Rental is steadily emerging from hype to reality in the outdoor market. Suston reaches out to rental specialists and sustainability experts to learn what it takes to make it in this tough but growing market.
With the rise of ecommerce, a shift from product ownership towards product access, and an increasing demand for sustainability, consumers and businesses are finding a solution that fits squarely with all three trends: Rentals.
Outdoor brands like Rab, Ortovox, and Houdini and retailers like REI and MEC have had rental programs ongoing for some time. Based on their reports, there is no shortage of demand. And perhaps this should not come as a shock. After all, who would not want more sustainable access to top-end gear at rock-bottom prices while not needing to store or maintain it?
Glancing over at the closely related recommerce market, one finds hard evidence of spectacular growth that is projected to reach $84 billion by 2030 – more than doubling fast-fashion’s predicted market share. But the question of whether rental is also good business is often left hanging without a response.
While optimistic that the future is looking bright for rentals, sustainability consultant Joel Svedlund believes that we still need to take any such grand claim with a pinch of salt:
“For recommerce in general, there’s no shortage of reports showing its growth,” Joel Svedlund confirms, before continuing:
“Rentals, on the other hand, are still too small to show any significant growth from a total market perspective. And at this point in history, coming out of a pandemic and going into a war, the fluctuations are big in both directions. So, it is very hard to say what the trends behind any changes really are.”
Lacking such data, one way to currently get a better idea of the status of rentals is to hear from businesses directly. Two such actors, Bergans of Norway and Arrive, provide case studies of companies striving to meet the rapidly developing rentals market with innovation and a great deal of experimentation.
CASE 1: Bergans of Norway
Bergans of Norway’s first serious foray into circular commerce can be traced back to the opening of its flagship store in Oslo back in 2016.
“We began offering rental of primarily camping equipment and found that there was strong interest from the very start,” shares Christoph Centmayer, Sustainability Manager at Bergans.
Building upon this positive trend, Bergans later entered a partnership with The Norwegian Trekking Association to equip one of its most popular mountain lodges, Gjendesheim, with outdoor apparel and equipment for rent to passing visitors and lodge guests.
“This also quickly became popular, as many foreign tourists would arrive by bus without the necessary kit to explore the surrounding mountains and lakes.”
But while customer demand was apparent from the outset, Christoph Centmayer admits that their rental initiatives soon showed signs of bogging down in administrative issues and that the business model required continuous adjustment in order to be financially viable.
“Rental of clothing and equipment has required a greater deal of logistics on our part, with drying facilities needed for tents and weekly cleaning and service for rented apparel,” shares Christoph Centmayer, before continuing:
“But one of the fundamental underlying challenges we’ve found with the rental model relates to the number of processes required to then prepare that product for the next customer. The key has been reducing or streamlining these processes, as each step takes an additional cut out of an already slim margin.”
With the hire of a new circular project manager, however, Christoph Centmayer believes that Bergans’ rental model has since become both more consumer-friendly and financially viable. He also is anticipating that Bergans’ latest recommerce initiative, a subscription service launched in 2020, will even better satisfy both customer demand and financial feasibility.
Case 2: Arrive
While Bergans continues to develop a rental model, its core business remains first and foremost developing great outdoor products. But another innovative company on the rental scene, Arrive, does not design, produce, or market any of its own physical products whatsoever. Instead, its business model rests upon mastering rental’s complex behind the scenes logistics and offering a simple solution to both brands and the end-customer.
California-based Arrive essentially offers an ecommerce rental and resale platform with a broad selection of outdoor gear and apparel. But it does not purchase the products it rents via its platform – rather, it services brand-owned products and takes care of the heavy lifting to make rental as smooth an experience as possible for both brands and customers.
Its co-founder and CEO Rachelle Snyder shares what prompted her to get into the rental business:
“Ross Richmond and I originally started the company to make it easier for people to shop the way they want to shop and for brands to access new consumers, compete in a new market, and offer a sustainable model that reduces resource extraction of new material.”
In addition to their own rental platform, Arrive has a simple rental and resale integration that enables customers to rent or buy gently used items from a brand’s own webshop along with their regular offer. With this, consumers are increasingly shifting their behavior from a consumption mindset to one that is centered around utilization for experience. The Arrive platform ultimately aims to enable a wider segment of consumers to experience more and consume better.
“The Arrive Platform can support nearly any brand, in any industry. Our model supports brands that service the United States as well as internationally via our technical capabilities.”
Is rental’s sustainability argument sound?
With more and more actors entering the rentals market, satisfying a new consumer segment’s demand may be well on its way to becoming good business. But are there any indications rentals are actually having any positive sustainability impacts? Here, Joel Svedlund is cautiously optimistic but emphasizes that the transition will not happen overnight:
“The sustainability aspect of circular commerce is complex and very important. However, since we are essentially remodeling a whole business system, it is also important to understand the limitations today while considering the future potential should it replace the classic linear model.”
For Christoph Centmayer, it is clear that the linear product model needs to change and he is confident that rental services are already having a positive impact. However, he admits that Bergans currently has no data to support it – yet.
“We’re currently looking into a collaboration with a renowned research institute on an LCA based on our subscription pilot, and we’re keen on getting the results. But it’s important to remember that rentals and subscriptions won’t work with every product. Not all products can withstand the frequency of use or be repaired, meaning that without a durable product in the first place, there’s little likelihood of success.”
As a direct result of these initiatives, however, Christoph Centmayer shares that Bergans is currently developing especially rugged, repairable products intended for rentals and subscriptions set to launch in the coming seasons. With such specially designed gear and apparel, he believes they can further extend the useful lifespan of rental products and thus help reduce overproduction.
Arrive’s Golden Opportunity
Not producing any products of its own, Arrive’s approach to sustainability would have to set out from an entirely different starting point. Besides the potential of rentals in replacing new product sales, it quickly identified a hitherto unexploited opportunity: Product Returns.
Today’s e-commerce sees nearly 20% of purchases returned, but contrary to what many may believe, these unused returns are often never re-sold. Adding multiple additional stages of processing and transportation, the costs of getting a returned product back to market is often simply unfeasible. As brands are reluctant to see their latest products lining thrift shop shelves, the majority of these returns then end up in the waste bin.
As this represents a massive cost both for the environment and a brands’ bottom line, Arrive approached brands offering to rent out their returns.
“Our Returns to Resale model is driven by brand returns, allowing brands to accept returns and turn them into a profit center with Arrive instead of a cost center,” shares Rachelle Snyder.
Besides reducing costs and helping boost a brand’s sustainability profile, Rachelle Snyder points out that having a cost-effective rental option for brands enables them to offer additional unique services to their customers such as extended return windows or try-before-you-buy experiences.
“We support brands to offer an extended life for products through rental and resale. Once a product has reached the true end of life, that product can be recycled or donated. The brand ultimately decides the end of life channels for the products and Arrive supports.”
Rentals basics: What works?
While both Bergans and Arrive continue to hammer out the details of a successful rental business model, Joel Svedlund points out that in the end there is one “make-or-break” factor that all companies embarking on rentals will need to contend with: the consumer experience.
“Brands need to ask how they can build customer convenience in circular offers that makes this more attractive than current linear offers. Whether or not consumers find the answer to such a question satisfactory will determine their chances of success.”
Although trends are indeed encouraging, for the foreseeable future rentals will likely not eclipse ownership. But another critical question relates to just how much market share is even possible. To this, Joel Svedlund believes that a product’s value has thus far proven to be the best determining factor for success in circular business models:
“The main threat to rentals is competition from cheap products. If a circular product has low-value competitors as a significant part of the market, a big hurdle will need to be overcome for the customer to understand why the circular offer is better than the low-value linear one.”
As such, Joel suggests that products likely to succeed in circular business models will be high-value, high-quality, dirt- and wear resistant as well as easy to maintain and repair. Anything that falls outside of these criteria is likely to face an even tougher time in an already uphill battle converting customers.
For some in the outdoor industry, this might mean good news. In order to meet the often harsh conditions and the wear and tear of outdoor activity, outdoor equipment and apparel is often already built with the very criteria that the rental market requires. In other words, many outdoor products may already hold a competitive advantage over other consumer goods when it comes to product rentals.
Even if certain outdoor products do have an advantage, Joel Svedlund is convinced that it is still too early to predict who the winners and losers will be in the rental market. However, he believes that a closer look at the prerequisites to success can provide a good indication of who has the best chances:
“We now know that circular business is labor intensive, needs two-way direct customer interaction, requires high-quality data exchange, has a much more symmetric logistics flow and demands high-quality, simple to use and repairable products. The players that can handle these factors well will have a great chance of success.”
What does the future hold for rentals?
Returning to the original question of whether outdoor product rentals have stepped beyond the pilot stage and into the category of “must-have” for any brand, perhaps it is safe to say that rentals still have one foot planted firmly on each side.
“Though we haven’t worked out every hurdle quite yet, we think it is critical we gain experience now with circular models in order to prepare for and promote the necessary transition,” shares Christoph Centmayer
“But based on the response these initiatives have been receiving, we see this transition is already well underway!”
While there no doubt remain countless challenges that have yet to be overcome, Rachelle Snyder is confident that the rental market will continue to grow and develop dramatically:
“Circular commerce is the next major channel and launching a combined and scalable rental and resale channel is essential to remain relevant, competitive and innovative.”
But despite promising growth, Joel Svedlund cautions that traditional linear sales and ecommerce will continue to bring in substantially larger revenue streams, at least in the short term.
“But over a longer perspective, I believe that rentals will become part of a larger palette of circular offers, where re-commerce, upgrades, and storytelling about the history about unique products can be interesting meta-values that build identity and value. The traceability needed, on unique product level, for both recycling and the circular offers discussed here, also offers a very interesting possibility to display a product’s full lifecycle and all the adventures it has been through.”
Lead Photo: Jonathan Eidse