New clothes are increasingly getting out of fashion, but the second-hand and rental markets are “an opportunity and a threat” for retailers, according to analysts at RBC.
Consumers want to make their wardrobes more sustainable, which can be done with the ‘5Rs’ of circularity – reduce, reuse, recycle, reinvent and repair.
The second-hand clothing market is expected to double in size to US$77bn over the next five years, according to data from resale platform ThredUP, most of its coming from individuals selling their garments to other consumers on websites such as Depop and Etsy (NASDAQ:ETSY).
The rental market, instead, is also set to double to a more modest US$7bn in 2025 from US$3.5bn in 2020, Statista calculated, driven by demand for occasionwear.
In this segment, retailers and department stores such as Selfridges have already tried their luck and more are to follow, RBC said.
“Resale and rental offers a new path for retailers to connect with customers and appeal to more ESG-focused consumers. However, we note that the growth of secondhand and peer-to-peer selling may serve to cannibalise traditional retail sales over time,” the Canadian bank said.
“The consumer mindset has shifted, with secondhand clothing now more acceptable or, in the case of vintage collections, even preferred. The convenience offered by peer-to-peer platforms provides a trendy alternative to traditional retail.”
Looking at London-listed companies, ASOS PLC (AIM:ASC) is “ahead of the pack”, having established its own second-hand vintage marketplace, while Associated British Foods PLC (LSE:ABF)’s Primark and boohoo Group PLC are expected to continue improving their sustainability credentials to appeal to environmentally-conscious consumers.