When Rent the Runway launched in 2009, it hailed its model as disruptive: by allowing users to rent clothing online by subscription, the platform was supposed to revolutionise the way consumers shopped and, in the words of co-founder Jennifer Hyman, “put Zara out of business”. Fifteen years later, the company, which today says it has 132,000 active subscribers, has remained far from profitable, struggling to contain costs and battling flat revenue and subscription numbers.
Demand is not the problem. The rental market, which Global Data valued at $6.2bn globally in 2023, is growing, more than doubling in size from 2016. Shoppers, whether for sustainability or financial reasons, have warmed to the idea of renting, which, even though not as widespread as resale, has become an acceptable alternative to buying new — especially when it comes to special occasions.
For the many rental companies that have launched since 2009, and especially in the past five years, it’s the model used by Rent the Runway, which is heavily reliant on a fast-depreciating inventory, that has proved difficult to sustain in the long term. The fashion rental market in itself remains an opportunity that companies are testing, trying to cater to different consumers’ mindsets and budgets.
There are many variables at play: some users prefer to rent from other users, while others only trust a particular brand or established third-party player. Some customers cannot rent without trying a garment on first; some use rental on a one-off basis for events, while others are making it part of their daily wardrobe through monthly subscriptions.
The deciding factor on whether someone rents rather than buys might be to save money, gain access to a product that would otherwise be too expensive, or to find an alternative, more circular way of consuming fashion while still being able to wear a new item.
“The opportunity differs greatly across market segments and across product categories,” says Jocelyn Wilkinson, a partner and associate director at Boston Consulting Group. “That’s why we see so many different [players] popping up in the market. There is clearly some money to be made, but it has to be pitched just right.”
In the US, Nuuly, the in-house rental service launched by Urban Outfitters in 2019, has been a success story, posting its first profit last November. Nuuly has benefited from access to Urban Outfitters’ large clothing inventory and its logistic capabilities. In the UK, peer-to-peer models such as Hurr and By Rotation, which launched in 2018 and 2019 respectively and allow users to borrow and rent directly from each other, have found a following among a fashion-oriented clientele.
£42Three-day rental cost at By Rotation for dress retailing at £1,195
“For me [rental] has been amazing for accessibility to brands that I wouldn’t normally be able to purchase,” says Charlotte Bendkowski, a London-based journalism student and editor who uses both platforms. “If I wanted to purchase a 16Arlington dress, I’d probably only wear that two or three times, realistically. So to be able to rent it for under a 10th of the retail price for a couple of days is amazing.” A dress from the London-based label retailing for £1,195 can be rented for three days for £42 from By Rotation.
“The reason rental has caught on so much is that you can almost fake having really expensive things,” continues Bendkowski, who is both a renter and a borrower. She also likes renting because it allows her to “always wear something new”.
From a business point of view, peer-to-peer models don’t buy or hold on to stock and don’t take care of the dry-cleaning (that falls to customers), which allows them to minimise costs. They then take a cut of the rental price, usually around 15 per cent. They also often offer a “social” aspect, encouraging users to connect online or in real life, which increases engagement on the By Rotation app. By Rotation’s founder Eshita Kabra-Davies says the platform is “next-generation rental — like [it is] Instagram or TikTok and Rent the Runway is Facebook or MySpace”.
By Rotation, which aims to reach profitability in 2025, has raised $3mn in funding since its launch and has expanded into the US market. Women’s fashion remains its strongest category, though it also offers other items, such as homewares and men’s clothing. By Rotation and Hurr have also partnered with retailers such as Net-a-Porter and Selfridges, consolidating their status as legitimate fashion players.
But peer-to-peer has its drawbacks. Bendkowski says some dresses were ruined when they were returned to her and that a Dior bag she rented turned out to be fake. Another peer-to-peer user, Charlie Hollinshead, tells me she is happy to rent dresses, but feels “iffy” about renting higher-value items such as handbags. “Things do get damaged and things do come back late, and you worry,” she says. (Some platforms offer protection via insurance, for example, and barriers to entry for big-ticket rentals, such as a required number of positive user reviews.)
These are some of the reasons why Matt Heiman, who co-founded rental service Cocoon in 2019, decided to sidestep peer-to-peer, adopting the inventory-managed model. “Luxury peer-to-peer is near to impossible — it’s setting itself up for disaster,” he says, citing related issues such as delays and counterfeits. “We don’t think the industry itself would support peer to peer because it opens itself up to fraud so hugely.”
Cocoon buys its inventory mainly from retailers and brands, which often agree to take them back after a few cycles of rentals to sell them in their own resale operations and provide newer styles in return. Users can buy a subscription or rent on demand.
Heiman says Cocoon is economically viable, despite being inventory-based like Rent the Runway, because it focuses exclusively on luxury handbags — which, as opposed to ready-to-wear clothes, don’t necessarily depreciate in value over time. “[Rent the Runway’s] goods are worthless every six to 12 months, while my handbags are worth more every year than they were worth the year previously,” he continues, adding that the business is now “roughly breaking even”. While the Cocoon website doesn’t show any Hermès Birkin or Kelly, it has a large selection from high-luxury brands such as Chanel, Louis Vuitton, Dior and Gucci.
Focusing on accessories also solves the issue of sizing for Cocoon — another drawback for users of online-only rental services, who can rarely try on wares before renting them. This is why some companies, such as Borrowed From in the UK and Revest in Italy, have physical showrooms where customers can try on looks.
“The challenges with sizing, infrastructure and the right inventory have hampered reputations and then consumer confidence in the storyline,” says BCG’s Wilkinson. “[For rental to work] convenience has to be there.”
To court as many users as possible, UK-based platform My Wardrobe HQ, founded in 2019, offers one-off rentals, subscriptions and both inventory-managed and peer-to-peer, as well as a resale feature. Resale is an add-on that most rental platforms now include and is attracting luxury brands into the space, consolidating its appeal. Wilkinson says renting tipping into resale can turn into “quite nice business” for brands.
“You get a democratic luxury consumer, somebody with slightly less expendable income, renting a product they wouldn’t ordinarily be able to buy, falling in love with it and then wanting to keep it and therefore making the purchase,” she says.
Among the luxury brands that have approached the segment is Ralph Lauren, which in 2021 launched rental in house in the US — though that has been discontinued. Meanwhile, Burberry has partnered with My Wardrobe HQ and, also in 2021, luxury conglomerate Kering signalled its interest in the rental market, taking an undisclosed stake in Cocoon.
My Wardrobe HQ co-founder Sacha Newall says the company’s white-label offering, which has already been used by Jigsaw, Garrard, Perfect Moment and Anya Hindmarch, has grown 315 per cent year on year.
These are signs that rental is no longer just a marketing tactic for brands, says Tom March, founder and managing partner of Redrice Ventures, which invested in By Rotation in 2022. “They are thinking about it as a new business model,” he says. “It’s just a different buying experience.”
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