Is access the new ownership? Even traditional retailers are bracing themselves for the day when leasing clothing becomes as natural as as hailing an Lyft or cueing up a song on Spotify.
Take Express, for example. In October, the mall fixture launched Style Trial, a service that allows customers to borrow up to three pieces—with no limits on exchanges, free shipping both ways and free dry cleaning—for $69.95 per month. If a subscriber loves something to death, she can buy it at a discount for keeps. Otherwise, she can keep garments circulating in an eternally refreshed “closet in the cloud” with virtually infinite options yet zero commitments.
“Essentially, it allows customers to experience the breadth of our full assortment and styling services without breaking the budget,” Jim Hilt, the retailer’s executive vice president and chief customer experience officer, explained. “We know our customer loves to experiment with fashion and Style Trial provides them with easy access to the latest trends, as well as an ongoing rotation of staple pieces at fraction of the price.”
Express was the third major women’s wear purveyor in less than a year to do this, following a mold set by New York & Co.’s NY&C Closet ($49.95 for three items) and Ann Taylor’s Infinite Style ($95 for three items). Soon after, Rebecca Taylor rolled out RTND, which lets subscribers take out four items for a monthly fee of $159. Vince launched a subscription box in the vein of Stitch Fix. Even DSW has promised—threatened?—to look into shoe rentals.
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Nikki Baird, vice president of retail innovation at Aptos, has her doubts the rental model will live up to the fuss.
“I think this is going to be a lot like flash sales, where it will get really big and overhyped, and then it will fade to something that plays a role in retail, but isn’t big enough on its own to completely disrupt the industry,” she said. And while rental might make sense for luxury purveyors who want to tap “millennials who have champagne tastes but light beer budgets,” high-street brands like Express and Ann Taylor are not nearly as aspirational.
“I think it’s shaping up to be more a ‘try before you buy’ market, where the real return on investment is not from consumers who pay a monthly fee for ‘borrowing’ a few clothes, but from selling consumers previously worn merchandise for effectively the monthly rental fee, plus an additional charge,” Baird said.
It’s true that the fashion-leasing segment is still in its infancy—only 6 percent of shoppers are currently renting clothes, per Forrester Research. Though Allied Market Research predicts the online clothing-rental market will surpass $1.8 billion by 2023, the number pales when compared with, say, the plus-size market, which is worth $21 billion.
A shift in the zeitgeist may be underway, however. Already, 62 percent of millennials and 57 percent of teenagers say they wish brands offered more ways to rent or borrow items, according to Cassandra, a business intelligence company that specializes in young people.
Indeed it’s the generations who have been conditioned to “no ownership” models like Airbnb and Uber who will be the main driver of the clothing-rental sector, said Neil Saunders, managing director at GlobalData Retail, a retail consulting firm based in London.
Part of rental’s appeal has to do with Gen Y and Z’s famous (and sometime infamous) social conscience. For fashion lovers weaned on Instagram, renting lets them indulge their appetites for the new and novel without contributing to fast fashion’s social and environmental ills.
“Consumers are much more willing to rent now than they were five or 10 years ago,” he said. “This is because people are less wasteful these days and see rental as a sustainable way to get items of apparel that they may only wear once or twice.
Access sans commitment also gives customers a wider latitude for experimentation without worrying if something doesn’t ultimately—to use the parlance of decluttering expert Marie Kondo—“spark joy.” Millennials are nothing if not budget conscious, after all, having come of age during the Great Recession.
“For some consumers, the option to rent allows them to try new fashion that they otherwise might not purchase,” said Robert Ferrario, senior vice president of strategy and growth at New York & Co. These can sometimes convert into actual sales. “Interestingly, with our ‘try then buy’ option, we are seeing a sizable number of clients purchase fashion items that they are renting,” he added.
A rental service lets retailers extract more value out of each item, too, Ferrario noted.
“Our NY&C Closet service allows us to get more utilization out of the garment, much like Airbnb with homes and Uber with cars, allowing us to increase the value of each item,” he said.
CaaStle in a cloud
There’s a good reason why Express, Ann Taylor, New York & Co., Rebecca Taylor and even Vince appear to run their subscription services in the same way. All of them utilize the proprietary CaaStle platform as their logistical muscle.
Designed to create a “frictionless experience” for the retailer, CaaStle—which stands for Clothing as a Service—is a fully managed, cloud-based white-label service that handles all aspects of the subscription model, from cleaning and warehousing to analytics and customer service.
CaaStle underpins another “unlimited wardrobe”: Gwynnie Bee, a subscription clothing service for women size 0 to 32 that served not only as CaaStle’s first “client” but also its guinea pig.
“When we started Gwynnie Bee about six years ago, the B2B platform we call CaaStle was the vision in the original pitch deck,” said Christine Hunsicker, who serves both as the CEO of CaaStle and the CEO Gwynnie Bee. “Before we were able to market the CaaStle platform to other retailers and brands, we needed to become experts in the space and prove that this model would actually work and ultimately drive higher profitability for them. We were able to achieve this with Gwynnie Bee as our proof of concept.”
The CaaStle platform allows retailers to create a new revenue stream that didn’t exist before without heavy upfront costs or the hassle of creating new assets, Hunsicker said. Businesses also have complete control of their branding and messaging.
“Essentially, we’re providing retailers a relationship-based model that increases the utilization of their core assets and results in increased profit,” she said. “There are other services in the market that are aggregators, but no other company allows the brand to fully own their customer.”
Rather than cannibalize sales, Hunsicker said the platform increases the spending of existing customers by an average of 100 percent while deepening their interaction with the brands. It also remits an operating margin of between 25 percent to 45 percent, compared with the traditional retail model, which hews to the single digits.
“The reason for this is people buy differently than they rent,” she said. “You buy your basics and your staples and things you’re going to wear again and again, and make a permanent part of your wardrobe. You rent the fashion trend pieces.”
Rental is also a great way to draw in and capture new customers who want to have the same “on-demand” experience that fast fashion provides but with higher-quality items and less buyer’s remorse.
“We do attitudinal research annually and attitude to rental has significantly shifted,” Hunsicker said. “There is an openness and understanding of how it would fit into consumer’s daily lives that didn’t exist a few years ago.”
Will the data CaaStle generates prove useful in other areas of business, too?
“Absolutely,” said New York & Co.’s Ferrario. “Especially as we think about future opportunities to refine segmentation and personalization based on category and wear-occasion affinities.”
Hilt from Express concurs. The more brands learn about past customer behavior, the better they’ll be able to predict what they might buy in the future. Rent the Runway, the grande dame of clothing rentals, for instance, is harnessing its data points to tailor-produce exclusive clothing collections for its clientele. Express and its cohorts may apply a similar tack in the future.
“The data we’re generating from Style Trial will provide us with unique customer insights and feedback on our product assortment and current trends,” Ferrario said.