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Clothing rentals are one more piece of the sharing economy, where customers — particularly those in their 20s and 30s — are less interested in owning or making big investments but still want access to different brands and services, says Steve Barr, consumer markets leader at PwC.
‘‘You no longer have to buy into the myth of continuous consumption and that there’s pride in wearing something as opposed to pride in owning something,” said Jennifer Hyman, CEO and co-founder of Rent the Runway, which in 2009 pioneered the business model that many retailers are now trying to replicate.
For clothing retailers, rentals offer a glimmer of hope at a time when they are dealing with mounds of unsold goods that often need to be deeply discounted. Several have already gotten into the second-hand business — another popular trend in the sharing economy led by companies like The Real Real and ThredUp.
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.
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Many in the industry consider these necessary steps as clothing retailers watch their fortunes erode. They, along with department stores, are expected to see their fourth-quarter earnings sink 11.3 percent compared with a 5.7 percent drop for the overall retail sector, according to research firm Retail Metrics LLC. Last year, clothing retailers accounted for an outsized share of retail bankruptcies, according to a recent report by consulting firm AlixPartners.
“Clothing retailers are dealing with pressures on multiple fronts,” said Ken Perkins, president of Retail Metrics. “Heavy promotions, chronic traffic declines, e-commerce investment. And now they’ve got rental and resale services as well. The rental market is small, but it’s going to grow, and they have to invest in it.”
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. Last year, Hunsicker’s retail clients saw total spending for both renting and buying increase two-fold on average for each customer.
But unlike Rent the Runway, a dedicated rental service for high-end designer clothing, the economics for traditional retailers — from marketing to dry cleaning and shipping, on top of running their normal day-to-day operations — pose significant challenges.
About a dozen retailers, including Banana Republic and Bloomingdale’s, have left it to CaaStle to handle the logistics. But Urban Outfitters, which lets shoppers rent their brands as well as outside labels like Reebok and Levi’s, is doing it all on its own — a formidable task.
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“(Retailers) are very used to marketing products, not services, so it’s challenging knowing which customers to message, and how often,’’ Hunsicker said.
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. Also, the clothes may not hold up well after multiple wears, says Rod Sides of Deloitte LLP.
Elizabeth Kashin, 53, of Indianapolis, says she tried Urban Outfitters’ 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.
“I can go to a second-hand store to get a better experience,’’ she said.
There is also the issue of too few locations to return rented items. Retail expert Melissa Gonzalez says retailers should have kiosks in their stores in key cities but right now, most don’t have any and shoppers must drop off their garment bags at a UPS or the post office. Rent the Runway has five stores and nearly 50 drop-off locations.
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February 11, 2020 at 05:08AM
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Retailers try clothing rental, but will it be a good fit? - The Boston Globe
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