How Retailers Are Quietly Being Cut Out of Future Sales
The Hidden Costs of Resale and the Strategic Power of Rental
Photo by Mart Production
In today’s circular economy, the question isn’t whether a garment will have a second life. It’s who gets paid for it.
Right now, resale platforms like Depop, The RealReal, and Poshmark are capturing most of the value. Consumers buy a $200 dress, wear it once or twice, and then flip it for $90. That second sale, and often a third or fourth, benefits the reseller and not the brand. What happens next is even more sobering: the garment eventually exits circulation, and the original retailer never sees it again.
This cycle has created a growing disconnect. Fashion brands pour resources into design, sourcing, and storytelling – only to watch the revenue from future uses go elsewhere. And that investment isn’t small. According to a 2018 report from Urban Outfitters, nearly 71% of the company’s total expenses went to manufacturing its goods sold. To make those costs worthwhile, brands must extract more value from every item they produce, not just from its first sale, but from its entire lifespan.
More Uses, More Value
While a single garment rental may seem minor, the long-term value is anything but. A dress rented three times per month at $69 can generate over $7,000 in just three years which far exceeds the returns of a one-time sale at $200 or $300. By retaining ownership, brands gain full control over product condition, pricing strategy, and customer experience at every touchpoint. This model not only extends the lifecycle of inventory and reduces waste but also transforms each item into a high-performing, recurring revenue asset.
In contrast, resale relies on consumer behavior and offers limited brand control. Once an item is sold, brands have no influence over how it's presented or priced, often competing in a crowded secondary market that can dilute perceived value. Worse, the proceeds of those future transactions bypass the original maker entirely. For retailers already managing narrow margins and high return rates, returns can account for up to 30% of retail sales which presents a compounding challenge.
Rental, by comparison, builds those returns into the model from the beginning. Each cycle of use is anticipated, tracked, and optimized, not treated as a cost center. This gives retailers more control over inventory movement, pricing strategy, and customer relationships. It's not just a new distribution model; it's a new value chain.
Circularity Is No Longer Optional
New legislation is also accelerating the shift toward circular business models. In 2024, California passed SB 707, making brands accountable for the end-of-life impact of their products. Similar Extended Producer Responsibility (EPR) laws are in development in states like New York, Massachusetts, Oregon, and Washington, aiming to reduce textile waste by shifting responsibility from consumers to producers.
For small retailers, this shift is daunting, but it also opens up opportunities. Rather than treating these laws as compliance hurdles, rental allows brands to turn accountability into revenue. By designing for circulation and managing a product’s entire lifespan, retailers can meet these requirements proactively, while maintaining margins and customer engagement. A rental item isn't just in use longer; it’s also delivering value longer, to both the brand and the consumer.
Rental vs. Resale: Two Paths, One Future
Both resale and rental are vital parts of the circular economy, but they operate on fundamentally different dynamics. Resale extends the life of the product but severs the connection between brand and buyer after the first transaction. Each future sale enriches a third party. Over time, this undermines the brand’s ability to manage quality, control pricing, and retain customer loyalty.
Photo by Mart Productions
Rental, on the other hand, allows brands to remain an active participant in every use. Items return home, are refurbished, and go out again, creating a loop that not only supports sustainability goals, but also justifies the high upfront investment that goes into product creation. For independent labels especially, this makes a difference. Instead of overproducing to meet unpredictable demand, they can recirculate what already exists, reducing overstock risk and improving inventory efficiency.
This distinction is particularly meaningful in a market where access is starting to matter more than ownership. Consumers are becoming more conscious of how long an item will last and how many times it can be used. Without a way to participate in that ongoing usage, retailers are effectively pricing themselves out of their own future.
A New Role for Retail
Rental also offers more than just access as it gives brands operational and strategic leverage. It enables limited runs, seasonal experiments, and trial-based customer acquisition without committing to unsustainable volumes. It turns logistics, which has traditionally been a backend function, into a customer-facing differentiator. And it allows brands to gather real-time usage data, deepening their understanding of what drives repeat engagement.
Yet despite the growth of the circular economy, retailers continue to be cut out of the value chain after an item’s first sale. Peer-to-peer platforms like Pickle may offer users convenience and flexibility, but they reroute profit away from brands entirely with each transaction enriching individuals, not the original creators. This disintermediation poses a serious threat to long-term brand sustainability. By contrast, B2C rental models enable retailers to stay in control of pricing, presentation, and most importantly, profit.
Urban Outfitters recognized this early with the launch of Nuuly in 2019, leveraging its existing brand portfolio to build a subscription model charging $88 per month for access to over 100 labels. The goal was ambitious: 50,000 subscribers in year one. By 2024, Nuuly had quadrupled that figure, reaching over 200,000 active customers, which is the maximum capacity of its 300,000-square-foot Pennsylvania facility. With demand continuing to surge, the company is now investing in a 600,000-square-foot Kansas City warehouse that will triple its operational footprint. Meanwhile, fashion rental as a category is projected to grow by an additional $1.16 billion over the next four years, according to Technavio.
For brands that want to harness this momentum, the path is clear: they must own their rental channels. That’s where L4L comes in. The company’s white-label SaaS platform empowers retailers to launch their own branded rental programs with no third-party intermediary required. With the tools to extend product lifespan, unlock recurring revenue, and comply with mounting EPR legislation, L4L enables brands to compete at Nuuly’s level. In a market that rewards longevity, rental isn’t just an experiment, it’s a necessity.
Photo by Mart Productions
Looking Ahead
As the resale market continues to grow, it’s becoming clear that brands can no longer rely on one-time sales to drive long-term value. Without a direct stake in the second and third uses of their products, retailers risk losing both revenue and relevance.
Rental offers a clear, controllable alternative where brands stay connected to their inventory, their customers, and their margins. With the right infrastructure, like L4L’s technology, launching a rental program is no longer limited to large-scale players. It’s a viable, strategic step forward for retailers of all sizes looking to adapt to a changing market and extract more value from the products they already produce.
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