Topline
The fashion rental industry, severely impacted by the pandemic, is seeing a resurgence as the two major players—Nuuly and Rent the Runway—report growth alongside the emergence of smaller clothing rental platforms, driven by Gen Z consumers.
The fashion rental industry is gradually making a comeback, with Urban Outfitters’ Nuuly, Rent The … [+]
Key Facts
Nuuly, a 5-year-old apparel rental business of lifestyle retailer Urban Outfitters, reported last week more than 50% annual sales growth for the first quarter ended April 30, following full-year increases of 172% in 2023 and 96% in 2022.
The subscription-based clothing company saw its average active subscribers grow to more than 224,000, up 45% from last year and a three-fold increase from 2022—with almost 40% of them still renting two years after signing up, according to Kim Gallagher, executive director of marketing at Nuuly.
Rent the Runway, the 15-year-old leader in fashion rental, beat analysts’ expectations in its latest earnings call in April and said it expects a break-even year, which is a “huge milestone for the company and clothing rental overall,” CEO Jennifer Hyman told Forbes, noting that customer loyalty rates were up 10% year-over-year.
Following years of financial struggles, the rental giant saw its shares soar by more than 170% year-to-date after bottoming out in April, buoyed by narrowed losses and optimistic sales projections as the company signaled that it was bound for profitability.
Pickle, a clothing rental app, saw its revenue jump 55% month-over-month last year—with double-digit growth continuing this year—supported by 90% of customers staying on for a year after joining, the company told Forbes.
Vivrelle, a luxury handbag and jewelry rental company, expects its membership to grow by over 100% this year, with new sign-ups in the first quarter up 30% year-over-year, according to the company.
Rental companies say Gen Z and Millennials make up a “majority” of their customer base—the primary drivers of the resurgence of clothing rental, seeking cost-effective and sustainable fashion alternatives.
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Key Background
The fashion rental industry took a significant hit during the pandemic as remote work reduced the need for office attire and events were canceled. Over half of Rent the Runway’s then-100,000 subscribers canceled or paused their memberships in a matter of days. However, the “normalization of behavior” after the pandemic in part drove the demand for rentals, especially for the “more expensive products that people prefer to rent rather than to buy,” said Neil Saunders, a retail analyst at GlobalData. Renting also offers a cost-effective way to refresh wardrobes without constantly purchasing new clothing amid inflationary pressures, he noted. For instance, at peer-to-peer platforms like Pickle, which enables users to rent clothes directly from one another, a $300 to $400 dress can be rented for just $30 to $50, according to the company. The budget-conscious younger generation is the driver behind the comeback of fashion rental. A majority of customers are “under 35” for Nuuly, “Gen Z and Millennials” for Rent the Runway, and “aged 22-40” for Vivrelle. Pickle’s main customer base is in the 26-30 range. In addition to economic reasons, Gen Z’s preference for eco-friendly consumption habits also plays a part: according to a study by Washington State University, 55% of Gen Zs said they had previously rented clothes, in part for sustainability reasons.
Crucial Quote
“Gen Z has a tendency to shop in a much more fractured way for apparel. Most older generations are very used to buying apparel and putting it in their closet and wearing it when they want. Gen Z is much more flexible,” Saunders said. “They like to have rapid changes of outfits. They don’t like to necessarily be seen in the same thing every day or every occasion […] Their general shopping and fashion habits just really chime with rental because they can change quickly.”
Big Number
$6.2 billion. That is the size of the global apparel rental market in 2023—more than double the $2.6 billion in 2016—with the U.S. accounting for the highest market share, according to data analytics firm GlobalData.
Surprising Facts
Americans leave 82% of their wardrobe unworn each year, the second-highest percentage among the countries surveyed, according to a 2018 study fby relocation and removals company Movinga.
Contra
Despite the positive trends, profitability remains a significant challenge for clothing rental companies—particularly the traditional models like Nuuly and Rent The Runway, which charge monthly subscription fees and operate based on inventories. Due to high delivery, maintenance and cleaning costs, some players will struggle to survive, highlighted Pippa Stephens, an apparel analyst at GlobalData. Rent the Runway, having long been vexed by inventory management challenges, is yet to turn a profit, with its shares still down 92% since its 2021 IPO. Nuuly reported its first-ever profit in the third quarter of 2023, four years after it was founded. Additionally, while considered a cost-effective option to access high-end brands without the need to purchase them, monthly rental fees may still come across as hefty for some users—topping $90 a month for the two rental giants. Some people can’t afford or don’t want to spend every month on subscription-based rental services, especially as the cost of apparel has gone up, adding to their inflationary woes, said Saunders.