Can a startup undercut Rent the Runway in the clothing rental space?

Discussion
Source: Haverdash
May 23, 2019
George Anderson

A new women’s clothing rental startup, Haverdash, is billing its $59 a month subscription plan as the most affordable unlimited rental service on the market. The question is whether the company’s pricing message will enable it to stand out against established players such as Rent the Runway and well-known newcomers like Urban Outfitters soon joining the market.   

Haverdash subscribers are allowed to swap out their three rented items as frequently as they want, and the service comes with free shipping, returns and dry cleaning. Clearly aimed at a younger demographic, the company’s curated collection includes brands such as Cupcakes and Cashmere, French Connection, J.O.A., Lush, Moon River and Sanctuary Clothing.

“Forget your mother’s rulebook that says fashion is only worth it if it gets worn multiple times,” said Jessica Kahan Dvorett, general manager of Haverdash, in a statement. “Haverdash gives you permission not to wear the same thing twice.”

While Haverdash may not be factually correct that its service is the most affordable — American Eagle Style Drop is $50 a month — it’s clear that price is central to its differentiation strategy in the rapidly expanding clothing rental market. GlobalData Retail, The Wall Street Journal reports, has forecast the clothing rental market to grow from $1 billion in sales in 2018 to $2.5 billion by 2023.

Urban Outfitters is also looking to cash in on rentals with its own women’s clothing service named Nuuly, to launch this summer. The service draws from the retailer’s own Anthropologie, Free People & Urban Outfitters’ brands as well as a wide variety of other vintage and current fashions from outside designers.

Nuuly will initially offer a selection of 1,000 styles and grow that three times over by the end of the year. The service, which offers sizes ranging from 00 to 26, is priced at $88 for one box, with six pieces per month.

Richard Hayne, chairman and CEO of Urban Outfitters, said that Nuuly is his company’s “next step” in fulfilling its mission to provide “the creative, compelling shopping experience” for today’s consumers.

David Hayne, Urban Outfitters’ chief digital officer, will run Nuuly. In an interview with the Journal, Mr. Hayne said that the company isn’t concerned with cannibalizing retail sales. He forecasts Nuuly growing to 50,000 subscribers and generating more than $50 million in annual sales.

DISCUSSION QUESTIONS: How big an impediment is price for consumers subscribing to monthly clothing rental services, and what’s the right price point? Do you see an opportunity for startups such as Haverdash, or has the die already been cast for the competitive lineup?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I can easily see this becoming a much more accepted approach, that brings flair and change to a consumer’s wardrobe."
"Now that we have finally gotten through to retail that it should not be all about price, we see a concept in the pricing race to the bottom. Never a good thing. "
"The impediment, just like with online shopping, is that a shopper has to spend the time to find what she wants to rent."

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15 Comments on "Can a startup undercut Rent the Runway in the clothing rental space?"


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Art Suriano
BrainTrust
I think the price point is where it needs to be whether it’s $59 a month or the $50 a month that Eagle Style Drop is charging. However I question the long-term viability of the concept. It seems to be a great idea, but I can see this being more of a short-term fad. Alterations are not possible, and how many people are okay taking clothes off the rack and expect that they will fit perfectly? That’s okay for knock-around fashion but if we’re going to look at dress clothes, that can be a problem. Also long-term I can see the novelty wearing off and the customer getting tired of continually having to return the rented clothes and unpack new arrivals, trying them on to see what they like and so on. We’ve talked before about how custom made clothing is the future, and as technology gets those clothes to a level of “made while you wait,” the entire industry will change, and there will be a much less need for rentals.
Charles Dimov
BrainTrust

Pricing is totally dependent on the value that customers perceive from the service. If Haverdash, Rent the Runway, and others do a good job, I can easily see this becoming a much more accepted approach, that brings flair and change to a consumer’s wardrobe. $50 per month seems VERY reasonable. There is no reason why $100/month is not a boundary that can be broken.

In fact, I think the $200-$500/month category is an open market for luxury goods and clothing. Hmmm… maybe there is a startup idea here somewhere!

Brandon Rael
BrainTrust

There is plenty of room for competition in the rental clothing space. Rent the Runway has the name recognition, and is the leader in a growing subscription service rental segment. Price is a big part of the value proposition. Haverdash is willing to take a short-term loss in order to gain on Rent the Runway’s domination.

The rental clothing segment offers consistent recurring revenue for both retailers and the software platform companies that are behind the scenes. For retailers and brands, subscription services not only represent another revenue stream, but also another way to engage with potentially loyal customers.

Aspirational luxury is a trend that is being enabled by companies such as Rent the Runway. We are only in the beginning of what could be a very viable customer engagement channel.

Neil Saunders
BrainTrust

Clothing rental is growing and there is increasing consumer interest. However, consumers will not subscribe to loads and loads of services; many will only subscribe to one. So as more players enter this arena the market is getting very competitive and not everyone is going to find success. In my view, those that offer a variety of brands have a better chance of success.

Bethany Allee
BrainTrust

There’s still room in this market. Price is a differentiation. But more than price, I’d argue that selection and convenience are equally important.

There’s an issue though, Haverdash isn’t size-inclusive, so it cannot fully compete with Rent the Runway. Not being size-inclusive forces it to compete in a smaller market with folks who can out maneuver them on convenience, because they have a broad network of brick-and-mortar entities.

Paula Rosenblum
BrainTrust

The real question is, can these guys make money at it…not just is there a market. Short answer is, I don’t know.

Cynthia Holcomb
BrainTrust

Yes, price is very important to get new customers “in the door.” But price takes a back seat to the customer experience. The impediment, just like online shopping, is that a shopper has to spend the time to find what she wants to rent. This requires searching a vast selection of styles, fits, shapes, fabrications, brands, seeking her own “taste” preferences to find a dress, for example, that she likes. Then there’s additional time spent reading reviews, seeking to find others who have rented the same dress, who are close to her height, weight and bra size. Time to shop is a requirement and an investment.

That said, this is a new generation of shoppers used to a digital interface for most aspects of their lives. The die is not already cast. If renting clothes becomes a norm in apparel, then there is a huge opportunity for new startups to differentiate themselves in their rental offerings, just like any other apparel retailer.

Lauren Goldberg
BrainTrust

I think there is definitely opportunity in this market, especially at a lower price point. In order to sustain and succeed, I believe all of these new players will have to excel at merchandise selection, product quality and more importantly, customer experience and usability.

Kai Clarke
BrainTrust

There appears to be room for many more startups in this market as the pricing and offerings still have yet to be clearly identified. How much to charge for a monthly offering and how many pieces to offer are not clearly defined. Add to this the types of fashion that each of these startups (and their brands) offers, and it is clear that we will see a market that is churning consumers as it identifies itself and the categories it will play in. The burning question really circles around how viable the clothing rental space is in the mid- and long-term.

Mohamed Amer
BrainTrust

Rental of products as a retailing concept will continue to evolve and expand to new categories – even luxury items. We’re still early in generating demand, but personalization coupled with re-use and circular economy factors may be priming the pump.

While the subscription pricing is important to attract consumers or lock out competition, more important is the ability to attract more brands in order to deliver a high variety of fresh styles that resonate. The more options that are in the hands of consumers, the more attractive will be the value proposition. Two other important elements: the startup must be able to communicate their consumer-based differentiators clearly and repeatedly as well as continuing to reduce shipping, logistics and dry cleaning costs.

Don’t underestimate the insights derived from consumer behavior that are captured by these subscription services. They can be highly valuable in predicting future demand and consumer behavior.

Lee Kent
BrainTrust

Now that we have finally gotten through to retail that it should not be all about price, we see a concept in the pricing race to the bottom. Never a good thing. It almost tells me that the concept may be reaching its end also. Or at least it’s time to think about the value of the brand and not consider every one in the space as a competitor. If the concept is solid then the brand should be able to price according to the value of the service and the content or rather the value of the clothing in the box. Certainly a box from Urban Outfitters would have a different value then a box full of designer clothing. Step up and differentiate! And that’s my 2 cents.

Craig Sundstrom
Guest

Not to be a troublemaker here, but I’m curious what the “carbon footprint” on this type of concept is. I picture a garment being taken from the closet, worn and then returned to said closet, over and over again; I then picture it being returned (to a warehouse) and reshipped all over the place, over and over again — hard to believe the latter doesn’t have some environmental impact.

Back to the main question: price always matters, but I would think with a niche service like this selection and service are far more important considerations.

LAURA RAMIREZ
Guest

This is a valid point that shouldn’t be considered trouble-making. This is basically still “fast fashion” with all of its inherent problems, on top of which are added the others you mention that include the additional and repeated transit footprint.

Further, though humanity is not making the right decisions at a fast enough pace, there has been an increase in consumer awareness that directs their dollars towards sustainability. Just look at the effort which Loop (TerraCycle) is hoping to get off the ground.

Being able to purchase more high quality, long lasting, classic and interchangeable apparel is a market focus which I think will continue to grow. How viable it can become given the constraints of MSRP vs disposable income (livable wage) still needs to be decided. That said, I have never in my life spent $720 annually on clothing. Insanity. This is a problematic issue, as related to society and the desire to create an Instagram life — I’m actually not being facetious.

Sonja Lukin-Beck
Guest
1 month 4 days ago
These are phenomenal points and Gen Y will definitely be asking the same questions. An additional question re:carbon footprint — the environmental impact of their dry/wet cleaning. No one has brought that up quite yet, but it could be real detriment to the business model if that side of the service is found to be as environmentally challenging as traditional laundering services. Anyone seen/heard more details on their cleaning practices? To comment on the initial question — I think the lower end models will be extremely challenged. The value to the consumer diminishes when the product becomes something you could/would potentially buy and not have to deal with all the other risks and challenges of choosing, waiting to receive, trying on and potentially getting something that doesn’t fit right etc. Then packaging it up, bringing to a postal service and returning it … all of that effort is not worth it for something you could just buy online for the same or less. At least when you buy something and you don’t like it you… Read more »
Shikha Jain
BrainTrust

This might be the unpopular opinion, but I don’t think the answer for Haverdash’s success is about price. And coming from a pricing consultant, nonetheless! Yes, they offer Urban Outfitters and will likely compete with them on price when UO’s subscription comes out. But it’s broader than price. When I think of rental subscriptions in the consumer world, it is less price and more offering and matching consumer behavior.

What makes Haverdash unique? Certainly the brands. Rotating pieces in and out can keep your wardrobe fresh and not hurt your wallet but what about fulfillment? Will consumers who sign up actually commit to revolving their wardrobe for everyday wear on a monthly basis? Makes sense for Rent the Runway or the Black Tux. Think about Blue Apron. In concept they have a great offer but retention is a problem because the offer is too aspirational and doesn’t fit with the target consumer behavior to the point where the subscription becomes a burden. i

wpDiscuz
Braintrust
"I can easily see this becoming a much more accepted approach, that brings flair and change to a consumer’s wardrobe."
"Now that we have finally gotten through to retail that it should not be all about price, we see a concept in the pricing race to the bottom. Never a good thing. "
"The impediment, just like with online shopping, is that a shopper has to spend the time to find what she wants to rent."

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