Subscription Commerce

Deep Dive: Clothing Rental Services Hit The Subscription Runway

Virtual fashion companies like Le Tote and Rent the Runway allow consumers to try clothes before they buy them, sparing them from having to return an item to a physical store if they regret the purchase. However, not every subscription fashion venture becomes a hit with consumers. The following Deep Dive outlines the challenges subscription fashion companies face as they try to remain in style.

Subscriptions are becoming the hottest new trend in the fashion industry. The model is appealing to retailers that are under pressure to adapt to shifting consumer preferences before certain styles and designs lose favor. Consumer spending on clothes has trended downward in recent years, and some accounts have estimated that it makes up only 3.1 percent of household spending, which is considerably less than the amount consumers drop on food and entertainment. 

In the face of declining clothing sales, the fashion industry is walking collections down the subscription catwalk in an effort to reach consumers. Subscriptions not only give companies exposure to potential customers and create recurring revenues, but they can save retailers the costs associated with traditional brick-and-mortar stores. The fashion subscription and rental market also provides designers with fast insights into consumers’ preferences. 

According to some reports, the digital clothing rental services market is already highly valuable. It was worth approximately $1 billion in 2017, and is on track to grow at a compound annual growth rate (CAGR) of 10.6 percent from 2017 to 2023, reaching a value of $1.85 billion. 

As is possible with any subscription-based venture, the fashion market is prone to pitfalls, especially because it faces a unique set of challenges  such as size issues, personal tastes and excess inventory.  The following Deep Dive looks at the scope of the subscription fashion industry, the specific challenges it confronts and why some ventures succeed while others fail. 

Fashion is the New Meal Kit 

Dozens of fashion and fashion-adjacent companies — those that deliver clothes, jewelry, fragrances and other related products — have already ventured into the subscription market, and are spending hefty sums to do so. Clothing rental company Le Tote managed to raise $15 million for its venture, while jewelry subscription company Rocksbox raised $8.7 million. Other players in the market include Golden Tote  which delivers clothes, shoes, jewelry and other products to its monthly subscribers  and Adore Me, a lingerie subscription box that costs members $39.35 per month. There are even companies such as Avenue A and adidas that send subscribers sportswear on a monthly basis. 

Not every subscription fashion service proves to be a trendsetter, though. The market has seen its fair share of wardrobe malfunctions from companies that have now shut their doors, including CakeStyle, Wardrobe Wake-up, Swag Of The Month, Ditsies, The Knicker Issue and Ellie, to name a few. 

So, why do some subscription fashion ventures succeed while others fold? The problem that most often plagues these businesses is customer fatigue. If customers receive too many shirts, blouses or pants, they are likely to become overwhelmed by the amount of clothes they have accumulated, and might consider terminating their subscriptions. This fatigue is prompting some fashion companies to make their products available to rent instead. 

Rent the Runway, one of the stalwarts of the subscription fashion market, grants customers access to a wide range of fashion products with its Unlimited rolling subscription service. The rental model appears to be helping fashion retailers reach new customers domestically and globally. North America accounted for 40 percent of online fashion rentals in 2017, but the Asia-Pacific market is expected to grow at a CAGR of 11.4 percent from 2017 to 2023. 

Additionally, the fashion subscription market is expanding its consumer reach by catering to niche markets. Gwynnie Bee is now offering fashion rentals for plus-sized consumers — a segment that has been neglected by other fashion retailers. Meanwhile, Union Station aims to take the pain out of purchasing bridesmaid dresses, which are often expensive and bought according to the taste and style of the bride, not the wearer. The firm enables brides to pick out their bridesmaids’ dresses, which can then be returned after they have been dry-cleaned. 

Buying clothes can be an expensive and frustrating process. However, by offering consumers a more flexible approach, the online fashion subscription market could be in season for a long time. 

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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