 17, 2019
Management

SMITH BRAIN TRUST  The growing crop of clothing rental companies wants you to imagine yourself never buying clothes again. You’d be living with a largely empty closet and a fashion subscription service that would keep you looking up-to-date and smartly attired.

It’s an uncomfortable concept, but also an appealing one. And it’s hitting consumers at an interesting time – when there’s both a growing awareness about the environmental damage created by the garment industry and a popular movement to minimize or “Marie Kondo” one’s possessions.

Definitely: Fashion rental services offer an opportunity for you to part with all the black work trousers and gray merino sweaters you’re lukewarm about, while still allowing you to succumb to the ever-present pressure you feel to be wearing something new.

But: Can they actually reduce your environmental footprint and the footprint of the overall garment industry?

“That’s the question,” says Maryland Smith’s Wedad J. Elmaghraby. “And it’s a big question.”

The garment industry, she quickly notes, is the world’s second-biggest polluter, behind only oil and gas. Manufacturing the clothing consumes resources, global transportation comes at a cost, far too much is made, and of that, a lot ends up incinerated or discarded in landfills. That’s the ugly reality.

“There is science that shows how you can design clothing in a more sustainable way, depending on what kinds of fabrics you can use and how you create the fabrics,” Elmaghraby says. “And there are a number of high-end fashion houses piloting sustainable product lines. But that is a small share of the overall demand - and the real environmental impact happens at the mid-to-lower end. Think H&M and Zara.”

“So it’s worth examining the big questions. What are the efforts in the space that are helping to reduce the negative environmental effects of the garment industry?” she asks.

Elmaghraby, a professor of Management Science at the University of Maryland’s Robert H. Smith School of Business, has spent much of the past decade studying secondary retail markets – those places where clothing and other goods find (or don’t find) their second lives. Lately, she’s been examining the fashion rental market.

If the mantra is: Reduce, reuse and recycle, then the fashion rental services fall into the “reuse” category. And that’s laudable, from an environmental standpoint. But is it making a difference? If a single formal gown is worn by 10 different women to 10 different events, surely that’s better, environmentally, than creating 10 separate gowns to be worn once by each woman (and then stored indefinitely in 10 separate closets only eventually to be thrown into landfill).

But, scaled up to everyday clothing, is it better that 10 women or men order five work-appropriate outfits to wear each week along with casual outfits, then ship it all back to the company to be cleaned and re-rented, and repeat the process week after week? Or is it better that those 10 women or men buy clothing that’s made in a sustainable way and wear those outfits for as long as possible?

Today, little is known about what happens to clothes that land in a rental fashion service. How often are they worn before they’re retired? How often are they shipped? And where do they go next for their second lives? Because none of the services are publicly traded (there’s speculation that New York-based Rent The Runway might be the first to IPO), the companies are closely guarding their data.

Elmaghraby has been discussing potential collaboration research with a company in the fashion rental space. In addition to offering a rental service, the company builds software used by other similar services for style recommendations, orders and tracking.

“The birth of this industry opens a lot of really interesting operations questions,” she says. “But the one that piques my interest is, well, how sustainable is the model?”

“The only way that this model will have a positive impact on the environment is if it can go to scale, meaning that a lot of people are using the rental market as the main mechanism for clothing themselves.”

Only then, she says, will the environmental advantages (clothes in rental rotation are worn far more often than ones that compete for attention in one’s own closet) outpace the disadvantages (the transportation footprint and the footprint of the clothes that don’t get rented). Getting there could take years.

The answer, she says, may not be known for some time.

Today, the fashion rental scene is growing, and all the companies want to gain favor among consumers. They’re all looking to be the most accommodating, the simplest to use.

“These companies are really trying to gain market share, so they are telling customers, ‘Take it! Wear it once, and ship it back to us. You don’t have to ship everything in your basket, you can ship it one item at a time. Do whatever you want,’” says Elmaghraby.

It’s a conundrum. Shipping items one at a time adds up to a lot more shipping – and a bigger environmental impact.

“They want to be able to say they are good for the environment, but they know in all honesty, they cannot say that until it becomes a habit for people to rent clothing on a large scale.”

Last year, Rent The Runway partnered with WeWork to create more than a dozen parcel dropoff and pickup spots. It has a similar partnership with Nordstrom.

That could be part of the answer, she says.

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About the Expert(s)

Wedad Elmaghraby

Wedad J. Elmaghraby is a Professor of Operations Management and Management Science at the Robert H. Smith School of Business, University of Maryland, College Park. Her research interests are at the interface of operations management, economics and behavioral decision making. Her current research includes (1)  online auctions in business-to-business secondary markets, (2) online platforms to promote sustainable business paradigms, (3) the role of returns in learning demand and (4) behavioral factors in business-to-business contract design.

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