Retailers' latest response to consumers' fading love affair with fast fashion? Renting.

URBN, the Philadelphia-based retail company that owns Urban Outfitters, this summer will launch a clothing rental service for women called Nuuly, where subscribers can borrow six pieces for $88 a month, the Wall Street Journal reports. The 48-year old publicly traded company, which also owns Anthropologie and Free People, has appointed its Chief Digital Officer David Hayne to oversee Nuuly as its own separate entity.

The service joins a bevy of startups in the space including Rent the Runway (RTR), which was founded in 2009 by Jenny Fleiss and Jennifer Hyman as a way to help consumers enjoy designer dresses without having to buy them. The New York City-based company, which hit a $1 billion valuation earlier this year, most recently expanded into a childrens clothing rental business.

Nuuly is betting it has what it takes to turn even more consumers into renters. Within a year, Hayne expects Nuuly to attract 50,000 subscribers, putting it on track to generate more than $50 million in annual revenue.

"We certainly don't think the customers are just going to stop purchasing," Hayne told the Journal. "Purchases make sense for things you know you're going to use often; rental makes sense for things you would like to try."

The company's move is well timed. According to research firm Allied Market Research, the global online clothing rental market collected $1.01 billion in 2017 and is expected to reach $1.85 billion by 2023. Young buyers who want to be able to update their wardrobes frequently but also say they care about environmental sustainability are largely driving the trend, according to global consulting firm McKinsey & Company's 2019 State of Fashion report.

At $88 a month, Nuuly's offering is on par with other rental services. Besides RTR, startup clothing rental businesses include Le Tote and Haverdash. The latter two startups offer plans at cheaper price points than RTR with options from more accessible designers and brands. While RTR offers a series of subscription options, its unlimited plan costs $159 a month. Le Tote offers customers eight to 10 items a month for under $100. At Haverdash, the service provides three garments at a time, with unlimited exchanges, starting under $100 a month. 

While RTR and other clothing rental businesses rely on big name fashion brands to attract customers, Hayne told the Journal that Nuuly will supply under-the-radar brands buyers are curious about to set itself apart. The thought is, people may not want to buy a brand they're unfamiliar with, but they will test it out. And even then it could lead to sales, as Nuuly customers may also purchase the items they rent. 

Similar to RTR, Nuuly plans to manage all operations in-house. The company has hired its own engineers, data scientists, and product managers to create the technology needed for the rental service, according to the Journal. The company will also operate its own warehouse, fulfilment centers, and laundry services in Philadelphia.

This isn't how every clothing rental service works. Mall retailers like Ann Taylor and American Eagle work with the New York City-based rental startup CaaStle, which is a play on the phrase "clothing-as-a-service," for their rental programs. For $95 a month, customers of Ann Taylor's rental program, dubbed Infinite Style, typically receive around nine items a month. They can have just three items at a time. Retailers pay for CaaStle's services, which include managing the retailer's website, databases, logistics, cleaning, returns, packing, shipping, and more, on a per customer basis. ​Christine Hunsicker, CaaStle's CEO and founder, told the Journal that a well-run rental company can generate 25 percent operating profit as opposed to low single digits for a clothing retailer.

Nuuly, which is currently accepting customer emails and Instagram handles, declined to comment for this article.

Published on: May 21, 2019