Fashion Rental Competition Is Increasing

Courtesy of Bloomingdales

Bloomingdale’s this week joined the clothing-for-hire trend, just in time for fall fashion, back-to-school, and college campus shopping, with all the attendant Instagram posts.

As the latest entrant in this increasingly crowded niche, starting in September, My List at Bloomingdale’s will offer women a $149 monthly fashion subscription. Initially, customers get four pieces, with unlimited substitutions.

Other newcomers to the fashion rental market are Urban Outfitters, Anthropologie, and Free People—divisions of URBN brands, which through its Nuuly service in July began offering six-piece rental boxes of women’s clothing for $88 a month. Included in their fashion selection are vintage denim and designer pieces.

Even with such an increasingly crowded field, “To us, subscription models feel very modern,” said Oliver Chen, managing director of retail and luxury for the brokerage firm Cowen. “People are rethinking material things. It’s possessions as a service.”

Still a small retail niche

Rented clothing once meant tuxes and Halloween costumes. Now options abound: There’s fine jewelry (Switch, $29 per month) plus-size fashion (Gwynnie Bee), kids’ wear and sneakers (Walmart, $48, and Nike Adventure Club, $20, respectively), maternity (LeTote, $89, or $79 for non-maternity).

Many mall specialty brands, including American Eagle, Ann Taylor, and Vince, have rental programs. It’s a shampoo-rinse-repeat model for fashion: Choose it, wear it, return it—and order more. Customers can always be shopping. To that end, Bloomingdale’s My List has a 10-item queue feature for future wardrobe choices.

Yet despite this growing flurry of fashion-rental-on-demand interest, the market segment remains small, relative to in-store and online clothing and accessory sales.

David Hayne, chief digital officer URBN and Nuuly president, characterized clothing rental as having “light awareness” among U.S. shoppers—but it’s growing. GlobalData Retail valued the rental market at $1 billion last year, with a 20% annual growth rate.

“We think this is the way the customer is headed,” said Hayne. So much so that, while others are outsourcing their rental programs, the Philadelphia-based URBN ponied up for the infrastructure: A new 300,000 square-foot warehouse, a laundering plant, and a dedicated team. They’re targeting 50,000 subscribers in 12 months, but Hayne declined to share how many they’ve signed on so far. 

CaaStle, which owns Gwynnie Bee and Haverdash, both rental services, reinvented itself as a third-party provider (the name is an acronym for “clothing as a service”) to capitalize on demand for a one-stop management system. They have signed on more than a half-dozen brands—including Bloomingdale’s— since launching in 2018 and just opened a second warehouse, in Phoenix. Walmart’s children’s fashion box is in partnership with the Kidbox subscription service.

What’s going to work?

Fine-tuning fashion box businesses has its difficulties. Retailers need to figure out: How much should they charge? How many pieces and how many change-outs? Will this cannibalize sales in an already-struggling sector? 

Rent the Runway, a pioneer and reputed $1 billion player in the clothing rental business, started as a way of allowing women to score cocktail dresses they only planned to wear once. So attractive was this niche that Neiman Marcus formed a partnership with the startup. Another early entrant, Stitch Fix, has developed its personal styling and fashion subscription business since 2011, now catering to women, men, and kids.

“We expect growing pains,” Chen said of the industry. “There are a lot of questions as brands learn how to do this. The business models were not set-up for this expectation [of rental inventory] so they’re going to need to think in new ways about the lifecycle of the garment.”

He said it may be particularly challenging for department stores such as Bloomingdales, a Macy’s division, to manage a different kind of demand. Some fashion labels may get squeezed, either by not being represented in subscription menus or by being widely rented (and then not actually bought.) Bloomingdales declined comment but its news release announcing My List mentions its house labels as well as Frame, and Kooples.   

URBN is prepared for some cannibalization of its retail sales. “We do anticipate that some sales might be impacted,” Hayne said but added that, longterm, Nuuly should be able to recoup and grow. “We know the customer’s desires are evolving and we want to be where she’s going.” 

In nearly all rental services, shipping is free both ways, but Chen pointed out that customers like to return in stores. The retailers who can offer this option, rather than mandating the ship-back, will benefit from that traffic. As well, if customers rent an item in the wrong size, they may want to facilitate a quick exchange in store.

CaaStle said for the brands it manages, which includes LOFT, American Eagle, Vince, Rebecca Taylor, and others, a customer spends 100 minutes a month on the brand’s rental sites. Moreover, existing brand customers spend 125% more, year-over-year, through all channels once they become subscribers.

Is subscription fashion more sustainable?

The global apparel industry is considered among the biggest industrial polluters . The popularity of fast-fashion has sped up not just the array of store merchandise, but consumer discards too. In theory, with subscription boxes, if closets go more communal, fewer garments can be made and they can be worn longer. 

“Sustainability is a real part of this and something the consumer innately understands,” Hayne said. “We made as many decisions as possible through the lens of what’s right.” For instance, Nuuly reusable shipping bags are spun out of ocean-waste plastic. Garments will be laundered in low-water machines designed to use special detergents.

However, Darin Archer, chief strategy officer at Elastic Path, a  commerce platform provider that counts LVMH as a client, said it’s not certain that rental services will be a net positive for the environment.

“If a rental service buys too many of one style that ends up being unpopular does that garment just get thrown out or is it donated or recycled?” he noted. “Additionally, with this model, consumers who might not have shopped online on a monthly basis due to budgetary constraints are basically getting the same experience but at a lower cost, adding more packaging and emissions from shipping into the mix.”

Archer also questioned sustainability from a time/effort standpoint. Will people really want to manage their closets so actively?

“Some subscription services are, frankly, too rigid and it’s a pain for customers to update order frequency, change their delivery date or just put a pause on deliveries altogether,” he said. “There’s definitely the risk of clothing rental becoming a novelty or getting relegated to something only for special occasions.”

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