Urban Outfitters this summer is set to launch an apparel rental service dubbed "Nuuly," the company said on its website, where it's collecting email signups. For $88 per month, customers can "choose six items to rent from a collection of up-and-coming designers, iconic labels, one-of-a-kind vintage finds and our own Anthropologie, Free People and Urban Outfitters family of brands," the company said.
The effort was first reported by the Wall Street Journal, which notes that David Hayne, the company's chief digital officer and its co-founder and CEO's son, will lead the new program to diversify revenue streams. Participating brands include Reebok and Gal Meets Glam, according to the Journal. Urban Outfitters didn't immediately return Retail Dive's request for comment.
Clothing rental was the disruption that Rent the Runway brought to the apparel industry, and several players are joining it rather than fighting it.
Rental services operate similarly across those offers, although monthly fees and swap policies differ. At Nuuly, items will be sent in a reusable bag with a prepaid shipping label. Customers can get six more after a month, when they either return or buy them outright, according to the Journal's report. The company itself will inspect and launder the apparel before renting or selling it again, according to the report.
Hayne told the Journal that the company expects Nuuly to bring 50,000 subscribers and more than $50 million in annual revenue within a year. The company, which in addition to the apparel banners offered through Nuuly runs wedding brand BHLDN, home goods banner Terrain and a pizza chain, reported Tuesday that first quarter net sales rose 1% year over year “to a record $864 million.” Comparable Retail net sales rose 1% in the quarter, driven by double-digit growth in e-commerce, partially offset by fallen store sales, and wholesale revenue rose 2%.
A rental model brings on several inefficiencies not found in traditional apparel retail, including the need for laundry, the inevitability of returns and the deterioration of merchandise. The apparel rental market also remains just about 0.3% of all clothing spend, GlobalData Retail Managing Director Neil Saunders told Retail Dive in an email earlier this year.
That may not be enough for the retailers selling items below the luxe category that is Rent the Runway's specialty, according to Jonathan Treiber, CEO of offer management platform RevTrax. "My feeling is that UO may struggle with a business model that works for their merchandise and price-point. Clothing rentals tend to work best when the items cost a lot and customers only need to wear it for a limited time or single event. Why pay $500 for a dress I only need to wear 1-2x?" he told Retail Dive in an email. "Would it be worth it for UO to rent a pair of $100 pants for $10?"
But the model could work if the company curates and rents outfits rather than individual items, he also said. "Renting out a $500 outfit for $50 begins to make a lot more sense," he said.
The market is growing, however, on pace to reach $1.28 billion this year, up by 28.9% over 2018 (not including costume rental for occasions like Halloween), according to GlobalData. And considering the participation of outside brands, Nuuly could furnish data to help build assortments, (especially at flagship Urban Outfitters, which already sells several outside brands), or perhaps even position Nuuly to eventually compete with CaaStle.
This post was edited to reflect the company’s Tuesday afternoon first quarter earnings release.