The Business of Borrowing
Inside the 4 Rental Frameworks Powering the Circular Fashion Economy
Photo by Nataliya Vaitkevich
Once upon a closet clean-out, the fashion industry realized that owning everything wasn’t the only option. Enter the fashion rental market, where renting your wardrobe is not just chic, but strategic. From peer-to-peer swaps to full-scale brand-run rental empires, four unique business models shape the fashion rental industry.
The Four Fashion Rental Models:
Business to Business (B2B)
Business to Consumers (B2C)
Business to Business to Consumer (B2B2C)
Peer to Peer (P2P)
B2B Fashion Rental
What is It?
In the business-to-business (B2B) rental model, companies provide rental technology, in the form of software, directly to brands and retailers. These solutions work behind the scenes through white label SaaS, streamlining everything from data and analytics to tracking e-commerce activity while also providing insights.
Company Role:
Secure industry partnerships with brands
Maintain the scalable software to track inventory, bookings, and e-commerce activities
Insights into optimizing inventory and data to drive sales for the brand
Business Role:
Provide the clothes available for rent to consumers
Maintaining customer relations through feedback channels and customer service help desks
Marketing and promotion on the retail-to-consumer front
Why it Works:
Retail Businesses: Autonomy over the brand is a key factor in why businesses use this model. It's a tech-forward approach that lets brands plug into the rental economy without reinventing their entire operation. By starting at a midpoint, it reduces capital expenditure that would be spent on building out distribution centers and software. It allows business to maintain their branding, but also provides a new revenue outlet using the circular fashion model.
Fashion Tech Company: Allows the company to gain recurring revenue through software licensing. Reduces risk of liability for bad business practices by the brand, as software is the only backend that allows retailers to sell to consumers.
B2C Fashion Rental
What is It?
In the business-to-consumer model, the company rents apparel items directly to consumers. They provide both the product and software needed to carry out a full rental operation, all done in-house or through SaaS technology. Clothing on this model is normally sourced through
Company Role:
Ownership of the clothing
Manages dry cleaning and repair or replacement of items
Shipping and inventory tracking
Offers flexible pricing: Through rent per item, monthly membership, and rent-to-own
Consumer Role:
Navigate the digital platform to select what to rent
Use of the item for an allotted amount of time
Return the item by using the provided shipping label
How To Succeed in B2C?
The biggest complaint amongst users of rental platforms is the turnover rate of clothes. As consumers have hundreds of selections to choose from, the in-stock variety and shipment times discourage many from using the same platform month after month. To combat these concerns, B2C rental should utilize key strategies to make for quicker inventory turnaround and ensure customer satisfaction.
They can utilize in-house cleaning services, which can reduce the cost per cleaning and achieve higher in-stock availability. Many platforms also include late fees or large deposits while the item is being rented in order to ensure items are returned on time and in quality condition. As consumers are constantly looking for the freshest trend to amplify their style, rental businesses have to stay competitive by showcasing fresh designs and brands. By partnering with already established fashion brands, they can transfer that brand's loyal fan base into one of their own, while also refreshing their inventory.
B2B2C Fashion Rental
What is It?
The B2B2C rental model combines the strengths of B2B and B2C rental operations by forming a partnership between the two businesses. The company provides the service and distribution, while the brand provides the clothes.
Company Role:
Provide the back-end tech that collects data on the full inventory lifecycle
Handles storage, packaging, and shipping
Responsible for the inspection and cleaning of items
Handle customer service and rental item issues
Brand Role:
Provide the garments to be rented
Showcased pieces that are listed on the company's platform
Consumer Role:
Shop via the company's e-commerce site
Return and ship the item back to the company directly
Who Gets Paid When an Item is Rented?
As the company is providing both the inventory distribution and the software, companies and brands have to agree on how to divide revenue from rentals.
The two types of agreements include:
Fixed Transaction Fees: The brand pays the company a fixed fee on every rental transaction through their platform.
Revenue-Based Percentages: The businesses agree on a 50/50 or 70/30 split of revenue, based on each partner's contribution.
Whether companies and brands use either agreement, the revenue generated is poured back into overhead operational costs that support the company's software and infrastructure practices.
P2P Fashion Rental
What is It?
The peer-to-peer model joins the platform with the consumers. Transforming individuals into both the lender and the renter. By generating products using the consumers' own wardrobes, the company is in charge of the software and digital platform.
Company Role:
Handles payment and shipping logistics
Organize the marketplace for simple browsing
Liable for customer issues and damage claims
Peer Lender:
Package the order with a provided shipping label
Set rental prices on your items
Assure quality by cleaning and repairing items
Peer Renter:
Submit a rental or swap request and confirm availability
Ship the item back to the owner
P2P for The Entrepreneurial Consumer
While P2P rental platforms handle the actual logistics of renting and payments, lenders are left with a seamless process. Many users of P2P rental platforms have found their low-energy model useful to facilitate a fashion side gig.
For Tulerie, a luxury peer-to-peer rental company, this has been especially evident on their platform. The company takes a 15% commission from its users, leaving a large margin for lenders to profit from each rental. As lenders are left with 85% of the sale, this has encouraged users who lend their items to be more active in the process. Some will promote their items via their own social media rental profile, and direct their followers to rent from them via Tuleries' website. Users have started providing personalized packaging and thank you notes, acting as their own small business within the platform.
Trust Is the Currency
In P2P marketplaces, there is more risk of liability as transactions occur directly between users. Since the platform is a facilitator and not a full-service provider, quality assurance can only be tackled from afar. So, how do you ensure user confidence and a trustworthy community?
Two Key Ways P2P Fashion Rental Builds Trust
Reputation Systems: Public ratings and reviews from its users are able to instill trust before they commit to an item. Transparent feedback keeps both parties accountable and encourages better behavior across the platform.
Verification Process: Implementing identity verification and secure payment systems is a must to ensure trust from users. When a platform vets its users and creates clear protocols for issues, renters and lenders feel safer participating.
The Industry’s Adjustment to Today’s Fashion Economy Needs
Fashion rental structures are no longer a sideline experiment, but take up a large market share of the apparel industry. With the global apparel rental market expected to reach $7.5 billion by 2026, this signals more than growth, but rather a fundamental shift in fashion business operations. Embracing these circular fashion business models is becoming a strategic business opportunity for companies looking to stay competitive in an evolving industry.
Rental is a step-by-step process, where companies, brands, and consumers all play an active role in the process. Each rental model divides the responsibilities among each other, making the process a unique circular way of enjoying fashion.
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Graphic by Looks For Lease
