7 challenges of the sharing economy (and how fashion can handle them)
The sharing economy is bringing great changes to all industries, including fashion
A lot has been said about the sharing economy in recent years, lauded as a way to make use of idle resources and make money by connecting people who need something with those who have it.
It's no secret that it has been growing rapidly, but what does this shift mean for fashion companies? As traditional retailers struggle to keep up with changing consumer habits, some believe that the sharing economy could provide a much-needed boost to the industry. But doubts and difficulties are not lacking.
What is the sharing economy?
In essence, the sharing economy is a business model in which individuals and companies share goods and services with each other (peer-to-peer) without involving traditional intermediaries. Examples of sharing economy include companies such as Airbnb and Uber, which allow people to rent out homes or offer rides for money.
The sharing economy also encompasses items like clothes, jewellery, books, toys, and electronic gadgets, among many other things that can be shared or rented instead of purchased.
This kind of business model has been around for quite some time but the emergence of new technologies has allowed it to expand quickly. In fact, sharing economy usually relies on online platforms, which improve efficiency and offer a more personalised customer experience to users. Thanks to it, consumers have now access to products they may not have been able to afford or lack the storage space for. On the other hand, companies can offer their products or services to a wider audience than ever before. Furthermore, by eliminating middlemen such as brick-and-mortar stores or rental companies they can reduce costs significantly. In other words, the sharing economy is revolutionising how businesses utilise resources both within their own company as well as within their community at large.
The sharing economy and sustainability
The sharing economy has a positive impact on the environment by reducing pollution and resource depletion. By utilising existing resources that would otherwise remain idle or underused, it can reduce the production of new goods or services and, as such, their carbon footprint. Moreover, new technologies and platforms facilitate the efficient exchange of items, meaning fewer resources are wasted due to transportation or storage.
In addition, by encouraging an open dialogue between producers and consumers, the sharing economy helps to foster a greater understanding of sustainability issues at large. By making people more aware of the importance of sustainable practices it can help ensure that they become part of everyday life.
What is the sharing economy?
The sharing economy is a business model in which individuals and companies share goods and services with each other without involving traditional intermediaries.
It incorporates all things that can be shared or rented instead of purchased.
The sharing economy applied to the fashion industry
We see a growing number of startups and historical brands offering platforms where consumers can rent or share clothes, accessories, and other fashion items.
Fashion renting has become increasingly popular in recent years as a way for people to have access to clothing items for a limited time by paying rent.
Initially, consumers were interested only in renting formal clothes to use for special occasions. Today, they are starting to rent even more common garments.
The motivations behind fashion renting are diverse:
- low economic availability,
- interest in reducing one's environmental impact,
- the desire to try different styles without having to commit to one in particular.
In the fashion-sharing economy, consumers can now create a shared closet that is larger and more diverse than the one that is physically in their room.
The benefits for companies
And for companies, what are the benefits of sharing economy fashion?
First of all, businesses can now offer consumers access to exclusive designer pieces or hard-to-find items, without the need for costly investments in physical stores. Then, online platforms have opened up new opportunities for businesses to collaborate with influencers and collect data that allow them to gain a better understanding of their customers and what kind of services they are looking for. As such, companies can more effectively target their campaigns and ensure that they have the right product mix available at any given time.
The sharing economy also helps fashion brands in terms of reputation. The more people share items within a company's catalog of clothing and accessories the greater the potential for increased customer loyalty due to word-of-mouth advertising. This could lead to higher customer satisfaction rates and potentially more sales in the long run.
Finally, the sharing economy helps fashion brands in terms of sustainability. It enables companies to find alternative ways to utilise resources, enabling an increase in the use of renewable materials and reducing waste. For example, fashion companies are exploring new ways to make use of shared assets such as materials and production facilities. This is especially important for small businesses that may not have the capital for large investments but could leverage the resources of others in their industry to remain competitive.
Challenges behind the sharing economy
Despite the benefits, the sharing economy confronts fashion brands with some issues. Let's see some of them.
One of the main challenges lies in understanding how people use the platforms and adapting their strategies accordingly. For example, businesses must consider the preferences of their target audience when choosing which online platforms to use, as well as determine the best pricing models for their goods and services. In fact, companies should bear in mind that customers may not be willing to pay full prices for rental items or services and may instead opt for cheaper options from other businesses.
Proper governance and safety protocols
As most sharing-economy transactions take place online, they are vulnerable to fraud or malicious behaviour. Businesses must ensure that the necessary protocols are in place when dealing with that. They must also provide customer service in case of issues to ensure customer satisfaction.
Another challenge for businesses is managing inventory if they decide to rent out items, which requires careful planning and organisation.
Businesses should also take into account legal issues such as liability, data protection, copyright laws, and even taxation regulations when engaging with the sharing economy.
Effective marketing strategies
Fashion brands should think beyond traditional channels such as print or television commercials and focus on leveraging digital tools like social networks and influencers.
Fashion businesses must consider how to maintain customer loyalty when engaging in the sharing economy, as it may be difficult for customers to keep track of the multiple companies they have interacted with over time. Businesses should look into developing their own online platforms or apps that can help them retain relationships with customers and build trust.
Authenticity of garments and hygiene
Fashion brands must assure customers that the garments they rent are in good condition and sanitised. In addition, in the case of luxury items, brands must prove the authenticity of the garment, which must also be checked again to ensure the original product is returned.
How to overcome these issues?
To tackle these challenges, businesses should focus on creating seamless digital experiences for customers by optimising their websites and mobile applications. They should also make use of data analytics tools to gain insights into consumer behavior and trends in order to develop targeted campaigns. Businesses could also explore options such as subscription services or loyalty programs to encourage customers to stay loyal to their brand. Additionally, companies should use digital marketing strategies such as email campaigns and social media to reach more customers.
One tool for doing much of this is connected products.
Connected products are items that come with an embedded technology that allows companies to collect data and share information about the products themselves.
For example, through a QR code placed on the label, consumers can access information on the sustainability of the garment, its rental history, and how to manage the rental. What's more, they can verify the authenticity of a luxury item.
The brand can also share exclusive content, send personalised offers, facilitate participation in the loyalty program or in creating UGC. Finally, the brand can constantly keep track of the garment, supporting inventory operations.
Connected products drive customer engagement and customer loyalty, while also reducing many of the problems we've seen above. In other words, by employing connected products, fashion businesses can capitalise on the opportunities behind the sharing economy.