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How to start an online clothing rental business
Got a passion for fashion? Turn it into a profit with a successful online clothing rental store.
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Whether it's designer dresses, outfits for special occasions or unique, hard-to-find items, there's a whole range of possibilities for an online clothing rental business. What's more, the success of several independent online platforms has proven the potential of this emerging marketplace.
In this guide, we'll take you through the key steps to getting a profitable clothing rental store up and running.
What is an online clothing rental business?
An online clothing rental business usually provides exclusive, high-end clothing to rent online. The service gives people the option to hire unique or more expensive clothes for a short time, rather than spending a lot on garments they may not need in the long term.
How to set up an online clothing rental business
- Choose a target market. Take some time to research your competition and aim to set yourself apart by homing in on a certain demographic or fashion trend. Try to combine your interests and experience with what's in demand. You could focus on budget-conscious women in their twenties or formal wear for business men. Or, you could take the eco-friendly approach and rent out sustainable clothing brands.
- Develop your business plan. The next step is to get clear on the vision for your business. Decide what kind of services you will provide and how you'll make revenue. You might offer one-off rentals for occasion wear and access to designer brands, or a subscription model which allows customers a certain amount of items per month with discounts. Your business plan will set out how you intend to manage ongoing costs and market your services.
- Establish your brand identity. You can stand out from the crowd by choosing a unique brand name and logo. Make sure you register your business name with the Australian Securities and Investments Commission (ASIC) so no-one else can use it. You can create your own logo or get a designer to do it for you with these graphic design tools and services.
- Create your online store. Likely the most important aspect of your enterprise, a user-friendly and attractive business website will act as the hub of your business. Your home page will be the first thing your potential customers land on, so make sure it stands out with strong images and compelling copy. It's worth investing in an experienced web developer and designer for this as well, such as an SEO copywriter to help you rank well on Google and boost traffic.
- Partner with designers and stylists. You'll naturally need to decide which labels and styles you want to provide for rental and where you're going to source them from. You could either stock your clothing in a warehouse or save costs by simply making commissions with rental transactions you arrange through other stockists.
- Source images. As an online clothing rental store, images of your dresses and attire will play an important role on your website. You may like to hire a photographer and some models to create vibrant and appealing shots for promotion or purchase stock images through sites like Getty Images.
- Compare loan options. If you decide you'll need to invest more into your business, you may like to consider a loan. You could apply for a small business loan, car loan or personal loan, depending on your requirements.
- Fulfil your legal requirements. To protect yourself from potential losses and miscommunication, you'll want to create a Terms and Conditions for your service. When purchasing clothing from vendors, it may also be a good idea to have a Sale of Goods Agreement in place.
- Promote your business. Once you're all set to go, you can now have fun with promoting your business. Don't hold back on getting your brand out there. Optimising your website with search engine optimisation (SEO) principles will help get eyes on your stock. Some ways to drive traffic to your site include creating weekly blog posts, setting up an email newsletter, keeping active on social media such as Facebook and Instagram, and using online advertising.
What you need to get started
There's quite a bit to consider when starting an online business. To save the overwhelm, we've broken down everything into key categories:
The skills you'll need
As well as an interest in fashion and willingness to keep up with the latest trends, it will help to build some business savvy which should include online marketing skills.
Here are some key skills which may come in handy when setting up your online clothing rental business:
- Ecommerce skills. You'll need to get a handle on running your website effectively, driving traffic to it, and managing transactions and enquiries.
- Communication skills. You'll be communicating both online and in person with vendors and customers. Therefore, the ability to negotiate with stores and warehouses, as well as respond to customers, will help you make traction.
- Administrative skills. A lot of your work will involve administration tasks such as tracking your inventory, fulfilling orders and bookkeeping.
- Marketing know-how. To make consistent sales, your marketing strategy should be an ongoing priority. It will help to continue learning and experimenting with a range of online marketing tools, such as Google Ads, email marketing, SEO and social media.
Courses and qualifications
While formal qualifications are not necessary to set up an online clothing rental business, you might want to upskill in areas such as business management and digital marketing. You could take advantage of HubSpot's free marketing courses and tools, and learn how to get more traffic to your site. There are also many useful paid courses on platforms like Udemy where you can learn everything from how to set up your online clothing store to SEO techniques.
To really build traction in the ecommerce space, you'll want to build skills in online marketing and social media advertising. Many Australian universities offer a range of courses that teach these skills, which could help you grow your business.
Take a look at our list of recommended online course platforms that offer a wide range of training options for business starters.
Want to learn more?
Access thousands of courses from some of Australia's leading providers.
Equipment and software
If you plan to handle your stock directly, you'll of course need a location to store the clothing like a warehouse. Some equipment you'll need for your warehouse will include:
- Garment racking. For longer-term storage in your stockroom.
- Clothes rails. Smaller racks to prepare your clothes for rental.
- Clothes hangers.
- Garment bags. Clothing covers to keep them protected in storage.
- Garment steamers. Steamers will deodorise and remove creases from clothes.
- Shelving. To stock smaller clothing items.
- Carrier bags. You can provide your customers with carrier bags to help them avoid weather damage and soiling.
Since your business will be operated solely online, you'll need some powerful software to run it efficiently. You could aim for an all-in-one rental software that will handle everything from orders and payments to invoicing and inventory. Booqable and Rentle are two options for clothing rental software.
Here are some other software options that will help to grow your online clothing rental business:
- Website building platform. You'll need to choose a strong website builder to set up your store. Popular platforms for ecommerce include WordPress, Squarespace and Wix. A web developer can also help you through this process if you want something more customised.
- Online payment software. You'll need this to accept customer payments. Popular international options are PayPal, Square and Stripe.
- Accounting software. You'll need an efficient way to stay on top of your bookkeeping. A streamlined software tool such as Xero or QuickBooks can help. Check out this review on QuickBooks which can manage your invoices, payroll, tax and expenses.
- Email marketing software. This will allow you to build a list of subscribers and keep them engaged with automated email systems.
- Social media management tools. You can integrate your social media and make it easier to schedule your content with tools such as Buffer or Hootsuite.
- Time management software. To keep you and your team on track and communicating effectively, a time management tool like Trello or Asana may be useful.
How to structure your business
Once you are ready to start your online clothing rental business, you must register for an Australian Business Number (ABN). This is mandatory to apply for a business name, invoice your clients and claim tax credits. After this important step, you are ready to start structuring and managing your business. There are three main structures to consider:
Sole Trader
If you are going to work on your own, you can register as a Sole Trader. As a one-person business, you will be solely reliable for everything concerning your new venture, including all debts and losses.
Partnerships and Companies
If two or more people plan to work on the same project, you can register a Partnership or even a Company. This means that you and your associates will share all your business gains and losses.
A Company is a separate legal entity to the business director, and can be privately or publicly owned.
Legal requirements
In some cases, you may need a Sale of Goods Agreement to outline the terms and conditions of your sale. As a business owner, you are most likely to require a host of legal documents, such as a Website Disclaimer.
Get access to legal services and documents online
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How to make money with an online clothing rental business
There are a few ways to monetise your clothing rental business online. You'll need to consider factors such as your budget and overhead costs, staff you may need to hire, storage facilities and how much time you're willing to commit to your business.
Here are some revenue models that can work for an online clothing rental business:
- One-off hires. You may choose to offer clothing rental as a one-off model, which means people can hire an item of clothing for a set time period, such as a day or a week.
- Subscription model. A subscription model means customers sign up for a monthly fee that gives them access to a certain amount of clothing items per month. You can offer perks to your subscribers, such as cheaper delivery fees and free drycleaning.
- Third party commissions. As a third party clothing rental service, you arrange deliveries and transactions for customers for other clothing providers, but don't deal with the stock directly. You can make money on commissions for every rental through this model.
- Advertising. You could offer advertising for fashion brands on your site and social media platforms in exchange for a fee.
- Sell clothes. Once you're up and running as a clothing rental service, you might like to add an extra revenue stream by offering customers the option to buy certain clothing items.
How to find customers
Marketing is at the heart of every successful business. In the case of a clothing rental business, you'll want to promote your services across a variety of platforms such as Facebook, Instagram, TikTok and even YouTube to gain as much exposure as you can. These platforms allow you to share content and build a following for free, but you can also utilise paid advertising options.
Of course, your website should be the jewel in your crown, and be both easy to navigate and utilise SEO best practices to attract customers. Creating a blog and posting regular content is one effective way to drive traffic to your online rental store.
Email marketing is also very important, as many leads will come from your newsletter.Take a look at our guide on marketing for small businesses here.
Pricing your services
Your pricing strategy will need to suit the market you're selling to, as well as your own costs. An online clothing rental business will usually have the following charges you will need to consider:
- Hire charges. These can be on a daily or weekly basis. Long-term hires may benefit from a reduced rate. More expensive items may have higher charges.
- Deposits. You may require these for customers that hire a designer piece.
- Extra charges. These can be necessary if pieces are lost, damaged or returned late.
Ready to get set up with Square?
Get your business moving with payment terminals, QR code ordering, invoices and more.To get an idea of how to start pricing your rentals, you could also research competitors already in the market.
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