Weekly Stories

Is Rental the New Retail in the Digital Age?

Reported by Claire Healy on Feb 12, 2015 11:35:13 AM

Le-Tote

In the current online marketplace, everyone’s on the hunt for the “next Netflix” – and, as indicated by the latest in start-up investment news, the search doesn’t stop at fashion’s door. Le Tote, a company that allows women to rent out clothing and accessories to rent and return. Operating on a subscription model, the service made tech headlines this week with news that it has acquired substantial new Series A funding worth $8.8 million from Azure Capital Partners (other pitchers in the round included Simon Venture Group, who are running our Decoded Fashion competition at SXSW). With the tech industry clearly ready to back these kinds of ventures, is rental fast replacing retail as the e-commerce model of choice? Or is it just another fast fashion fad?

By all accounts, the services that apparel subscription companies provide are designed to reflect a fast fashion world. Le Tote, for example, sends you a box a month (at $49 a month) filled with 3 items of clothing, 2 accessories and a tote bag. You can wear these for as long as you want (with no late fees!) but can equally move on to the next trend package as soon as you’re ready. You can even buy an item outright if you feel you want to keep it forever. Even better, the picks are styled by an in-house stylist so each package is tailored for your style.

Other subscription services have found success in focussing on this mix-and-match, customisable approach. The original trailblazer in subscription services is undoubtedly beauty company Birchbox, which delivers high-end beauty and lifestyle products at $10/month. Dubbed the leader of ‘Discovery Commerce’ since its launch in 2010, Birchbox also operates in the UK and Europe. Why has this particular beauty queen been so successful? Because they’ve looked beyond the sample-size subscriptions and at the bigger, full-sized picture: the conversion rate to full-size purchases through Birchbox’s e-commerce site is impressively pegged at half of all subscribers.

Also re-inventing retail through rental is US-based Rent The Runway, whose mission professes to have a ‘technology soul.’ An online e-commerce service allowing customers to rent high-end designer apparel and accessories for a fraction of the retail price, the service’s transformative business model has also put them ahead of other copycat companies (see Girl Meets Dress in the UK). One key aspect that gives customers and partners a reason to buy-in is the engineering: in order to help customers find the perfect dress amidst over 60,000 items on the site and app, Rent The Runway leverage a huge amount of fit data. Moreover, a high-speed reverse-logistics system allows for an astonishing (often 1-day) turnaround. In their own words, the company ‘gather an insane amount of data’ – proving that analytics helps customers have the perfect e-commerce experience, as well as helps brands to accrue brand loyalty from younger customers with unique tastes. Put simply: the clothes will certainly look as good at home as they did on your screen.

With many of the leading subscription services still ensconced in tech capitals of the US, time will tell whether there will be similarly disruptive game-changers in the UK. The lesson, overall, might be to stop looking for the ‘Netflix for Fashion’ – in the apparel and accessories subscription model game, tailoring to your market is key.

Reported by Claire Healy

Topics: Subscription Service, le tote, Discovery Commerce, rent the runway, Weekly Stories, Birchbox

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