Rental and Second-Hand: The Retail Revolution of Fashion Brands

The textile industry faces an unprecedented paradox. On one side, fast fashion continues to dominate with its frenzied production cycles. On the other, a new generation of consumers demands transparency, sustainability and accessibility.

This tension has given birth to two disruptive models that are redefining the shopping experience: clothing rental and second-hand. These approaches are no longer marginal niches but strategic segments that major retailers are massively integrating into their offerings.

Why this revolution now?

Three factors converge to accelerate this transformation:

• Evolving mindsets: 73% of millennials accept paying more for sustainable products
• Regulatory pressure: new traceability obligations and taxes on environmental impact
• Technological innovation: digital platforms facilitating the circular economy

This profound mutation is reshaping the contours of fashion retail. Retailers who can navigate between tradition and innovation, ownership and usage, linear and circular, will gain a decisive advantage over their competitors.

In this article, we analyze:

• Emerging business models and their performance
• Winning strategies from market leaders
• Operational challenges and their solutions
• Sector evolution prospects

Introduction: The Industrialization of the Circular Economy

Fashion and sports retail is experiencing a silent revolution. While rental and resale pilots were confined to specialized start-ups just two years ago, 2024 marks the year of industrialization by sector giants.

The Acceleration of Retail Giants

H&M now deploys its rental service across 15 European countries after conclusive tests in Sweden. ASOS has integrated its second-hand marketplace directly into its main app, reaching its 26 million active users.

In sports, Patagonia generalizes its Worn Wear program across all 37 European stores. REI surpasses 500,000 used items sold annually.

The Pressures Transforming the Sector

This mutation responds to dual pressure:

• Regulatory: AGEC law and future Digital Product Passport
• Consumer: 73% of 18-34 year-olds favor brands offering sustainable alternatives

Industrialization Challenges

The transition from pilot to industrialization raises major operational challenges that many underestimate:

• Reverse logistics: managing returns, quality controls and recirculation
• Cannibalization: balancing new sales and second-hand without eroding margins
• Customer experience: seamlessly integrating these new journeys into existing digital ecosystem

Key Success Factors

Pioneers succeeding in this transition share three common characteristics:

• Native integration into existing systems
• Data-driven approach to circular stock management
• Premium positioning that valorizes circularity rather than suffering from it

Article Structure: 5 Strategic Levers

This article breaks down the 5 strategic levers to succeed in this industrialization:

Lever	Strategic Focus	Business Impact
Technical architecture	Infrastructure and system integrations to support circular flows	Operational scalability
Business models	Pricing structures and multi-channel margin optimization	Sustainable profitability
Logistics operations	Collection, sorting, refurbishment and redistribution processes	Operational efficiency
Acquisition strategies	Removing psychological barriers and converting early adopters	Customer growth
Performance measurement	Specific KPIs and ROI of circular initiatives	Strategic management

The objective: transform regulatory constraint into sustainable competitive advantage.

This approach builds on feedback from European and North American leaders to offer an actionable framework for retail decision-makers.

The Challenges of Retail Integration of Circular Models

Integrating circular models into traditional channels disrupts retail fundamentals. Historical retailers must rethink their metrics, operations and positioning against now-hybrid competition.

Transformation of KPIs: From Single Sale to LTV

The transition from transactional to circular model requires a revolution in performance indicators. Where traditional retail focused on revenue per m², new KPIs integrate customer lifetime value (LTV) and usage cycles.

Retailers like Zalando (with its "Closet" rental service) observe 40% higher customer LTV among multi-service users.

This transformation requires massive technological investments:

• Real-time product tracking systems
• Dynamic pricing algorithms
• Omnichannel customer management platforms

Gross margin also evolves: while it decreases short-term (25-35% vs 50-60% in sales), recurrence generates superior profitability over 18-24 months.

Operational Challenges: Hybrid Inventory Management

Hybrid inventory represents the major operational challenge. Retailers must simultaneously manage:

• Traditional new stock
• Products in active rental
• Items under refurbishment
• Second-hand pieces

Operational challenge	Traditional impact	Circular solution	Additional cost
Reverse logistics	5-8% returns	100% rental returns	+15-20% logistics cost
Refurbishment	Non-existent	15-20% product cost	€12-30/item
Product tracking	Simple unit	Complex multi-cycle	2-3% of revenue (RFID)
Storage	Linear	+40% space needed	+25% real estate costs

Leaders like Patagonia invested €15 million in their refurbishment centers. They achieve €12/item refurbishment cost vs €25-30 for non-specialized retailers.

RFID technology becomes essential: each product requires real-time status tracking (available, rented, in transit, under refurbishment). Initial investment represents 2-3% of revenue but generates 15-20% operational gains.

Competitive Repositioning Against Pure Players

Facing Vestiaire Collective (valued at €1.7 billion) and Rent the Runway (IPO 2021), traditional retailers must rethink their value proposition.

Circular pure players dominate on digital experience and specialization, but historical retailers maintain decisive assets.

H&M with its "Garment Collecting" program processes 20,000 tons/year of textiles, creating economies of scale inaccessible to pure players.

"The future belongs to retailers who master model hybridization, not those who choose sides" — Marie Ekeland, tech and retail investor

Market share of integrated circular services grows 35% annually. It already represents 8-12% of revenue for early adopters like Zalando or IKEA.

This successful integration becomes a major competitive differentiator against Amazon and specialized pure players.

Product Segmentation: Which Items for Which Circular Models

Occasion Wear and Events: The Natural Territory of Rental

Occasion wear represents the most mature fashion rental segment with optimal rotation rates.

Evening dresses achieve 35-45% margins per transaction vs 15-20% in traditional sales, thanks to average 12-15 rentals over their lifecycle.

Performance criteria are particularly favorable:

• High purchase price (€150-800)
• Low usage frequency (1-2 times per year for consumer)
• Predictable seasonality
• Extended product lifespan over 18-24 months
• Exceptional 98% return rate

Retailers like Rent the Runway or By Rotation demonstrate viability with 3x higher revenue per item than classic sales in this segment.

Outdoor and Sports: The Extended Try-Before-Buy Opportunity

The outdoor/sport segment revolutionizes traditional approach with particularly efficient hybrid rental-sale models.

Technical equipment (skis, bikes, hiking gear) presents high acquisition prices (€500-2000) and marked seasonal usage.

Criteria	Pure Rental	Try-Before-Buy	Classic Sale
Conversion rate	15%	65%	25%
Margin per transaction	25%	45%	20%
Customer satisfaction	78%	89%	72%

Extended try-before-buy (7-30 day rental with purchase option) generates exceptional 65% conversion rates vs 25% in direct sales.

Patagonia and REI Co-op report 40% increase in average basket thanks to this model.

Fast Fashion: Economic Limits of Circularity

The fast fashion segment reveals inherent contradictions in low-cost circular models.

With average purchase prices of €15-35, rental margins per transaction fall to 8-12%, making the economic equation complex.

Structural obstacles of circular low-cost

Main limitations include:

• Limited product lifespan: 6-8 rentals maximum
• Disproportionate logistics costs: cleaning, storage, transport represent 40-50% of revenue
• Problematic return rate: 15-20% loss/degradation
• Difficult profitability threshold to reach

Viable alternative: resale and intermediation

Shein and Vinted understood this by focusing on resale rather than rental.

They apply 10-15% commissions on high volumes. The viable business model for this segment remains second-hand with intermediation platforms.

"On fast fashion, we abandoned rental in favor of buy-back-resale. Unit margins are lower but volumes compensate." — Circular Economy Manager, European textile group

Technological Architecture: Prerequisites for a Circular Platform

Implementing a circular strategy at major retailers requires complete overhaul of existing IT architecture.

Legacy systems cannot handle the complexity of multi-status flows required by rental and resale. This technical transformation represents the major challenge of circular transition.

Real-Time Multi-Status Inventory Management

Traditional "available/sold" management becomes obsolete with circular economy.

Retailers must now track up to 12 different statuses per item:

• Available for sale
• Available for rental
• Rented
• In return transit
• In quality control
• Under repair
• In cleaning
• Downgraded

Patagonia uses Neo4j graph database to map complex relationships between products, statuses and locations.

Their system processes 2.3 million status events daily with 45ms average latency.

Product Status	Stock Impact	Client Availability	Average Duration
In rental	-1 sale, +1 rented	Sale unavailable	14 days
Quality control	Blocked	Unavailable	2-4 hours
Refurbishment	Blocked	Unavailable	24-72 hours

Dynamic Pricing and Valuation Algorithms

Circular pricing relies on three main variables:

• Product condition (AI-evaluated)
• Real-time demand
• Personalized depreciation curve by category

Decathlon developed proprietary algorithm adjusting rental prices every 4 hours based on 23 variables.

These include local weather, sporting events and return history. Result: +34% revenue per product compared to fixed pricing.

Integration with existing ERPs (SAP, Oracle) occurs via asynchronous REST APIs to avoid bottlenecks.

Leading retailers use microservices architectures with sub-100ms response times.

Product Traceability and Digital Passport

Digital Product Passport (DPP), mandatory from 2026 under AGEC regulation, becomes the backbone of circularity.

Each item has unique identifier (blockchain or encrypted QR code) containing complete history.

Vinted stores 847 million product passports on private Ethereum blockchain, with €0.003 transaction cost.

Each interaction (sale, rental, repair) is immutably recorded.

"Traceability is no longer nice-to-have, it's a legal and commercial prerequisite. Our customers want to know their purchases' history." — Sarah Chen, CTO at Zalando

DPP Component	Technology	Cost/Transaction	Response Time
Unique identifier	Encrypted QR Code	€0.001	< 50ms
Complete history	Private blockchain	€0.003	200ms
Quality certificates	Distributed IPFS	€0.002	150ms

Retailers mastering this tech stack observe 28% average increase in gross margin on circular channels, according to McKinsey 2024 retail tech study.

Business Models and Profitability Optimization

Break-even Calculation per Product and Channel

Rental-sale economic equation relies on complex break-even varying drastically by product category.

For premium sneaker at €150, break-even typically establishes at 8-12 rentals at €25/week, integrating hidden costs.

Hidden operational costs represent 35-45% of rental revenue according to Vestiaire Collective 2024 data:

Cost item	% Rental Revenue	Break-even Impact
Cleaning/Maintenance	15-20%	+2 rentals
Storage/Logistics	12-18%	+1.5 rentals
Accelerated depreciation	8-12%	+1 rental
Total hidden costs	35-50%	+4.5 rentals

Profitability by channel varies significantly according to distribution mode:

• Pop-up stores: break-even at 6 rentals thanks to accelerated rotation
• Pure digital: break-even at 10 rentals due to logistics costs
• Hybrid: optimized break-even at 7-8 rentals via tactile experience

Pricing Strategies: Subscription vs Transaction

Transactional model (one-off rental) generates higher short-term margins but limits customer recurrence.

Conversely, unlimited subscription (Rent the Runway type at €89/month) optimizes lifetime value but requires 3x larger inventory.

Pricing model comparison over 12 months:

Model	Frequency	Price	Annual revenue/customer
Transactional	15-20 rentals/year	€25	€375-500
Subscription	12 months	€45	€540 + upsells
Hybrid	Variable	Mix	€620 (ARPU)

Hybrid model advantages:

• Customer retention: +40% vs pure transactional
• Optimized ARPU: €620 per customer/year
• Pricing flexibility according to events

Dynamic pricing based on real-time demand becomes crucial. Adidas tests variable pricing according to events:

• Fashion Week: +60% on base prices
• Sale periods: -30% to stimulate demand
• Predictive algorithms to optimize revenue

End-of-Life Product Monetization

Inventory exit strategy represents 25-35% of overall circular model profitability.

After 15-20 rentals, three paths open with differentiated returns:

1. Second-hand Resale

Second-hand resale: 30-40% of new price after 12 months intensive rental.

Zalando Zircle generates 15% additional margin on this activity thanks to:

• Product quality certification
• Dedicated platform with strong audience
• Integrated logistics

2. Donation Programs and Tax Optimization

Donation programs: Tax optimization (66% deduction) + measurable CSR impact.

H&M thus recovers 8-12% value via tax credit on unsold items:

• Partnerships with charitable associations
• Social impact traceability
• Valued CSR communication

3. Material Recycling

Material recycling: Partnerships with industrials to valorize fibers.

Patagonia recovers €5-8 per kg of textile via chemical recycling channels:

• Fiber transformation into new raw materials
• Reduced destruction costs
• Additional revenue creation

Vertical Integration Advantage

Vertical integration of these flows becomes major competitive advantage.

Retailers mastering the entire circular value chain show 8-12 points higher operating margins than rental pure players.

Benefits of complete integration:

• Total product lifecycle control
• Cost optimization at each stage
• Revenue source diversification
• Reduced external dependency risks

Customer Experience and Omnichannel Purchase Journey

Successful integration of rental and second-hand into traditional retail ecosystem relies on seamless omnichannel approach eliminating consumer cognitive friction.

Leading retailers transform these services into natural extensions of their main offering rather than separate channels. This strategy creates coherent, uninterrupted customer experience.

Seamless Integration into E-commerce Ecosystem

Technological convergence between new purchase and circular services becomes major differentiator. Top-performing platforms directly integrate rental and second-hand options into their classic purchase journey.

This approach generates 23% higher cross-service conversion rate than siloed approaches. Optimal technical architecture relies on several pillars:

• Unified stock management system simultaneously presenting new, refurbished and rental-available products
• Contextual recommendation based on customer budget
• Usage frequency analysis to guide toward rental or purchase
• Sustainability preferences integration in suggestion algorithm

Physical Touchpoints: Try-on and In-Store Returns

Phygital becomes essential to remove second-hand and rental barriers. 78% of consumers want to touch and try before buying pre-owned products.

This preference is particularly marked in textiles and sports equipment. Innovative retailers respond to this expectation through dedicated space strategies.

Dedicated Spaces and Authentication Technologies

Leading retailers deploy dedicated in-store spaces with specific fitting areas for circular products. These spaces feature:

• Real-time authentication technologies
• Automated quality grading systems
• Information kiosks on product history
• Measurement tools to optimize fit

This approach generates 67% in-store transformation rate vs 34% for pure digital.

Touchpoint	Conversion rate	Average basket	Customer return
Digital only	12%	€78	15%
Store + Digital	28%	€94	8%
Integrated omnichannel	34%	€112	5%

Unified Return Logistics

Unified return logistics constitutes decisive competitive advantage. Customers can return new, rented or second-hand products indifferently at any point of sale.

Optimized process guarantees 48h processing SLA for refurbishment and recirculation. This fluidity eliminates friction and reinforces customer trust.

Personalization and Algorithmic Recommendation

Artificial intelligence becomes the engine of circular product discoverability. Recommendation algorithms evolve to integrate new scoring criteria:

• Product environmental impact
• Durability and estimated lifecycle
• Circularity and reuse potential
• Customer eco-responsible preferences

This multi-criteria approach achieves 89% recommendation precision on eco-responsible profiles.

Predictive Analysis of Purchase Patterns

Advanced personalization analyzes purchase patterns to automatically propose relevant circular alternatives:

• Rental for one-off or seasonal usage
• Second-hand for accessible premium products
• Buy-back for wardrobe renewal
• Exchange to optimize goods rotation

"AI allows us to transform each customer interaction into circularity education opportunity, with 42% suggestion adoption rate" — Digital Director, European sports retailer

How to Industrialize Your Circular Offerings with ZIQY

Industrializing circular services requires unified technological approach rather than disparate solution assembly.

ZIQY suite offers modular infrastructure transforming pilot initiatives into truly scalable revenue channels. This approach enables retailers to move beyond experimental stage to create sustainable business models.

Unified Platform for Three Essential Services

ZIQY natively integrates three complementary modules within same infrastructure:

• RENTAL: Complete rental cycle management (booking, logistics, maintenance)
• REUSE: Second-hand marketplace with product traceability
• DPP: AGEC compliance and automated digital product passport

This modular approach allows retailers to deploy services according to business priorities. Major advantage lies in technical and UX consistency maintained across entire customer journey.

Accelerated Time-to-Market via Native APIs

Integration with existing systems (ERP, PIM, e-commerce) occurs via standardized REST APIs. This approach drastically reduces implementation delays compared to custom developments.

Traditional method	ZIQY approach
6-12 months development	4-8 weeks deployment
Dedicated dev teams	Configuration via admin interface
Complex integration tests	Pre-tested, documented APIs
High development budget	Controlled integration costs

European fashion retailer launched rental service in 6 weeks vs initially budgeted 8 months with custom solution. This deployment speed enables rapid market testing and offer adjustment based on customer feedback.

Unified Management and Measurable ROI

ZIQY dashboard centralizes KPIs from three circular services, enabling 360° performance vision.

Retailers access real-time:

• Rental product rotation rates (observed average: 4.2x/year)
• Resale value vs new price (typically 35-50% by category)
• Carbon impact avoided per reused product
• Additional revenue generated vs traditional business
• Customer satisfaction rate by service
• Operational costs per transaction

Proven Scalability Across Different Segments

ZIQY architecture adapts to sectoral specificities while maintaining common technological foundation. This flexibility enables rapid deployment across different points of sale.

Successful deployment examples:

• Outdoor sports retailer deployed solution across 12 stores in 3 months
• Fashion retailer integrated 2,000 references in rental with automated stock management
• Appliance distributor activated all three modules across 25 points of sale in 4 months

ZIQY modularity also enables functionality adaptation according to market maturity. This adaptability includes progressive service activation, workflow customization, and integration with local logistics partners.

This industrial approach transforms circular experiments into true growth levers. It offers financial visibility and scalability impossible to achieve with artisanal solutions, enabling retailers to build sustainable circular business models.

Frequently Asked Questions

What ROI to Expect Over 12 Months?

Average ROI for rental/resale programs in fashion retail sits between 15-25% first year, with variations by segment.

Additional revenue typically represents:

Service Type	Share of Revenue	Gross Margin
Rental	8-12% of revenue	40-60%
Second-hand resale	5-8% of revenue	40-60%
New sales (reference)	-	50-55%

Profitability strongly depends on two key factors:

• Article rotation rate (target: 6-8 rotations/year)
• Supply chain optimization

How to Manage Sales Cannibalization?

Actual cannibalization is below 10% according to Accenture 2024 studies.

Retailers observe rather:

• Complementarity between offerings
• Customer base expansion
• Purchase frequency increase

Effective anti-cannibalization strategies:

• Clear pricing differentiation (rental = 15-20% of new price)
• New customer segment targeting
• Specific occasion positioning
• Ranges dedicated to circular services