This holiday season, a transformation is underway. The retail industry is evolving into a more environmentally and socially conscious industry. The “make-use-dispose” model is slowly being replaced with a circular model propped up by innovative and sustainable materials, rental services and resale channels. It's a new and exciting circular economy, and holiday shoppers are already on board. In fact, more than a third of millennials said they will shop for rental and reused items this holiday season.
Interestingly, global designer brands are leading the way, ready to seize holiday wallet share by giving consumers want they want. Most recently designer Burberry announced a partnership encouraging customers to buy and sell through the RealReal, a luxury consignment marketplace. Customers who opt in will get insider perks like exclusive access to a personal shopping experience. The partnership hits on the high notes of a circular economy: conservation without deprivation, and a more personal customer experience that is rooted in technology.
What else can consumers anticipate this holiday season?
Luxury leaders: Luxury goods from cashmere to denim to high-end streetwear are leading with sustainable materials. Burberry and The RealReal cited that the circular economy of fashion is key to their business and a driver of their partnership. Luxury designer Stella McCartney is using circular textile Re.Verso™, a regenerated cashmere made from post-factory cashmere waste in Italy. Designer brand FRAME has launched a similar cashmere in advance of the holidays. Cashmere has the highest impact environmentally out of common apparel materials – roughly 100 times the environmental impact of wool. Digitally native Everlane also has launched a new cashmere and sustainable denim made of reused materials and with environmentally conscious processes. Both pieces are front and center of the retail business’ pop-up partnership with Nordstrom. Luxury has also taken on rental subscription services — Rebecca Taylor and Vince launched their subscription services this year, and may be hoping shoppers are giving the gift of a regenerating wardrobe.
Mass popularity: While luxury may have been a first mover, this holiday season, consumers will see the promises of the circular economy popping up online and in big-box stores. Big brands and retailers are seeing the overwhelming demand for products with purpose, and considering mainstream scale and sophisticated supply chains, these retailers have a lot to gain in shifting to a new consumption model. JCPenney and Macy’s have already announced pilot projects with ThredUp, the world’s largest consignment store. Madewell is another ThredUp partner, selling used denim in their stores beginning November 1. American Eagle, Express and Ann Taylor are also in the reuse and rent game, minimizing waste and keeping customers happy with fresh looks.
Green motivation: Rental can be very profitable for retailers. For the luxury market in particular, operating margins for rental, subscription rental and recommerce are 61 percent, 30 percent and 39 percent according to a Fashion For Good report. The entire resale market will continue to grow: The burgeoning resale market is projected to double in size by 2023 while apparel rentals, which offer monthly recurring revenue, are growing by 20 percent annually. For consumers, there is also a financial motivation to rent and reuse. While consumers want sustainable options, younger generations in particular place a lot of pressure on creating Instagram-worthy outfits or sharing their latest travels over social media. Rental and subscription offerings deliver on two needs: a constant influx of new looks without using more materials and creating waste.
Glimpses of the store of the future: With some big names continuing to announce store closings, the store of the future conversation continues. In fact, some are saying more consumers will shop online than in-store this holiday season, unlike years past. To thrive, the store model we know today must change. The circular economy is a strong tailwind for that change — a move to a more tech-enabled, dynamic customer experience in the store of the future. One example of this approach is outdoor retailer REI, who announced earlier this year that it will expand its offering of products available through rental. This will allow for more REI customers to try new experiences. The store can also serve as a place to participate in secondary markets — buying and selling used, otherwise discarded clothing as brands like Madewell will soon do. The circular economy also creates inroads to brand community and genuine connections during the holidays and beyond. All in all, a more evolved store requires an enlightened business model, one that creates a loop to maximize customer experience while minimizing waste.
Retail holiday shopping often highlights the trends of the times. This year, the holidays are highlighting a fundamental shift in how consumers shop, consume and dispose of goods. Into the next year, we will continue to see new rental, resale and other fundamentals of the circular retail economy take shape.
