How to start a clothing rental business

Did you know that the UK alone produces 206.456 tonnes of clothing waste each year? But with a clothing rental business, you can reduce this waste and earn money doing it. 

A clothing rental business lends items to people so they can try them out or wear them for special occasions. It’s a less expensive option for customers than buying. Plus, you can continuously earn money off a steady inventory. 

But if this idea is new to you or you’re not quite sure how to make it work, don’t worry. We’ve got you covered.  

This article discusses how to start a clothing rental business, including:

• Planning
• Setting up
• Organising 
• Marketing

Rental clothing may seem like a lot to keep track of. But, with a well-developed plan, you can start your clothing rental business and structure it for success. Let’s go over the planning essentials. 

Start out with market research on fashion trends. With a clear idea of the current environment, you can understand what clothing people want, what’s in style, and what the best brands are. 

To learn about today’s fashion industry, consider looking to: 

• Your favourite clothing sites to analyse trends. 
• Popular fashion magazines like Instyle, British Vogue, or Grazia.
• Fashion Week runway looks. 
• Statistics and research from sites like Google Trends and Statista.

Then, narrow down your research to other clothing rental or sustainable fashion businesses. You may need to overcome competition from companies like By Rotation, Hurr, and Rotaro. 

Your market research will help you uncover your business’s target audience, or the people most interested in your rental products. 

For example, you may choose to focus on a primarily female audience since women typically shop for clothing more than men. From there, you could focus on environmentally conscious people. 

You may also focus on people who like expensive clothing but lack budget, like young professionals. 

Clarifying your target audience and understanding their motives will help you reach them and find customers for your business. 

Specialising your business allows you to stand out from the competition. If you offer something unique and specific, you can more easily draw people in. 

So consider a few things: 

• What type of clothing will you focus on? – You might focus on dresses for special occasions, seasonal pieces, or everyday wear. 
• What kind of style will you circle your business around? – Most clothing businesses focus on a particular fashion, mood, or type of buyer. For example, you could do preppy chic, vintage, or bohemian. You might also circle your collection around a particular colour scheme.

When you narrow down your business, you’ll also need to consider the renting model. Think about:  

• How long you’ll rent your clothing for. Will it be long term or short term rentals?
• How you’ll distribute, track, and reclaim it.  
• How you might handle lost or damaged clothing. 

To run a successful clothing rental business, you’ll need to have an eye for fashion and detail. It’s essential to have products people want to rent. Plus, if you can style a good look, it’ll be easier to sell your pieces.

If you’d like to take fashion styling courses, there are plenty, like this one from the London College of Fashion. 

Aside from that, it’s important to take care of your inventory well since you’ll reuse them. So, you may want to read into clothing care and laundering to get it right and prolong your inventory’s life.  

But what will you need to start your rental clothing business? Start by considering how you develop your clothing collection. For example, you could:

• Purchase an inventory of clothing – More initial costs but fewer regular business expenses. 
• Renting out clothing owned by other people – Fewer initial costs but more regular fees. This way, you won’t have to pay for the clothing yourself,  but you will pay the owners to use their clothing. 
• Design and create your own clothing to rent – if you have fashion design skills and want to invest in the time and cost of clothing creation.

Also, consider how much clothing you want to start out with and the different sizing you’ll need. 

Then, decide if you’ll open a clothing shop for your rental business or run it primarily online. You might let people pick up their clothing or offer to ship. 

Apart from clothing, you’ll likely need 

• A washer and dryer
• Clothing care products (stain remover, fabric sprays, polishes etc.)
• Storage for your inventory

All these questions may seem like a lot to consider. But if you iron out the details beforehand, you can approach your new business wisely. 

So, once you have a clear idea of your clothing rental business, put it all together into a business plan. This plan can outline everything we’ve covered so far in addition to your business’s objectives, values, and starting budget. 

Your budget will determine how much you need to spend on starting your business, or the startup costs. It’ll also look at the running expenses once you get started. 

Plus, your budget can help you determine what to charge for your rentals and how much you expect to earn. 

Think you’ll need external funding to cover the cost of your inventory? You’ll also need a business plan to secure an investor or business loan. 

Part of how to start a clothing rental business is setting it up for success. Once you have a plan, you can turn your business into a legal entity. 

To establish your business, you’ll need to register it with the UK Government. You have two main options for this. You could register as either a: 

• Sole trader – This one’s a bit easier to do and takes less time to manage. But you’ll also be personally liable for your business and it’s finances.
• Limited company –  It’s a bit more of a process to register, and there are more regulations and taxes (i.e. corporation tax). But, the business is a separate legal entity from you, so you only risk what you put into it. 

So, weigh each option to understand which is the right fit for you. This may feel like a big decision, but don’t worry, you can always transition to a limited company later on. 

You can also check out our article on how to set up your business: sole trader or limited company. 

You’ll also need to manage and report your own taxes, including income or dividend tax and national insurance. If you’ve never done this before, it’s pretty easy if you know where to look.

People with variable income submit a Self Assessment tax return, which you can do online. 

Here are a few other things to know:

• As we mentioned, limited companies also need to pay corporation tax. 
• If you expect to earn over £85,000 annually, you must register for VAT. 
• Ever heard of Making Tax Digital (MTD)? It’s a government initiative to digitise the tax process. Only VAT registered businesses must worry about it, but eventually all companies will need to comply. 

Finding the right insurance will protect your business’s finances. For example, you might want to insure your rental clothing inventory. This protection will help you stay profitable if you lose or damage any of your products.  

You could also get public liability insurance to defend you from injury or damage claims against your business. 

Make sure you’re aware of the regulations behind renting clothing. If you plan to rent items longer than three months, you may require consumer credit authorisation from the Financial Conduct Authority.  

Also, write up clear rental contracts, so your expectations and limitations are clear to the client. Without a client contract, you may not be able to hold clients responsible for lost or damaged clothing. 

Knowing how to start a clothing rental business is one thing. But, you’ll need to stay organised to keep it alive. 

To stay on top of your day-to-day, it’s important to check your sales, communications, and calendar regularly. A business management tool like Google Workspace can help you do this. 

This way, you can keep a clear to-do list and respond to client emails efficiently.

Though your inventory may not change, you will need to stay on top of it well and know where it is and when. If you struggle to meet customer needs, it might be a sign to expand and add to your stock. 

Be sure to keep clear records of where your products are and when they’re due back. This way, you can hold customers accountable, remind them, and protect your profitability. 

Also, consider how you’ll accept payments. If your business is primarily online, it’s important to add a payment method to your website. Paypal, for example, is safe and secure. 

If you run a clothing rental shop, you might need payment machines. Sumup has some great options for small businesses.

You’ll also need to organise your finances to track your profits and make accurate tax reports. The best way to stay on top of what you spend and earn for your business is by separating it from your personal finances. 

You can separate your finances by opening a business current account, a bank account designed specifically for businesses. With this, you’ll have all your business transactions in one place. 

On top of organising your expenses and earnings, it’s important to analyse them and record them in your bookkeeping. Modern accounting software will make this much easier. 

Accounting software can help you: 

• Track your cash flow.
• Categorise expenses for your records.
• Send and receive invoices. 
• Simplify your tax process. 

The best tools automate the process to promote accuracy and take stress off your hands. 

But what tool is right for you? Why not try Countingup, the business current account with built-in accounting software? It’s rated ‘Excellent’ on Trustpilot and used by thousands of small businesses in the UK. 

Start your three-month free trial today.

So, you know how to start a clothing rental business. Now you’ll need to earn some customers. Let’s go over a good marketing strategy for a clothing rental business. 

Your brand identity is how your business looks to the public, and you want it to look as good as the clothing you rent. So, consider how you might design your brand using a consistent colour scheme, tone, and memorable logo.

With a free design tool like Canva, you can get ideas for your brand and design marketing materials that make it pop.

Learn more about developing a strong brand with our article on how to create a brand identity for a small business. 

You’ll also need a good website for your clothing rental business. If you plan to sell your clothing online, this is even more crucial. Consider designing a website filled with fashion elements that draw the eye. 

In general, you website should include: 

• Your business story – who you are, what you do, and why. 
• Contact information – your email address, phone number, and links to other places to find you. 
• Pictures of your products– and a digital shop if you sell online.

If you’re unsure where to start, see: How to create a business website. 

People often start their shopping journey on social media. Platforms like Instagram, Pinterest, and TikTok are great places to find outfits, style tips, and shopping ideas. So, consider marketing your business on these platforms.

Start by creating profiles and adding your business name and logo. Then, you can post pictures of your styled looks. You could also create videos about quick tips and trends. 

Platforms like Instagram and Pinterest also let you pay to promote your posts, which will help you reach more people.  

Another way to reach customers is through influencer marketing. You can pay fashion bloggers and influencers or offer them a discount to wear and promote your products. 

If they post about your business and review it highly, it’ll help you earn their audience’s attention and increase your sales.  

So, there it is. This article will help you learn how to start a clothing rental business. And soon you can help people wear the clothes or their dreams sustainably.  

Just remember, to succeed, you’ll need to: 

• Plan ahead. 
• Set it up legally and logistically.
• Organise everything clearly. 
• Market yourself strongly.

Wondering how long it all might take? Starting a business is a lot of work, but with a little focus and dedication, you can make it happen in a timely manner. 

To learn more, check out our article on how to start your own small business in 30 days.