Here's How Luxury Clothing Brands Can Prosper in the Sharing Economy

In a sharing economy where anyone with the means can lease a casket, solar panels or even live chickens, new business models are constantly springing up to increase access to otherwise expensive goods minus the price of ownership. 

Clothing rental is far from novel, but it has become a boon for luxury brands to reach younger consumers who are more likely to be apathetic to luxury labels and prioritize experiences over things. 

Unlike Rent the Runway, which pioneered the clothing rental concept in 2009, CaaStle operates behind-the-scenes to help upmarket labels like Ann Taylor and New York & Company start their own subscription models for customers to rent clothing. Doing so helps brands monetize unsold or slow-moving inventory.

The company offers a turnkey solution for retailers to provide Clothing-as-a-Service (CaaStle, geddit?), overseeing everything from building the subscription website, managing the customer database, packing, shipping, laundry and drycleaning. Retailers simply send their inventory and CaaStle takes care of the rest.

Rentals can help premium brands engage new and existing customers

Entering the rental business might seem self-sabotaging for a luxury brand, whose value perception is rooted in exclusivity, but it serves as a valuable way for brands to engage new and existing consumers. 

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“[Premium brands] have a lot of clothing, they have a lot of customers, and we can help them create this access model and essentially create better customer engagement and make more money,” Christine Hunsicker, founder and CEO of Caastle and Gwynnie Bee, said at the Annual Retail Forum in New York City.   

On a mission to prove the concept to luxury brands, Hunsicker founded Gwynnie Bee, a subscription service for plus-sized women’s clothing, in 2011.

At the time, clothing rental services were limited to one-off rentals for tuxedos, evening gowns and prom dresses; everyday clothing wasn’t part of the mix. Today, subscription services like Stitch Fix provide curation by personal stylists for the everyday look as a value-add, often thriving on the element of surprise. 

“We went after what people would need to be integrated into an everyday part of their life. So it became much more about everyday clothing – fashionable workwear – and much less about one-time tuxedo rentals,” said Hunsicker. 

Instead of burning unsold inventory, monetize it 

Typically, luxury brands treat unsold stock like a badge of dishonor. While some pump their excess inventory into outlet stores at discounted prices, Burberry opted to burn $36.5 million worth of unsold items in 2017 rather than relegate it to the off-price market.

Entering the rental business enables clothing brands to monetize unsold stock, where an item rented more than ten times can generate more revenue than a single sale. Ann Taylor makes 80 percent of its inventory available for rent through its subscription service, Infinite Style. 

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Surprisingly, renting portions of inventory doesn’t cannibalize on revenue derived from ownership. It’s not that consumers who purchase to own never rent, or vice versa – rather, people are more likely to buy basics like a white-t-shirt, but they’ll rent more daring items, like a rhinestone-studded bomber jacket.

“The white-t-shirt is actually a little harder to rent than the chartreuse sweater with the giant bow on it that [the retailer] couldn’t sell,” said Hunsicker.  

People are more likely to experiment with their fashion choices when they rent – something high-fashion brands can take advantage of – and market as a value-add to the customer. 

“There’s a high consideration bar when you buy. Does it fit exactly right, do you already have something like it, are you going to get enough wear out of it? And that’s before you even get into the price-to-value equation in your head,” said Hunsicker, a former tech executive. “With a rental, the only thing that matters is, do I like the photo enough to try it?”

The erosion of the American mall makes it harder for people to discover new brands

Aside from luxury, lesser-known brands also have something to gain from rentals. Hunsicker pointed out that apparel is a browsing category predicated on impulse buys as opposed to a category like electronics, where a purchase is usually contingent on a need. For this reason, discovery is hugely important for brands to acquire new customers. 

“As overall mall traffic goes down, there are fewer people walking by the window seeing the shirt that speaks to them and going, oh, I’m going to try that brand,” she said.  

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Given the fast-moving nature of rentals versus selling an item one-off to a single consumer, the rental model generates consumer data at an exponentially higher rate, allowing retailers to better understand what customers think of their wares. Did the clothing fit right, are customers renting certain items more than once or returning them early? 

Hunsicker says the typical consumer of a partner retailer rents an average of 108 garments per year.

“95 percent of those garments are coming back with someone saying how it fit, what did I like about it, what didn’t I like about it. We’re capturing meaningful data on those 108 pieces of garments that can go into the manufacturing pipeline, that can then inform the retailer how to improve or change their clothing line on any given cut or fabric.” 

Although CaaStle collects the data, Hunsicker says the data itself remains under the ownership of the retailer. 

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