By: Jane Leascizer
Traditional retailers can no longer afford to wait on the sidelines to see how the renting business goes. That’s why a growing number of retail businesses are now offering customers the option to rent clothes for a monthly fee instead of buying them. Brand-name businesses such as Bloomingdale’s, Banana Republic and Urban Outfitters are the latest to offer these services. Even footwear chain Designer Brands says it’s considering launching a rental service for shoes.
The clothing-rental business is expected to reach $2.5 billion by 2023, according to research firm GlobalData. When combined with resale, it will account for 13% of the total $360 billion U.S. clothing market within the decade, which is up from 7.3% today.
For clothing retailers, rentals are a last-resort option when they are dealing with unsold products that need to be deeply discounted. J.C. Penney and Macy’s, for instance, have partnered with ThredUp to sell gently-worn clothes in a couple dozen locations. Nordstrom is testing resale at its women’s flagship store in Manhattan and online.
Christine Hunsicker, CEO and founder of CaaStle, a startup that manages inventory and shipping for retailers, says rental services have anywhere from a 20% to 25% operating profit compared with only 5% for traditional retailers. In 2019, Hunsicker’s retail clients saw total spending for both renting and buying increase two-fold on average for each customer.
About a dozen retailers, including Banana Republic and Bloomingdale’s, have left it to CaaStle to handle the logistics. But Urban Outfitters lets its shoppers rent their items, taking the hard route of doing it all on its own. “[Retailers] are very used to marketing products, not services, so it’s challenging knowing which customers to message, and how often,” Hunsicker explained.
Despite the effort, customers say that Urban Outfitters is very problematic. Elizabeth Kashin, 53, of Indianapolis, says she tried Urban Outfitter’s Nuuly rental service last month. She never received her package of six items but was charged anyway. After contacting customer service via social media, she got another package but said the clothes didn’t look clean.
Some experts wonder whether it even makes sense for lower-priced clothing chains to get into the rental business since customers could just buy the clothes used or get them at a deep discount.
Another issue is that there are not nearly enough locations to send rental items. An expert named Melissa Gonzalez pitched the idea of having kiosks in popular-city stores, such as Los Angeles or New York, for the shoppers’ convenience.
Nonetheless, retailers continue to follow its lead and hope to end up in a better place.
