Why Wardrobe Sharing Platforms are Dangerous to Luxury Brands

While luxury brands like Burberry and Tiffany & Co. are leaders in digital marketing, others fall behind, struggling to understand Gen. Z and millennial consumers. Especially in tech-savvy China, achieving brand relevance in the media-saturated world is a struggle for many established heritage brands. Tackling this new world implies conquering the full essence of the digital customer experience and embracing growing trends like peer-to-peer (P2P) platforms.

Wardrobe sharing apps are the latest global hype, perfectly responding to the needs of the environmentally conscious, hyper-connected consumers. Replacing ownership with convenience and accessibility is not something invented by millennials but they are responsible for significant advancements in the market. Despite a robust appetite for P2P apps, some critics voiced concerns regarding the long-term impact on the luxury market.

First, it’s worth mentioning that the sharing economy is seeing robust growth. A PricewaterhouseCoopers report from 2015 predicts that global revenues from the sharing economy will generate $335 billion by 2025. In China, the sharing economy has seen dramatic growth and World Economic Forum estimates that by 2025 it will account for 20% of the GDP. Furthermore, according to a 2017 report from iResearch China, the country already recorded 12 unicorns, overtaking the lead from the U.S. who registered only 11 unicorns. In China, the sharing economy was strongly supported by the ruling Communist Party; thus, the boom was powered by competing public strategies and favorable policies.

Second, the sharing economy revolutionizes sustainability by reducing waste, greenhouse gas emission, and toxic substances. According to PwC, 78% of interviewees agreed that the sharing economy “reduces clutter and waste.” This responds to the needs of “woke” consumers and shoppers anxious about social and environmental issues.

Third, the sharing model offers better pricing and higher accessibility. Owning a Birkin means paying a premium but renting it comes with a lower price tag. Despite its disruptive essence, the sharing model has the potential to harm the luxury sector. Consumers need to take in consideration the following developments:

1. The sharing economy is sabotaging craftsmanship and the artisan-made production

The blueprint of a luxury product demands effort, exceptional skills, and several hundreds of hours of labor. Heritage brands like Chanel and Dior partner with ateliers and distinguished craftsmen to create the latest designs. During his time at Chanel, Karl Lagerfeld was praised for perpetuating centuries-old craftsmanship through collaborations with Lesage, Desrues, Lemarié, and Maison Michel. As expected, a design that requires several hundreds of hours of labor is close to an art piece and this increases the value of the product. But in the shared economy, these garments pass from buyer to buyer, losing their uniqueness and appeal. High-end apparel was not intended to become conventional but aspirational and rare. The scarcity of the designs pushed the market price up, but if the garments are available to a wider public, the price falls again. In the long run, democratizing the high-end fashion world will put out of business various ateliers and craftsmen.

2. Quality issues

Loose stitching, lost buttons, broken zippers, and faded colors. Everyone who ever owned a piece of clothing knows that even investment pieces wear out. A rented garment that was worn hundreds of times ends up in worse shape. A simple research about Rent the Runway on SiteJabber brings up hundreds of complaints from subscribers who vent about quality issues. Some acknowledge even additional costs and fines. Mandy Velez from the Daily Beast details in a long post her USPS misstep, which came with a lofty financial penalty.

3. Consumers associate luxury with ownership, not with access

It’s difficult to preserve the brand’s luxury identity if the product is available for mass consumption. In the long run, the accessibility offered by the sharing economy dilutes the identity of luxury brands making them bleed market share. Exclusivity means keeping the masses out not inviting them in.

4. Conspicuous consumption won’t disappear

Conspicuous consumption has harmful consequences for the earth and our wellbeing and safety. As the world moves faster, the retail market tries to keep the pace. Medium estimates that 15 years ago, Chinese consumers wore approximately 200 times a garment before disposing it. Today, the number has decreased to 62 wears. Fast-fashion brands, and not heritage houses, are to be blamed for conspicuous consumption. So, wardrobe-sharing platforms are a greener alternative to luxury buying, but they still don’t solve the problem in the long run.

5. The death of shopping gratification

Not only ownership but also instant shopping gratification gets eliminated in the sharing economy. As consumers stop buying new garments, they cease to enjoy the emotional hype that comes with new purchases. Curbing instant gratification and emotional purchases is morally virtuous but eliminating it altogether means cutting production and retail jobs, bankrupting companies, and sending the retail market into a death spiral.

6. Risk of counterfeit luxury goods

 The vast majority of wardrobe sharing platforms has to overcome additional hiring challenges, as they can’t access experts who have competence in counterfeit products. In fact, PwC reports that 48% of P2P consumers have concerns about quality issues, showing a willingness to trust department stores over wardrobe sharing platforms.

7. Dumping a higher stock of merchandise on the market does not increase the perceived value of the brand

Again accessibility kills luxury. We’ve seen it with mid-level and affordable luxury brands that struggle to stay relevant. While the past years came with a renaissance for heritage brands, the mid-segment market was massacred. According to a study from Deloitte, in 2017 sales at the premium and low-priced retailers have seen 8% growth, while mid-retailers registered a decline of 2%. 21st century consumerism is all about differentiation, not democratization.

8. Privacy concerns

Wardrobe sharing platforms collect valuable data on their consumers. This gives them a market advantage but opens the shoppers to real privacy risks. Not all companies embrace the transparent corporate culture or adopt new technologies, thus, data mismanagement remains a serious concern.

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