The sharing economy has transformed the way consumers get transported from point A to B, how they rent vacation homes, how they get food delivered and, increasingly, how they shop.
The latest Platform Economy Playbook explores how digital platforms have enabled companies to move beyond transactional digital commerce and explore new models.
Renting vs. Buying
Clothing rental used to involve renting a loaner tux for a prom or other formal event, but it has moved into the modern age with platforms like Rent the Runway to make designer apparel and accessories more affordable for limited time usage. Consumers might not want to pay $500 for a dress but can justify $75 for to wear it for an evening. What started as a pay-as-you-go model morphed into a subscription service and is now being applied to other verticals like home goods with Rent the Runway’s recent partnership with West Elm. Even IKEA, which was a late eCommerce adopter, has started experimenting with furniture rentals.
The subscription model that Rent the Runway tweaked has now been applied by companies like Fashion Pass for fast fashion rather than designer goods.
One of the takeaways from the Platform Economy Playbook is that amidst tech innovations like artificial intelligence (AI) to help personalize clothing selection and speed up delivery and social media-powered commerce, customer service has become a differentiator. “Customer service is going to majorly separate the five-star rental companies from the two-star,” said Brittany Johnson, CEO and co-founder of FashionPass, in an interview with PYMNTS.
Gwynnie Bee originally debuted as a subscription service for plus-size clothing, but launched a digital platform last year called “CaaStle” (Clothing as a Service) to enable traditional retailers to offer their own subscription clothing rental business. Ann Taylor and New York and Company were early participants.
According PYMNTS’ Subscription Commerce Tracker, Americans spent $2 billion per month on subscriptions in 2018.
Hybrid subscription/personal stylist services have also emerged like Trunk Club for men and Stitch Fix, which has expanded into both men’s and children’s apparel.
When Stitch Fix released its earnings last week, the company credited Style Pass, a membership program that offers unlimited styling, as a primary driver of engagement and loyalty. The $50 membership fee is credited toward purchases and Stitch Fix revealed that this help in selecting clothing has increased customer retention to over 70 percent among users.
What’s Old Is New Again
Gone are the days of sifting through bins at Goodwill and browsing garage sales. Digital platforms have also given the resale market a boost. Companies like thredUp facilitate the buying and selling of used clothing, while on the design side there is Chairish for home décor and 1stDibs for high-end furniture and antiques.
According to thredUP, resale retail is worth $40 billion, 49 percent of which ($18 billion) is apparel sales. That number is set to increase to $33 billion by 2021.
“Part of the shift is in how the mobile and digital economy has opened up aspirational brands for customers who previously had to settle for cheaper, fast-fashion alternatives,” thredUP’s Founder and CEO, James Reinhart, told PYMNTS.
More true to the sharing economy’s roots, digital platforms like Facebook Marketplace have also given consumers tools for peer-to-peer sales and are transforming old-fashioned classified ads. OfferUp, an app, allows anyone to sell and ship used items while Poshmark is specifically for fashion and has a social media angle.
ThredUP not only appeals to bargain-seekers but it also positions itself as eco-friendly for keeping unwanted clothing out of landfills. This appeals to two distinct audiences: seniors and millennials, who make up 32 percent and 30 percent of resale shoppers, respectively. According to the company, women over 65 were 3.4 times more likely than the average to cite value as their primary reason for buying second hand. Younger buyers were 2.4 times more likely to name environmental concerns as a motivation for buying used goods.
As consumer expectations keep changing and retailers experiment with new models, sharing economy platforms will likely have to evolve as well.
With so much competition in the space, retailers are having to refine and differentiate their services. “We are looking at it as a part of the puzzle and working out what does that next phase look like, what do we add to that to make it more experiential?” said Trunk Club CMO Linda Bartman, in an interview with PYMNTS.