Things keep getting worse for fashion rental platforms – Glossy

Much of the fashion industry is suffering under the coronavirus pandemic, but few areas have been hit as hard as fashion rental. 

While formalwear, swimwear and workwear are all areas that have seen their use cases reduced due to coronavirus, rental is in the unfortunate position where much of its value is made obsolete by quarantine, social distancing and the cancellation of events. 

For example, much was made of the fact that Rent the Runway was valued at a billion dollars last year, becoming the first fashion rental company to hit that milestone. But the company has struggled in the last few months, laying off or furloughing 35% of employees. Now, according to a report from Bloomberg, the brand’s valuation has dipped to less than $750 million as it lowers prices for investors. 

Nuuly, URBN’s in-house rental program, was forecasted as a major growth area for the entire company just last year, but in the company’s first quarter earnings call on Tuesday, CEO Richard Hayne said  “aggressively reduced investments” in Nuuly were a part of the company’s efforts to stay afloat.

Le Tote, the rental company that owns Lord & Taylor, reportedly has it worst of all. The company is likely to liquidate all of its Lord & Taylor assets less than a year after buying the retailer for $75 million in August 2019. It laid off most of its staff across both Le Tote and Lord & Taylor in April. 

“As the retail sector emerges from the Covid-19-induced shutdown, customers’ appetite for rental apparel may diminish,” said Gene Bornac, svp of retail at enVista. “High unemployment and massive discounts on clothing not sold in March and April will reduce the value proposition for rentals. Additionally, struggling retailers will rethink many of their partnerships with rental companies, especially those that have yet to prove their value.” 

Reached for comment, a representative of Rent the Runway said only that the brand is focused on “the safety of both customers and employees” and that, like all in the fashion industry, the future is up in the air. But Rent the Runway has given some indication that things aren’t all bad. There has been at least some positive movement in the rental of athleisure, though the company declined to elaborate.

Rent the Runway, despite all of rental’s issues at the moment, is also the best positioned to weather a prolonged crisis. While Nuuly had a successful debut year, bringing in $8 million in the first 12 months, it is not profitable, and parent company URBN has other, more lucrative brands to focus resources on. E-commerce has been a bright spot for the company, growing by 30% in Europe, even during the pandemic. Rent the Runway, on the other hand, brings in about $100 million a year, is profitable and still has at least some interest from investors. Investment group T. Rowe Price is reportedly leading a $25 million funding round for Rent the Runway right now, though both companies declined to comment on the report. 

For smaller rental companies that don’t have the large padding of revenue and funding of Rent the Runway, it will be much tougher to survive. Those smaller platforms are having to resort to more desperate strategies in order to stay afloat.

“We’re trying a lot of things right now because this has been hard,” said Silje Lübbe, founder of rental company Nova Octo. “We’re planning to start allowing people to commit to orders later in the year and are giving preferential pricing now. I’ve always been against promotions in general, but these are not normal times. We have to do what we have to do.”

As for whether the long-term survival of rental is possible, looking at China, which is ahead of the rest of the world in terms of recovery, could be a good bellwether. Chinese rental company YCloset, which is backed by Alibaba, saw its number of rentals increase back to normal levels when social distancing measures were eased in March throughout China. 


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