Rental and Secondhand: Retailers Scale Up

Introduction: The circular revolution underway

The retail sector is experiencing a major transformation. In 2024, giants like H&M, Zalando, Urban Outfitters and Nike are no longer content to test rental and resale: they are integrating them directly into their main distribution channels.

This evolution marks a decisive turning point in how traditional retailers approach the circular economy.

Gone are the pilot initiatives confined to dedicated sites or external partnerships. Retailers are now deploying their rental and resale services at the heart of their e-commerce platforms and physical stores.

H&M has thus launched its rental service directly on its main website, while Zalando integrates its secondhand marketplace into the classic shopping experience.

The drivers of this acceleration

This acceleration responds to dual pressure: evolving consumer expectations and growing regulatory constraints.

73% of European millennials say they favor brands offering sustainable alternatives, while the AGEC law in France imposes new obligations on retailers for traceability and unsold goods reduction.

Major operational challenges

Yet, the transition from pilot to large-scale deployment raises major operational challenges:

• Reverse logistics: managing returns, cleaning, refurbishment
• Technology integration: unifying new/used stocks on a single platform
• Team training: supporting sales staff on new models
• Profitability measurement: calculating ROI on extended product lifecycles

The 4 strategic success pillars

The success of this transformation relies on four strategic pillars that we will analyze in this article:

1. Unified technology architecture: how to integrate rental and resale into existing systems without creating silos
2. Circular supply chain optimization: reinventing flows to efficiently manage extended lifecycles
3. New hybrid economic models: balancing recurring (rental) and one-time (sale) revenues to maximize Customer Lifetime Value
4. Client adoption strategies: removing behavioral barriers and transforming trials into regular usage

"The successful integration of rental and resale into our main channels allowed us to increase our average basket by 34% while reducing our environmental impact by 28%" — Sarah Johnson, VP Digital Strategy, Zalando

This analysis is based on supporting 15+ European retailers in their transition to integrated circular models, revealing key success factors and pitfalls to avoid for successful strategic transformation.

Strategic challenges of circular integration

Integrating circular models into traditional distribution channels represents a major strategic turning point for fashion and sports retailers.

This transformation goes beyond simple diversification: it fundamentally redefines the value proposition and revenue creation mechanisms.

Optimized stock monetization and product lifecycle extension

The circular economy allows retailers to multiply revenue points on the same product. Unlike the traditional linear model, each item now generates recurring financial flows.

Patagonia perfectly illustrates this strategy with its "Worn Wear" program. The brand buys back its own used products at 50-70% of new price, refurbishes them and resells them at 80-85% of original price.

This approach generates a gross margin of 60% on secondhand, comparable to new.

H&M performance reveals similar results:

• Rotation rate of circular stocks: +35% vs traditional collections
• Average duration of monetization per product: 18 months (vs 4 months in linear)
• Additional revenues per reference: +40% over complete lifecycle

Acquiring new client segments (Gen Z, eco-conscious millennials)

Circular integration opens access to highly valued client segments that are difficult to conquer through traditional channels.

Segment	Conversion rate	Average LTV	Purchase frequency
Traditional clients	2.8%	€180/year	3.2x/year
Circular clients	4.2%	€252/year	5.1x/year
Eco-conscious Gen Z	5.7%	€290/year	6.8x/year

REI Co-op observed a 40% increase in client LTV among users of their "Re/Supply" program. These clients show a 25% higher retention rate and recommend the brand 3x more often.

Gen Z represents 35% of buyers on integrated circular platforms, versus only 18% on traditional channels.

This segment shows a propensity to pay 15-20% more for brands aligned with their environmental values.

Competitive differentiation and premium positioning

The circular economy becomes a defensible competitive advantage against the commoditization of traditional retail.

The H&M case with "H&M Take Care":

• Brand perception: +22% on "responsible" attribute
• Purchase intention: +18% among 18-35 year-olds
• Premium pricing accepted: +12% vs classic range

This differentiation relies on three complementary levers:

• Technical expertise: refurbishment, authentication, extended warranties
• Client experience: seamless omnichannel journey between new and circular
• Authentic storytelling: traceability and measurable environmental impact

"The circular economy is no longer a nice-to-have but a must-have to stay competitive against specialized pure players" — Sarah Johnson, Head of Sustainability at ZIQY

Pioneer retailers observe a 35% higher overall conversion rate and increased resistance to promotions, thus preserving their margins in an inflationary context.

Operational challenges of scaling up

The transition from a promising pilot to generalized deployment represents the true maturity test for retailers.

Market data reveals that 78% of circular initiatives fail during this critical phase, mainly due to underestimated operational challenges.

Complex multi-status inventory management

The coexistence of new, used, and refurbished products radically transforms stock management.

Traditional ERP systems, designed for linear flows, struggle to manage this three-dimensional complexity.

Product Status	IT Complexity	Management Cost	Realized Margin
New	Standard	100% (base)	45-60%
Used	High	+180%	25-40%
Refurbished	Very high	+240%	35-55%

Leaders like Patagonia or The RealReal invest heavily in proprietary platforms.

Patagonia has developed a "Product Passport" system that tracks each item through 15 different checkpoints.

Reverse logistics and quality verification processes

Reverse logistics represents the most costly challenge, with 15-25% additional costs compared to traditional flows.

Each return requires inspection, cleaning, potential refurbishment and re-stocking.

Nike has developed a standardized 4-step process:

• Automated reception and sorting (24h max)
• Quality control by AI + human expert
• Refurbishment according to 3 defined levels
• Dynamic pricing based on actual condition

This approach allows them to process 12,000 items/day with an error rate below 2%.

Dynamic pricing and circular asset valuation

Pricing circular products remains more art than science. Algorithms must integrate:

• Physical condition (complex subjective evaluation)
• Real-time demand (accentuated seasonality)
• Refurbishment costs (variable by item)
• Brand positioning (image preservation)

"Valuing a used product requires 40% more data points than a new product. It's this complexity that creates our differentiation." — Operations Director, Vinted

Zalando uses a predictive model analyzing 180 variables to optimize its secondhand prices.

Result: 25% accelerated stock rotation and stabilized margin rate despite operational complexity.

The failure of many pilots is explained by underestimating these technical challenges. Successful retailers invest 2-3 times more in IT infrastructure and team training than initially planned.

Economic models and deployment strategies

Short-term rental vs subscriptions: optimization by segment

Retailers adopt differentiated approaches based on their positioning and target clientele.

Occasional rental generates 60-80% margins on premium items, particularly effective for special events and luxury pieces.

Adidas and Nike favor this model for their limited collaborations and technical sports equipment, targeting consumers looking to test before purchase.

Subscriptions show an 85% retention rate but require a significant rotating catalog.

H&M is currently testing a hybrid model with €29/month for 4 pieces, generating superior long-term client value despite lower unit margins.

Internal marketplace vs partnerships with specialized platforms

The choice between proprietary development and strategic partnerships largely determines medium-term profitability.

External marketplace commissions range between 15-25%, reducing margin but accelerating time-to-market.

Approach	Initial Investment	Commission/Margin	Experience Control	Time-to-market
Internal marketplace	€200-500k	40-60%	Total	12-18 months
Partnership (Vestiaire, Rebag)	<€50k	15-25%	Limited	2-3 months
Hybrid model	€100-200k	30-45%	High	6-8 months

Zara develops its own Pre-Owned platform with full integration into its ecosystem, while Patagonia relies on Worn Wear to capitalize on its environmental DNA.

Omnichannel integration: digital, stores and collection points

Channel orchestration determines client adoption and operational efficiency.

Retailers with omnichannel integration observe a 23% increase in basket value thanks to cross-channel synergies.

In-store collection points reduce logistics costs by 30% while generating additional traffic.

Decathlon experiments with dedicated corners in 15 pilot stores, with on-site authentication and refurbishment.

Winning integration strategies:

• Click & Collect rental: online order, store pickup/return
• Reverse showrooming: physical try-on, digital order
• Hybrid relay points: partnership with existing networks (Mondial Relay, Pickup)
• Premium services: home delivery/collection for subscribers

"The successful integration between our physical and digital channels allowed us to increase our conversion rate by 34% on circular services" — Innovation Manager, Galeries Lafayette Group

The key lies in unifying client and stock data to offer a seamless experience, from discovery to return.

Technologies and infrastructure for circularity

Successful integration of rental and secondhand into main channels relies on robust technological infrastructure.

Leading retailers invest heavily in solutions that transform their traditional operations.

Circular inventory management systems and traceability

Classic inventory systems cannot manage the multiple statuses of the same product: new, rented, being refurbished, or back on sale.

Modern solutions integrate specialized APIs that track each item through its complete lifecycle.

Patagonia uses a blockchain traceability system that allows tracking 78% of its products from production to resale.

This transparency generates a 15% premium on resale price thanks to reinforced client trust.

RFID and dynamic QR code technologies enable real-time traceability.

Decathlon deployed RFID chips on 2.3 million items in its rental program, reducing inventory errors by 89%.

AI and machine learning for pricing and predictive demand

Dynamic pricing algorithms become the major competitive advantage of circular retailers.

These systems analyze 50+ variables: seasonality, product condition, local demand, rental history.

Pricing Criteria	Traditional Method	Predictive AI (ZIQY)
Adjustment speed	Weekly	Real-time
Variables analyzed	5-10	50+
Predictive accuracy	65%	87%
Margin optimization	+8%	+23%

Vestiaire Collective developed an algorithm that predicts demand with 87% accuracy, allowing optimization of buyback and resale prices.

Result: +23% gross margin on refurbished items.

Automation of refurbishment processes and quality control

Quality control automation represents the most complex technical challenge but also the most profitable.

Computer vision systems can now identify 95% of defects on textiles and shoes.

Zalando automated 60% of its quality control process with high-resolution cameras and AI.

This automation reduces processing time by 30% and standardizes quality evaluation across centers.

Sorting and refurbishment robots are beginning to emerge:

• Automatic sorting by size, color, brand (98% accuracy)
• Standardized cleaning according to material type
• Automated labeling and packaging
• Objective quality scoring on 1-10 scale

"Refurbishment automation allows us to process 3x more volume with the same team, while guaranteeing consistent quality" — Operations Director, European retailer

These technological investments become indispensable to maintain viable margins on large-scale circular activities.

Regulation and compliance: anticipating evolutions

The European regulatory ecosystem is rapidly tightening, transforming compliance into a decisive competitive advantage for retailers who anticipate.

Traceability and transparency obligations are redefining circular economic models.

Digital Product Passport (DPP) and mandatory traceability

The Digital Product Passport becomes mandatory from 2025 for textiles, then extends to all sectors by 2027.

This digital revolution imposes complete product lifecycle traceability.

For rental/resale models, DPP represents a value multiplier: each item has a verifiable history (origin, repairs, previous users).

This transparency reinforces consumer trust and justifies premium prices.

Mandatory data includes:

• Material composition and geographical origin
• Carbon footprint and environmental impact
• Working conditions and social certifications
• Repair instructions and parts availability

Extended Producer Responsibility and circular economy

EPR (Extended Producer Responsibility) intensifies with quantified objectives: 65% reuse/recycling by 2030 in textiles.

Eco-contributions evolve toward a bonus-malus system favoring circularity.

EPR Criteria	Linear Model	Circular Model (Rental/Resale)
Eco-contribution	+15-25% of price	-10 to -30% (circularity bonus)
Collection obligations	Costly, complex	Integrated into economic model
Impact reporting	Declarative, limited	Traceable via DPP and data

Circular retailers transform this constraint into economic opportunity.

Patagonia saves €2.3M annually thanks to its Worn Wear programs that reduce its EPR obligations.

Consumer protection and warranties on used products

The European directive on sale of goods now applies to used products with specific adaptations.

Legal warranties remain 2 years minimum, even for refurbished items.

This evolution professionalizes the used market and eliminates unscrupulous actors.

Established retailers gain credibility against C2C platforms.

"European regulation on used goods creates a quality standard that benefits professional actors. We observe a 35% increase in consumer trust since new warranties were applied." — Consumer Trust Index Study 2024

Specific obligations for used goods:

• Transparent and standardized quality diagnosis
• Adapted warranty to product condition (6 months to 2 years)
• Right of withdrawal of 14 days maintained
• Traceability of repairs and refurbishments

How to structure your circular strategy with ZIQY

The transition to circular economy requires robust and unified technical infrastructure.

Retailers who succeed in their transformation don't multiply ad hoc solutions, but adopt an integrated platform that covers the entire product lifecycle.

The integrated modular approach: 4 pillars, 1 platform

ZIQY structures its proposition around four complementary modules based on a unified database:

Module	Function	Business Impact
RENTAL	Short/long-term rental	+35% recurring revenues
REUSE	Secondhand marketplace	+28% margin on trade-in
REFIT	Repair/upcycling	+42% product lifespan
DPP	Digital product passport	Native AGEC compliance

This modular architecture allows progressive deployment according to each retailer's business priorities.

Native integration with existing systems

One of the main adoption barriers remains integration complexity.

ZIQY solves this issue through pre-configured connectors:

• ERP/WMS: Automatic synchronization of stocks and movements
• E-commerce: Native widgets for Shopify, Magento, WooCommerce
• CRM: Cross-channel client data unification
• Accounting: Automated reporting of circular flows

This approach reduces time-to-market by 50% compared to custom developments, with average deployment of 8 weeks versus 6 months.

ROI dashboards and performance management

Measuring circular initiative performance remains a major challenge.

ZIQY integrates advanced analytics with sector-specific KPIs:

Financial metrics:

• Circular revenues vs traditional revenues
• Client acquisition cost (CAC) by channel
• Extended Lifetime Value (LTV) on circular economy

Operational metrics:

• Secondhand stock rotation rate
• Average rental duration by category
• Volume of repaired/refurbished products

"Retailers who manage their circular strategy with precise data generate 23% additional revenue from the first year" — McKinsey Study 2024

The key to success lies in this holistic vision: rather than juxtaposing isolated solutions, ZIQY offers coherent infrastructure that makes the circular economy a true growth lever for ambitious retailers.

Frequently Asked Questions

1. What ROI to expect from a large-scale rental/resale program?

Leading retailers observe 15-25% ROI on their circular programs after 18-24 months of deployment.

Patagonia thus generates 40% additional margin on its Worn Wear items, while Levi's shows 22% profitability on its refurbished jeans.

Operating costs generally represent 30-40% of circular revenue (logistics, refurbishment, platform).

Technological amortization spreads over 3-5 years with initial investments of €500K to €2M depending on scope.

2. How to manage cannibalization between new and used?

Cannibalization remains limited to 5-8% when programs are well segmented.

Nike finds that 78% of clients of its circular services are new or buy in addition.

Effective anti-cannibalization strategies:

• Delayed timing: resale launch 6-12 months after new
• Client segmentation: target "conscious shoppers" (25-40 years, high income)
• Distinct ranges: limited editions excluded from circular program