Circular Fashion: 5 Business Models That Are Actually Working in 2025

Circular fashion is no longer just a buzzword—it’s a movement reshaping the fashion industry from the inside out. With growing concerns over textile waste, overproduction, and unsustainable consumerism, brands are pivoting from linear models to systems that reduce, reuse, and regenerate. But which circular fashion business models are truly working in 2025?

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Let’s explore five successful approaches that are creating real value for both the planet and the bottom line.

1. Resale & Recommerce Platforms

Brands like Patagonia (Worn Wear) and COS (Resell) have integrated resale directly into their business models. Rather than seeing secondhand platforms as competition, these brands have embraced them to extend the lifecycle of their products and deepen customer engagement.

Third-party platforms like ThredUP and Vestiaire Collective are also thriving by partnering with labels to offer branded resale experiences. Recommerce drives circularity by keeping garments in circulation longer—and data shows Gen Z prefers shopping secondhand for both environmental and budget reasons.

2. Rental & Subscription Services

Rental fashion once had niche appeal, but it’s now booming with global players like HURR, By Rotation, and Rent the Runway. In 2025, brands like Selfridges and Banana Republic have joined the rental space, allowing customers to borrow clothing for special events or seasonal wardrobes.

Subscription models—where customers rotate garments monthly—offer a consistent revenue stream and reduce the need for fast fashion hauls. This model is particularly successful in maternity, workwear, and luxury occasionwear categories.

3. Take-Back & Recycling Initiatives

Brands such as Nudie Jeans and H&M have take-back programs that encourage consumers to return used garments. The collected items are sorted: some are resold, some are upcycled, and others are sent to textile recycling partners.

These programs not only reduce landfill waste but also allow brands to reclaim materials for future collections. Emerging textile-to-textile recycling technologies (e.g., Infinited Fiber, Circular Systems) are accelerating the feasibility of this model.

4. Made-to-Order & On-Demand Manufacturing

On-demand fashion cuts down on overproduction—one of the biggest sustainability issues in the industry. Companies like Unspun (custom-fit denim) and Dressarte Paris (luxury made-to-measure) are gaining ground by using AI and 3D scanning to create garments only after an order is placed.

This model minimizes deadstock and encourages thoughtful purchasing. It also supports more localized and ethical manufacturing, often leveraging digital technologies to reduce waste and improve accuracy.

5. Upcycling & Remanufacturing

Upcycling transforms pre-existing garments or textile waste into new fashion pieces. Brands like Marine Serre and Rave Review are making headlines with high-end upcycled fashion, while smaller labels and artisans are embracing patchwork and reworking as a core aesthetic.

Remanufacturing goes a step further—like Outerknown’s Project Vermont, which rebuilds used flannel shirts into new ones. This model not only diverts waste but creates entirely new product lines from what would have been discarded materials.

Why Circular Fashion Business Models Matter

According to the Ellen MacArthur Foundation, a circular economy in fashion could reduce carbon emissions by up to 39% and significantly reduce textile waste. With increasing regulatory pressures (like the EU’s Textile Strategy) and shifting consumer values, circular models are evolving from “nice-to-have” to “must-have.”

Fashion brands that embrace circularity not only future-proof their business but also appeal to a more conscious, digitally-savvy audience looking for transparency, quality, and responsibility.

Circular fashion isn’t a passing trend - it’s the future of the industry. Whether through resale, rental, recycling, on-demand production, or upcycling, these business models are creating profitable paths forward while reducing harm to the planet.

If you’re a fashion entrepreneur, now’s the time to explore how circular strategies can align with your brand and meet the demands of a more mindful market.