How to build a circular rental business

If you’re considering entering or are currently in the circular based rental business, our recent conversation with Katie Hanton-Parr, Co-Founder of premium baby equipment rental company Baboodle, delves into the details of bringing one from idea to kitchen table to a scaling, evolving, ongoing concern. The challenges, the opportunities, the details needing tending to are all explored. As is the growing interest in and support of such circular businesses, both by consumers and brands. 

Katie, to us, demonstrates how hard work coupled with an agile approach and picking the right market, customer and product mix can lead to traction in this evolving business model.  

The Genesis of a Circular Vision

Katie's journey to founding Baboodle began with a personal pain point that millions of parents face. "I had my first daughter in 2021, and I think the idea for Baboodle just grew organically from seeing the issues around the way that you purchase kit for your babies and the existing way of doing things as in the linear consumption model," she explains. "And I was just so convinced that there had to be a better way of doing it."

The problem she identified was multifaceted and universal among new parents. "Babies grow really quickly. They don't like half of the stuff that you buy for them or you don't like it. It's really unpredictable. The kit that they need is so expensive. It's thousands and thousands of pounds over their first year if you were to buy everything that you are told you need." Beyond the financial burden, the physical and logistical challenges were equally daunting. "When you're done with it's really big, it's bulky, it takes up a lot of physical space, which didn't work for us in a little London house with no spare storage room. And it's time consuming. There's a big time investment in selling it on or donating it afterwards."

Starting Small, Building Smart

What sets Baboodle apart from many startup stories is Katie's deliberately lean approach to launching and scaling the business. "I think the first iteration of the website was literally a PDF where you ticked what you would like. And we sent that out to various people, asked them to send it onto their friends, and the rentals just started trickling in."

This grassroots beginning proved invaluable for understanding the true operational challenges of running a circular business. "Operationally and financially at the very beginning they were by far the biggest challenges. We were bootstrapping it for ages and we were just basically buying to demand." The company started with Katie commandeering her living room, then bringing her brother on board to work from the same space, before eventually moving to a small fulfillment room.

The real learning came when they attempted to work with third-party logistics providers. "I think operationally, this is where the challenges became really apparent, is that no one is really set up for the reverse logistics side of things. So that was something that we had to map out." After trying several 3PLs and spending months driving to warehouses to clean products on the floor, they made the crucial decision to bring operations back in-house.

The Technology Challenge: Building Without a Blueprint

One of the most significant challenges facing Baboodle—and circular businesses generally—is the lack of existing technology infrastructure designed for these new business models. "If you start an e-commerce business you come up with a product, you brand it well, you market it well, you get a 3PL and there's your business. Whereas this is entirely different. It's limited in terms of the out the box plug and play tech stack that you can just switch on," Katie explains.

Working with HappyPorch, Baboodle has taken what Katie describes as a crucial iterative approach to technology development. "We knew that we needed our own systems. We've got Supercycle now. We use a combination of Firmhouse and Supercycle, and they each do a great job on the subscription management side of things, but it doesn't necessarily clock over into the warehouse management."

That’s where circular operations attuned Refulfil has proved an invaluable asset. 

The challenge extends beyond just finding the right tools—it's about creating entirely new processes. "There are plenty of warehouse management tools out there, but none of them really function in the way that we need for the return side of things. And there are lots of shipping platforms out there who do the outbound stuff, but their return stuff is very limited."

The Iterative Technology Philosophy

The approach that Baboodle has taken with us at HappyPorch represents a new model for technology development in the circular economy. Rather than attempting to build a perfect solution from the start, they've embraced iteration and learning. "We don't yet know what we don't know. Also importantly, I think there are lots of people, a lot more qualified than us building out this tech simultaneously. So we don't want to overinvest when there will be solutions coming. And it will just be a case of stitching things together with various APIs."

This philosophy has practical benefits beyond just cost management. "I think taking a bit of a phased approach to tech, basically which works well for cash flow and it also works well for building the right thing for us and our business." The result is a technology stack that has evolved organically with the business needs, creating something that's both functional and scalable. We believe it’s all about adapting and fitting the software to the business, rather than the other way around. 

The Power of Strategic Partnerships

The complexity of building a circular business has made partnerships absolutely essential to Baboodle's success. Katie emphasizes the collaborative nature of solving these unprecedented challenges: "I think no one can do this in a silo. I think we are living and breathing it. And communicating all the problems to you guys, Supercycle, Danai at Refulfil every day. Like I say, you don't know what you don't know. So we're constantly iterating, trying things, realizing that we need to tweak that in some way."

The value of these partnerships extends beyond just technical solutions. "I think there's a huge benefit to working with a team like you guys who are building in real time. So we're all working out the issues and then solving as we go. And the partnerships there, I think it's created something scalable. There's no way we'd have been able to map this out by ourselves."

Key partners include:

• Supercycle: Providing subscription management solutions tailored to circular businesses, within the Shopify platform
• Firmhouse: Supporting subscription infrastructure
• Refulfil: Contributing operational expertise through Danai's deep understanding of circular logistics
• HappyPorch: Developing bespoke technology solutions to bridge gaps in the existing tech stack, using Retool and other resources

"I think just having the resource there of, you know, you and Danai who live and breathe this stuff and just know circular inside out and Danai's Ops brain who can just see a problem 10 steps ahead and then solve for it," Katie notes. "I think it would be entirely impossible" to build this without such specialized expertise.

Data as the Foundation for Circular Growth

The technology stack that Baboodle has built with its partners is generating extensive insights into the circular economy. "We've had fairly limited data to go off so far. And it's all about the lifetime value of customers and all the actual payment data and that sort of thing we've got. But what we don't have up until now is a really clear digital log of how long a product lasts, an individual product lasts, what that translates to on a SKU basis, and therefore what return we actually have across a SKU."

The newly accrued data thanks to their evolving tech stack is proving invaluable for optimizing the business model. "We've got loads of KPIs that we track across a SKU basis. We also are starting to introduce tracking across a team basis so we can start to see where the gaps in the team are, what processes are taking too long and need to be refined." The insights extend to understanding which products truly work in a rental model: "So that's giving us a much clearer picture on what products actually perform well in rental. And which ones might appear to perform well, but actually the cleaning on them costs double and therefore the margins are just too tight on that particular product."

Creating Value for Brand Partners

The data generated by Baboodle's operations is creating unexpected value for brand partners. "It's actually a really useful source of data and a lot of them using that data and that dictates the next release of X model. There's a lot of interesting work to be done from a product perspective with this, just a line of communication directly to the customer with quite intense use."

This represents one of the most promising aspects of the circular economy—the feedback loop between usage data and product design. "We have really good information on how these products fare over time. Probably more insight than across all the brands, more insight than any retailer would have."

Overcoming Operational Challenges

The day-to-day reality of running a circular business presents unique challenges that linear businesses don't face. "I think what will always be the case is that we're basically running a business where stuff comes back broken. You've got to fix it and send it out. And the scale that we're doing that's happening. We've just got a lot of physical things to process every day."

Despite these challenges, Katie has been pleasantly surprised by customer behavior. "Do you know what I was really surprised by though, when we first started doing this at any sort of scale, was how respectful people are generally. It could go one of two ways with rental. People either look after it really well 'cause they're nervous about charges and things like that, which we don't do. I think we've made a really conscious effort not to do that."

Looking Forward: Scaling the Vision

As Baboodle continues to grow, Katie sees tremendous potential for expansion. "I am really excited to get all these processes that you built which will allow us to scale. So at the moment we've been so focused on kind of the operations and building a really solid foundation for the business. We've not really switched off any sort of brand awareness or marketing so I'm really curious to see what happens when we throw some money at that."

The company is positioned to explore new partnerships and B2B solutions. "I just think there's a huge opportunity, in terms of brand partnerships what we can offer brands and it's something that we might start to build out a little bit more."

The Broader Circular Transformation

Katie's vision extends far beyond Baboodle itself. "I think that starts with changing in the customer's mind, doesn't it? And I think once the customer's mind has changed, we are seeing huge growth and it's fairly low customer acquisition costs, so that would imply it's a lot of word of mouth and a lot of people just coming round to the idea of rental."

She sees this customer shift as the catalyst for broader industry change. "I think that will then force a change amongst brands because they're gonna, I just think, the circular economy is coming, there's no two ways about it. It's becoming a lot more mainstream. It's becoming a lot more readily used by most people, I'd say now in some way or form."

Building the Infrastructure for Tomorrow

Baboodle's journey represents more than just a successful startup story—it's a blueprint for how circular businesses can be built in partnership with specialized technology providers. By taking an iterative approach to technology development, building strategic partnerships with companies like Supercycle, Firmhouse, Refulfil, and HappyPorch, and focusing on data-driven optimization, they've created a model that others can follow.

The company's success demonstrates that the circular economy isn't just about environmental benefits—it's about creating new forms of value through better data, improved customer experiences, and more efficient resource utilization. As Katie notes, "I remember thinking at the time, this is so replicable, once we've done this right, it could apply to any industry."

The infrastructure being built by Baboodle and its partners is laying the foundation for a broader transformation in how businesses operate. By solving the complex challenges of reverse logistics, asset tracking, and customer experience in a circular model, they're creating the tools and processes that will make circular business models accessible to companies across industries.

The future of commerce is circular, and companies like Baboodle are proving that with the right partnerships, technology, and iterative approach, that future is not only possible—it's already here.

Learn more about Baboodle at baboodle.co.uk and follow their journey on Instagram @baboodle_uk.