Fashion Rental Adds New Revenue Stream for Agile Retailers
Ten years ago, the idea of renting clothing seemed quite outlandish, but a lot has changed in a decade. The National Retail Federation flags luxury resale and rental as one of the biggest trends for 2020. But retailers will need an agile and omnichannel technology platform if they want to integrate this new business model quickly and without disruption.
The wildly successful fashion rental pioneer Rent the Runway has achieved unicorn status, valued over $1 billion. And one recent report suggests the garment rental market will double and reach $51 billion in the US over the next five years, growing almost five times faster than the wider clothing market.
Nevertheless, the company’s meteoric growth landed it in hot water this summer when a new warehouse inventory system transition did not go as smoothly as expected, and customers did not receive their garment in time for an event, which is a core part of the company’s brand promise and so the stakes are higher than other rental services.
The short-term damage of the technological failure was enough to make the CEO issue public apologies, subscription refunds, and $200 in cash to those affected, and to stop taking on new customers until mid-October.
Successful expansion means adding technology and complexity without disrupting your current business. In the next few years, there will be new business models and technologies that retailers want to try out, but they need to be prepared for that from a technology perspective.
Why this trend is here to stay
In part, the appeal comes from a public interest in terms of sustainability and closing the loop for a circular economy. For others, simply having access to beautiful clothing that would ordinarily be out of budget. And for a new generation who may never own homes, the concept of ownership is changing. Millennials are less interested in owning pieces forever – a little while is enough. In addition, people may be more likely to invest in a pricey item if they knew they could get a significant portion of their investment back.
Combining rental subscriptions with a physical location has the potential to capture more revenue as consumers buy clothes in addition to their subscription, and may also help reduce serial returns problems, giving traditional retailers even more incentive to try it out.
The importance of implementing change seamlessly
In 2017, the company went from an online-only business to opening five locations, so it could offer customers personalized attention and services and reduce shipping costs by providing touch points for customers to browse and pick up/drop off clothing. This transition was presumably easier because it involved setting up stores with traditional POS features and services.
But RTR’s truly innovative supply chain is certainly more complex than most, and was bound to experience some growing pains. Rent the Runway recently opened a second 300,000 square foot fulfillment center in Texas, and presumably required a technology upgrade. But the breakdown underscores the need for retail technology platforms which are designed to test and implement innovation without business disruptions.
As more retailers look to adopt different business models, it’s crucial to have a retail technology platform that is agile and configurable enough innovate incrementally and adapt to innovation seamlessly.